Once Something Is Free, It Is Hard To Start Charging A Subscription

Free samples have proven a great marketing tool to get customers to try something before they buy it. But in the case of online content, when content has been given and consumed for free, it is hard to convince the user to start to pay a subscription fee, even with the incentive of no advertising. Perhaps it is that the consumer has got hardened to the fact that there is always advertising. And in most cases, even with a subscription (newspaper, magazine, cable TV, etc.), there is both subscription AND advertising.

In the case of Facebook looking to offer a premium subscription model, ad free, a paltry 2.4% would be willing to pay about $40 a year. There is some elasticity in the model. As the proposed price point is reduced 25%, another 2% would be likely to pay. And likely to pay and actually buying a premium subscription is most likely much lower than that. Linked In has tried a premium model as well, offering additional services and better information for a fee. Whether they are successful or not, only they can tell us.

Still this was an interesting study by Ad Age. In the case of the internet, the revenue is still in authorizing the connection to the web. The cat seems out of the bag to try and convert free content into paid content. With barriers of entry onto the web so low, anyone can author a website and deliver content, content can be copied and share easily, and free content has become the status quo. Today, it seems that advertising and e-commerce are the best way to produce revenue.

Magazines Rethink Strategies to Deal With Economy

Magazines should not be the only type of content companies to rethink their strategies. This same retrenchment will affect all media outlets: newspapers, radio, TV, film, etc. "A perfect storm of sectoral pressures (rising paper and printing costs, plateauing circulation across most titles) and the broader economy’s woes have swallowed profits and revenues..." This statement is relevant to every outlet that relies on either subscription or advertising or both. But it is not just today's economy that is to blame, changing technologies and environmental issues add to these economic woes.

There is good news. We are consumers on content. There is an infinite appetite to consume and a need to be entertained, interested, informed, and educated. We may change our consuming habits but those companies that read the trends will adapt to reach these new behaviors. It may be timing and a little bit of luck, combined with good strategic thinking and tactical solutions.

Economic Turmoil As These Doors Close, Which Ones Will Open?

I consider myself a very optimistic person. As I watch our economy deal with a recession, it comes with many costs. And unfortunately the list of layoffs keeps getting longer:
AT&T - 12,000 workers
Motorola - 3000
Viacom - 850
Adobe - 600
NBC - 500
Comcast - 300
Ticketmaster - 300

And more announcements will come very shortly.

It has already affected consumer spending and retail is facing it head on. Bankruptcy is touching Linen and Things, Circuit City, Bally's, and perhaps soon one or more auto manufacturers.

I am empathetic to those affected by this retrenchment. Change does not always mean growth; sometimes it requires a step backwards before driving ahead. But I remain optimistic, even as this list is sure to expand, that the economy, and us as individuals, will be stronger and healthier in the long run. I remain optimistic that even as one door closes, another opens.

Cable - If You Can't Join Em, Beat Em!

Two interesting articles in today's New York Times. On one page an article headed, Who Needs a TV? I’m Watching on a Laptop, and on the next page, another article, YouTube and Hulu Visit the Living Room. The first highlights the fact that with video at you fingertips on the PC, you get what you want, when you want it, where you want it, and with limited commercial interruptions. The main limitations remain sports and newer movies today, but that is a short term problem that will be solved.

The second article should scare cable operators and linear networks even more. What is interesting about the article is not either Hulu or You Tube; rather, the device to connect these services to HD TV sets. "The Neuros Link is a device that connects to a television via an HDMI cable and can stream Web video to any HD display. The device requires a broadband connection and little else: there is no subscription fee, because the device brings in free content from the Internet." Now you have your streaming content and see it on a big screen Hi Def TV set.

So what saves the operator - making the set top box more ergonomic and flexible than it is today. Add a web connection, add interfaces to the Wii and PS3 for direct downloading, add Tivo, and move its functionality to a remote control that is easier to use and simpler to work. Save networks by enabling interactive advertising across all video so that it recognizes brands and connects to relevant content.It is time to think "outside the box"!

Are There Too Many Content Choices - Condé Nast Pulls Plug on Properties

Classic business lifecycle means that when products and services move from segmentation to fragmentation, then customer shares get smaller and smaller. Over time, these fragments can no longer sustain their business model and must get acquired or disappear. Look at any industry, any product line, and eventually, because of internal, technological, environmental, and other factors, consolidation eventually occurs and the fragments return into viable segments. Need some examples, how about the auto industry today, Accounting companies, Banks, and yes even content.

Condé Nast is shutting down sites and others will follow. If they can't adequately create a business model that will become profitable, the brands must adapt or die. What surprises me today is that TV networks have yet to see much consolidation. Currently, I would describe the number of cable networks as highly fragmented. If history is a guide, then it cannot sustain itself and reductions must occur. Initially, I expect some brand extensions to reduce back to its parent network. If the network's niche cannot sustain a positive cash flow, the network may need to go dark. In addition, alternate ways to view content, via VOD and the web, may limit available content on these extension brands. Lastly, declining ad revenue means that their is less money to support too many networks. This will filter down to ultimately affect a networks' longevity.

