I caught an item over the weekend at paidContent about paying for content. Come to think of it, what else would you expect to find over at that site? All joking aside, paying for content in the digital age is actually a very serious issue for media investors. If you're a shareholder of Disney (NYSE: DIS) or General Electric (NYSE: GE), as I am, then you know both of those businesses have ample exposure to intellectual properties that management would like to exploit over the web. For a fee, of course.
The paidContent piece discusses research apparently conducted by a News Corp. (NASDAQ: NWS) subsidiary that suggests consumers would be willing to pay for stuff on the internet. All I can say is, I hope the research turns out to be accurate.
It really is a frightening dilemma. The print media is going the way of the dinosaur because of all the information being distributed on the web, mostly in no-cost formats. And the home-video marketplace isn't what it used to be thanks, in part, to online access (again, for no exchange of money).
The idea of paying for digital content must catch on. It will be good not only for the suppliers of material, but for the technology companies that support the electronic backbone of the distribution platforms. How can the industry convince people to pay up?
This is not an easy question. Look no further than Google's (NASDAQ: GOOG) YouTube to see the problem of monetization. Surfers resist attempts at models that go beyond advertising (even then, they don't want the ads to intrude on the experience).
Media businesses simply need to perform a variety of online experiments. Start charging for content, and see what sticks. But businesses like News Corp. have to be willing to take big chances. They must possess the guts to walk on the wild side.
What do I mean? Well, in past articles, I've mentioned my belief that day-and-date release of movies (i.e., distributing product in theaters and other platforms such as pay-per-view on the same day) should be tested. And I specified that the media companies should perform the experiment with movies that count. If you do a day-and-date strategy with a project that lacks franchise appeal and has no stars attached, it might not generate a great return because it possesses no brand equity (see Bubble, a film that didn't gross a heck of a lot according to Boxofficemojo). On the other hand, if News Corp. did a day-and-date with a new X-Men flick, then the results might be more meaningful.
Let's take the thought experiment further: What if News Corp. were to release a project like X-Men day-and-date on the web? What if it released the film on the web first? That would grab a lot of attention, and it could help teach consumers that buying content on the internet is a valid form of entertainment access.
My point is that content companies have to be willing to push the envelope. And they have to be willing to stand tough. Start charging for library product. Uncover what works and what doesn't.
Do I hold hope that this sector will finally figure out an answer to the conundrum of digital distribution? At the moment, I don't believe any CEO out there is affording this problem the kind of serious consideration it demands. Who suffers in the end? Shareholders. Long-term value for those who own the stocks of a Disney or a News Corp. depends in large part on extracting the most money possible from a content library. Executives better get this through their heads.
Disclosure: I own Disney and GE; positions can change without notice.
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Reader Comments (Page 1 of 1)
9-27-2009 @ 4:11PM
thedude said...
When I saw the headline I figured this would be about news and general information content which is obviously ad based bloggingstocks for example. News content and printed material is already full of ad space. The cost we pay for subscription and in home delivery usually barely even covers the cost of delivery and I certainly wouldn't pay for online new or informational content PERIOD but I don't mind ad based services.
Since you are referencing feature based entertainment it's a different barrel of monkeys and I agree with you.
The cost for two of attending a movie on opening night is $3.00 in gas, 30 minutes standing in line $19.00 for tickets $8.00 for popcorn with synthetic butter $7.00 for waterdowned sodas 20 minutes of pre-movie advertising and trailers, shoes sticking to the floor and some loudmouth talking through the whole thing or other idiots just causing disruption (moron teens and cell phone users)
Attend 1 movie per week for a year and you're looking at $2000.00 for two people. Family of four $4000. About the cost of a midlevel entertainment system that will last for upwards of 4 years.
I personally have not gone to the movies since 2005
Compared to my 60" plasma and home theater system as well as the comfort of my own home- the slim benefits of commercial theaters can not compete. Also home theaters are evolving in quality much faster and more economically than movie theaters. I will probably be updating to a 108" projection within the next 6 months
Would I pay for downloading and viewing a movie at home the same weekend as the theatrical release ? Probably not as I rarely use the pay per view or on demand features of my TV provider. Timing just isn't that important to me.
When I am interested in a movie I usually buy the disc within a week or two of it's release so assuming it was released on BluRay DVD at the same time sure I would buy it reasonably soon thereafter.
Although I could see hundreds of millions of people paying $1 to $3 for a temporary download opening weekend that is viewable anytime/anywhere within say 48 hours
This would be a more cost effective and efficient way for studios to provide content although it could potentially spell the downfall of the movie theater as we know it - Not really a bad thing as they pretty much gouge movie goers anyhow and the worst parts of the movie experience is the theater.
I think paid content is the way of the future and the only speed bump is bandwidth - BUT downloading a movie over night(or whilst at work) for later viewing that weekend would eliminate the time necessary for slower downloads of very large 6-10gig files - I'm guessing here I don't know how big an HD movie file would be , I did download a SD copy of The French Connection and it was just over 1 gig.
Of course the studios would have to have MASSIVE server capacity and dozens of mirror download sites to handle the traffic. Still cheaper than producing hardcopies for theatrical distribution though
9-28-2009 @ 1:52AM
Ronald S. Ronny said...
Very simple problem at least *conceptually.*
Just ask and answer the basic relevant questions:
1) "Why is content free, at the present?"
ANS: Because the content providers are giving it away.
2) "Why are the content providers giving away content?"
ANS: Many reasons: because people aren't going to the movies as much, not buying print media, and the main viewership/readership trend is online. Give away the content online and sell ads.
3) "But ads aren't covering all the costs -- when will free content end?"
- ongoing expenses that exceed incomes will force all media/content providers to either go out of business or merge with each other
- consolidation in the media business will allow fewer, larger firms to reduces costs by reducing overhead
- consolidation in the media business will allow fewer, larger players to withhold popular content *unless* it's paid for (think about HBO: it's not included in 'Basic Cable', and it has highly-desired HBO-owned-or-controlled content that is withheld from viewers unless they pay extra beyond 'basic cable')
The main problem right now is this: too many media companies are playing a game of 'let's take market share by 'dumping' our content below cost' just like Microsoft killed Netscape and other firms by giving away technology that cost them a fortune to create.
The media companies look at their rivals and decide "We *have* to give away our content, all our rivals do it, if we start charging we'll lose all our viewers and then our advertisers then we're go out of business."
This may be true, but in the long run all media firms must start making money on their content or go out of business anyway.
It's a matter of time before media firms will merge, go out of business, be acquired, then start applying a 'basic cable/premium content model' for distributing their content. This already exists today but is not yet prevalent.
It *must* become prevalent because the creation of the content is NOT free. It's cost of creation MUST be passed on to the user.