From consumer publishers wrestling with whether or not to install paywalls, to information providers struggling to place a value on their output in a crowded marketplace, the one thing media companies seem to get wrong time and again is pricing. Of course every business is different, and there’s no on-size-fits-all solution, but in almost ten years as a headhunter the issue of how and what to charge the customer has seemed to plague the media market.
Paul Mason, the economics editor of Channel 4 News, comes closest to identifying the crux of the problem that faces most media companies in the digital world. In his recent book, PostCapitalism, Mason says that as digital replaces physical media, almost everything is reduced to the same state – that of an information product that can be infinitely distributed and replicated at virtually no cost. Whether you’re talking about an episode of Game of Thrones, the historical worldwide prices of bauxite, or a picture of Kim Kardashian, it doesn’t matter – it’s all information that can be reproduced and shared.
When this happens, conventional laws of supply and demand break down completely: unless access to information products of this kind is tightly controlled, supply will always exceed demand – and regardless of the work that went into producing these information products, the value to the consumer effectively falls to zero.
So here’s a cheery question for you to ponder as we move into the festive period: in the eyes of your audience, is there actually any value to what your company produces at all?
I’m not asking about the value of your audience itself, that’s a different thing; but the value of your content. Chances are that you’ve been wrestling with the question of how to make money out of digital products for over a decade now, but whether you’ve asked yourself this stark question is a different matter.
It’s a question all digital businesses will need to ask themselves – and some have already started: big tech firms, Mason explains, have realised that the ‘interplay between supply and demand does not come into the price of an iTunes track’.
“The supply of the Beatles ‘Love Me Do’ on iTunes is infinite,” Mason says. “And unlike with physical records, the price doesn’t change as demand fluctuates either. Apple’s absolute legal right to charge 99p is what sets the price… Apple does not only rely on copyright law, it has built an entire walled garden of expensive technologies that work together… to make it easier for us to obey the law than to break it. As a result, Apple dominates global music sales, with around 75% of the market.”
The businesses that are struggling most with pricing are the traditional consumer publishers. News UK has experimented with paywalls, with mixed results, with The Times doing somewhat better than The Sun in this department. But, as a friend of mine puts it, “unless you really like the crossword, or you have a particular affinity for Michael Atherton or AA Gill, why would you pay for content you can get for free elsewhere?”
Publishers can’t expect people to pay for access to content out of sheer altruism. There needs to be something more in the offering. If the reader wants ‘lifestyle’ content, there’s a world of bloggers and enthusiastic non-professionals putting stuff out there for free. These individuals have taken a whole world of content out of ‘the market’ and let traditional publishers scratching their heads over what to do about it – and what to do next.
Finally though, let’s move onto the section of the market that really does understand the digital economy: the business information providers. These firms provide analysis and data that’s essential for professionals to do their jobs; and a lot of the time they are the only people to have this information, at least in a format that makes it digestible.
The best business information providers know exactly how much it costs their clients not to have that information; often because they’ve quantified the value of that problem in advance. The price, therefore, justifies itself. That’s why the likes of Thomson Reuters, Platts and IHS can get away with charging tens of thousands, at the very least, for a subscription. But even in B2B, there some well-established companies that still get pricing wrong.
Too many traditional publishers moving into subscription-based information and data are still taking a ‘publishing-plus’ approach to pricing – working out what they sell the print version for, and bumping the price up a little bit for the online version.
It’s this approach that leads to prominent information businesses charging a fraction of a price of their competitors and still not growing their market share. Customers sees that lower price and, more often than not, assumes it reflects the quality of the information.
There’s a lot to being said for being reassuringly expensive.