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The Future of Media Is Paid

Posted by Michael Shehan on November 26th, 2012 at 7:45 am

There’s no doubt that the media industry has seen dramatic change in the last 15 years. Readership of traditional newspapers has plummeted. Compounding the issue, the traditional newspaper model where classifieds and ads were sold based on circulation (regardless if someone actually read the paper and saw your ad) has been absolutely decimated as advertisers have moved their dollars to more effective, more addressable advertising options.

With the rise of many quality blogs, online publications, and digital video and social media, we continue to see this content shift online faster than ever before, and the old school newspaper monetization model doesn’t work online. For instance, even if a newspaper sold all of their banners at the highest possible CPMs, it would never make up for what they have lost from their traditional model, and therefore will never be able to support the glory days of newspapers. Say a newspaper could sell four banner ads on a page for $10 CPM each (and that’s being generous). For every 1,000 page views, they would make $40. Applying Denver Post’s comScore stats for last month where they generated 45,000,000 page views, they would make $1,800,000 per month. I can guarantee you that the incremental $1.8M made from banner ads comes nowhere near what they used to make from their traditional model.

An additional problem for publishers is that the Internet is considered by most to be inherently free, which explains why publishers have struggled to establish payment models online. And the problem isn’t limited to the news publishing industry – many different industries struggle to churn out the content readers/viewers desire while remaining profitable.

The TV industry is a perfect example; when TV content first moved online, broadcasters and content providers made some TV content available for free. Even if you think back to the beginning of Hulu, it was a free service before they added HuluPlus, their premium subscription site. However, as more users have gone online for entertainment and opted to ‘cut the cord,’ we’ve seen content providers go to extreme lengths to protect their cable/satellite subscription models by requiring terrestrial subscriptions for online consumption, switching to online subscription-based models, in addition to relying on pre-roll video advertising. This has created a confusing environment for consumers, but we must also recognize this is an environment full of experimentation and testing. And while confusing, choice is usually a good thing for consumers.

We continue to see a wide variety of business models created for accessing content online, making one point very clear: the future of media is paid. Publishers and content providers simply can’t afford to provide content for free without getting something in return. But as some companies are finding out, what they receive in return doesn’t always have to be money or ad dollars, it can be a user’s time or even actions like posting on a brand’s Facebook wall. The good news is that consumers have shown they’re willing to pay or give their time for content they care about.

The New York Times paywall is a great example of a paid model that is working. When they first launched the paywall in early 2011, many were skeptical that readers would pay to access New York Times content online. Fast-forward almost two years later, and the paper boasts more than 530,000 paying subscribers for its digital editions, with some analysts estimating that the paper will have more digital subscribers than print within a couple of years.

Google recently made a move in an effort to convert engagements into cash by launching a new product, Google Consumer Surveys, which prompts visitors to answer a microsurvey on market research before accessing a site’s content. It’s a win-win for both advertisers and publishers. Advertisers run the surveys and Google pays sites five cents per response. For sites with heavy traffic, that can add up to a lot of cash when combined with their ad revenue.

And it doesn’t end there – a host of Internet-based companies have seen great success by establishing business models that require some sort of payment or engagement. The freemium model, which offers basic products or services for free, but charges premiums for advanced features, has seen an incredible amount of success with companies like Pandora and Dropbox leading the charge.

Options for watching TV content online are improving as well, and several companies have developed options for consumers when viewing the video ads played before entertainment content. Solve Media is allowing consumers to skip ads by typing in a captcha, and SkipIt allows viewers to earn opportunities to skip video ads by liking a brand on Facebook or paying a small fee. This is important to publishers because in a recent SpotXchange survey, more than 90% of consumers said they were more likely to visit a website more often if it allowed them to skip video ads.

The Internet is a dynamic environment where users create their own experience. Media companies are quickly realizing that they can no longer just copy the business models of their traditional broadcast and print mediums. It’s also clear that consumers are open to choice and paying a premium for the services and content they want online. The challenge for publishers and content providers is deciding what exactly that business model will look like.

2 Responses to “The Future of Media Is Paid”

  1. So says:

    Choice is not "always good" or nearly so. Repeated psychological studies show that too much choice, of the type we often seem today, is detrimental to good mental health.

  2. Dax Hamman says:

    Hey Mike, great piece.

    To your point, consumers have got used to having the interwebs for free and don't seem to understand that someone, somewhere has to pay for it, and if the money dries up all we will be left with is gaming blogs and cat videos.

    So yes, there has to be more advertising at a rate that makes sense for content producers, or consumers have to open their (e)wallets.

    Interestingly, the data coming out from Europe is that the new cookie laws haven't created a huge shift in behavior, with consumers allowing cookies - if this process is positioned correctly, we have an opportunity as an industry to finally tell consumers cookies are not evil.

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