Monday, March 2, 2009

Why Media Must Charge For Web Content

The Wall Street Journal charges for it's online content, and Newsday wants to. While free content continues to exist, the premium content depends on revenue to support its business model. In the broadcast model, networks depended on advertising fees, and TV shows built in syndication as a means to further profit. In the cable model, networks depended on both subscription fees and advertising to prosper. Broadcast liked this model so much, they bought cable networks. Local stations came up with retransmission consent to get subscription fees from cable affiliates as well. And then the web showed up.

The barriers of digital distribution dropped away and content could be shared freely, copied for networks and web pages, and share with the click of a button. Why pay for content if it can found for free in alternate locations. Why pay for the chicken if the eggs are free. But eventually someone has to feed the chicken or it will die and there will be no more eggs.

Content creators and distributors are recognizing the value of their content and how it needs to be shared, as either promotional vehicles or to build brand preference. But eventually, the online viewer will have to pay. Content can't be free forever and advertising revenue may not be enough by itself to maintain the current model. Either costs have to drop or more revenues have to be found. At the moment, content companies are cutting costs, but if it is too much, the content will suffer.

WIll consumers pay. Some are already. Apple has built the iPhone that makes it too easy to buy applications and view content. Perhaps it is that simplicity and a pricing structure deemed reasonable by consumers that will build an online subscription model. Will the cable companies be able to control the pipeline enough to limit only purchased content to come through to the device? Will free content be pulled and limited to subscriptions like Netflix? The model must change to enable a real business to develop; what it eventually looks like is still to be determined.

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