Free, as every junior brand manager knows, is the most powerful consumer proposition in the marketer’s armoury… but for all its value as a tactical promotional tool, free is generally worthless as a sustainable business model.
I was reminded of this truism with three related news items last week, all from NewsCorp. First, in London, the company announced the closure of the evening freesheet thelondonpaper, after huge losses since launch. Second, in New York, Rupert Murdoch declared his intent to start charging for online news content. Finally, on Friday evening in Edinburgh, James Murdoch delivered the MacTaggart lecture to this year’s television festival, taking the opportunity to lambast Ofcom’s “analogue attitudes in a digital age” and the “chilling scale and scope of the BBC’s current and future activities”.
Most of the broadcast sector’s immediate reaction to the Edinburgh lecture, unsurprisingly, has focused on the role of regulator and state broadcaster in today’s multimedia world. While, the linking together of the two stories on the closure of thelondonpaper and the intention to charge for online news content has fuelled hope among many in the press that this is the start of a brave new world of paid-for press content online and offline.
But the real linkage in all these stories seems to me to be much more about the core issue for newspapers (and indeed all media companies) around how to deliver a sustainable profitable business model in the digital age.
There’s some obvious but painful lessons being learned.
First, in the real world, “free” is a disastrous business proposition. The real world costs of newsprint, presses, street vendors and distribution means it’s bonkers to give away product for free. Sure, at the height of an advertising boom (the like of which we may never see again), there might just be sufficient revenue to sustain one free product to commuters on the underground; but you wouldn’t build many long-term business models around it, would you? You certainly wouldn’t expect sufficient ad revenue or readers to support Metro, London Lite and thelondonpaper – let alone ShortList and Sport. Someone mistook the tube for YouTube.
So News International’s decision to exit the free market in the real world is spot on.
If free is unsustainable in the real world, then the next marketing truth is self-evident. You have to make the real-world experience so special, so valuable that consumers will pay for it, especially when they can get the basic content for free over the web.
The quality of the paper and the photos, the depth of distribution, the unique articles, the variety of offers, the richness of the experience need to be compelling in the modern age, because if they’re not, consumers will drift to the free online content. NewsCorp knows the value of great content better than anyone, following the success of BSkyB’s premium sports channels on TV. But the last thing you should do is mix free content with a real world distribution cost.
Which takes us to the next story. In the online world, by contrast, free is the business model. The real world physical costs of paper, printing presses and distribution just don’t exist. With citizen journalists (or indeed career journalists) and local photographers sat in every corner of the globe, the only transparent cost is creative time composing articles and reporting news. So, it’s a high risk strategy to assume your readers will pay for content in an online world when a multitude of providers supply multiple articles. Especially when millions of consumers currently enjoy free content and are unlikely to change their habits. It’s like trying to charge for the genie once he’s out of the bottle.
Of course, there will always be the odd exception – perhaps financial reporting from the FT or The Wall Street Journal, where subscribers will pay for unique access to copy – but those will be rare.
And if the individual commentators are so good, why wouldn’t readers go direct to subscription pages for individual writers rather than via the gateway of a newspaper? It seems to be much more likely that, over time, the only way to get value for your content on-line will be to distribute it as widely as possible. If you let everyone access all your content and find their own value within it, there’s a chance you’ll find a model to make money – but the old model of controlling distribution to charge for content is dead.
Put simply, in an analogue world, spectrum (or newsprint) was scarce. Old media barons -newspaper proprietors or broadcast licensees – controlled distribution, so could charge for content. This controlled supply meant guaranteed audiences. In a digital world, there’s plenty, not scarcity, so you lose control of distribution, which in turn means you lose direct control of the charging model.
So in the real world, you need to make the content experience rich enough to charge for it; in the online world, you need to make the distribution experience broad enough for consumers to value it. Google becomes your best friend. Uncomfortable, I know. But that’s free advice.