Networks need to own their content and all its distribution platforms. Those that rely on buying rights better buy all the rights, domestic and international, streaming, VOD, etc. Otherwise, it may lose its audience share and ultimately its value to the consumer. Streamlining the business model will become the next step. It's what the auto industry is facing today and what content companies are starting to experience.

Most People Don't Watch Web Video For More Than 60 Seconds

We tend to have short attention spans. If we don't like what we are watching immediately, we are quick to turn it off. Technology has put controls on the tip of our fingers and we tend to keep our finger on the button all the time. Add to that the infinite choice available on the PC and we are unlikely to watch more than a few minutes before stopping. "After clicking play, viewers only watch to the end of 5-minute long Web videos about 10% of the time. Only 16% make it through three minutes, Web video services provider TubeMogul reports, after measuring 23 million streams on six top video sites over two weeks."

Given that the PC lets us multitask, it is hard to devote our attention to one screen when we are juggling multiple projects. It becomes harder to devote attention to one screen or video for too long a time without some distraction, either on the PC or external (phone call, meeting, etc) to interrupt us. Still, this research simply looks at a moment in time. What I think confuses people is technology with content. All lengths are relevant, and ultimately the consumer decides where they want to watch their videos. How it is transmitted to a screen, TV, PC, or cell, will one day be meaningless. That is to say, we won't be differentiating between a web video and a broadcast video; rather, we will describe it as simple short form or long form. And to the question of monetization, the length of the content and the device it is displayed on may ultimately determine which type of advertising is most effective.

Recession Winner: Cable Operators

Television becomes the heart of the house. And in a recession, TV has become the place to forget our troubles. Today, TV access is through a pipe, a pipe that also connects us to more variety of content options. As household begin to watch their monthly spending, it seems clear that overall, cable TV is a low cost alternative to outside entertainment.

For a family of four going to the movies for one afternoon, the cost can exceed $30, not including popcorn. Monthly HBO is on third less for a full month of movies. And while households may even choose to downgrade their cable service to eliminate premium networks, they won't shut it down completely. They will still want networks to watch and have access to VOD and DVR entertainment to record and watch the shows they want when they want. And ask most households which service is most important and most will say their internet access. It offers cable the best profit margin and brings a continuous stream of content options to the home. Just try pulling your child off the PC.

So cable will continue to enjoy a solid monthly cash flow. Cable entertainment may even become more important than other forms of entertainment. Broadway is seeing a slew of shows close; restaurants are seeing less patrons as more dine at home. And cable feeds the home in multiple ways: TV, Internet, Phone. "People don't stop watching TV, using the Internet or making phone calls during recessions. That means the cable operators -- which offer all three services -- stand to strengthen while most everyone else hurts during the next few months."

Digital Sales Surpass CDs at Atlantic

When is the last time you bought a compact disc? As an avid ipod user, I rather download tracks than purchase the physical media. So it comes as no surprise to learn that digital purchases are beginning to exceed compact disc. "Atlantic, a unit of Warner Music Group, says it has reached a milestone that no other major record label has hit: more than half of its music sales in the United States are now from digital products, like downloads on iTunes and ring tones for cellphones." Listeners have changed their music habits and are consuming differently.

What is also interesting to note is that digital purchases are not simply for the music track, but that revenue is coming in from additional usages like ring tones. It reminds me of the old story about baking soda. How do you get more sales of the product; more uses and more usage. You don't just cook with it, you put it in the back of your refrigerator to make it smell better. With digital downloads, you add it to gaming and other applications and music finds more uses and usage as well.

Obviously, the fear of digital downloading is content rights and protection. With perfect copies made accessible, the technical challenge to eliminate free file swapping is a challenge. Technical innovation and marketing efficiencies will move consumers to prefer legal means to download for better content and better results versus inferior copies and less desirable experiences.

TiVo Dials Up Mobile DVR Site - Real Convergence

Finally, some real useful convergence. And no I am not talking about seeing the phone number of the call coming to my telephone appear on my television screen. I am talking about something better. Connecting two useful devices together in a meaningful way. For us Tivo fans, sometimes we forget to record a show. Recently a friend of mine was rushing home last Saturday because he had forgot to tape his U of M college football game. But now, even if we are forgetful, we don't have to worry. One call from our cell phone to our Tivo quickly will set a recording. "The new mobile site, at m.tivo.com, lets subscribers with broadband-connected Series2 or Series3 TiVos schedule recordings, while it’s also available to anyone to browse and search television shows." No rushing home required. If networks want to put a stop to DVRs, the answer is simple - put every show on VOD. Until technology can insert into the DVR, there is more control with the VOD; content owners should be expanding its titles and gaining better control over the experience with its viewers.

And how does Tivo take this convergence to the next level. Simple, make it two-way. Like a slingbox, enable shows I've recorded on my Tivo to be viewed on my cell phone. Now my friend can watch his Michigan football game through his Tivo to his phone. Again, no rushing home.