4 Business Models in the Age of Free Content

According to CNN Rupert Murdoch expects News Corporation newspaper websites to charge users for access within a year. The comments on the article are pretty negative, only three of the most recent 50 comments would pay for content and two of those specify that they would not pay for News Corporation content. Most of the comments indicate a high expectation for free content to continue some of the rhetoric paints this as a threat to the democratic nature of the internet, while some analysts predict a shake up the culture of free content.

So who’s right?

Wall Street Journal requires paid subscription to access most content.

WSJ requires paid subscription to access content.

Amongst all the commentary on the death of the print media I came across this chart from the Silicon Alley Insider, showing an overall drop in newspaper circulation on newspapers across America, with one notable exception, the Wall Street Journal. News Corp owns the Wall Street Journal, and they require a paid subscription for almost all content. It’s an incomplete picture but it may indicate that maintaining a fee based subscription for content online provides a dis-incentive for people to switch to online content.

It’s been clear to me for a while that there’s something a bit screwed up about the business models of most web 2.0 sites. I wrote a couple of weeks ago about YouTube’s money worries, their ad income doesn’t cover their bandwidth bill.

There seem to be three possible models to make money from online content;

Subscription: It can work, but it is tricky to get people to subscribe. It seems to be most successful when some content is available for free and some available as premium content, this has worked for Salon for example.

Advertising: Only a few high traffic websites will make significant advertising alone. This was true back in 1997 when Jakob Nielson wrote about it and it’s certainly now when the growth in online content has been growing significantly faster than the number of users. As site numbers drop the advertising spend drops rapidly, compare the user numbers and advertising revenue of AOL.

Plus there can be a significant dissonance for the reader between the content on the site and the ads served  – although this is getting better all the time.

Commissioned Content: Writing and publishing content as commissioned by a company blurs the separation of editorial and advertising copy. It’s generally considered bad journalistic practice and it’s not a quality strategy. It’s the content behind sites like ArticlesBase.com, their “top authors” produce 25 articles on one subject in a sort of link farm attempt.

Picture 14But there’s one further model not widely used; Micropayments. In this model some content can be freely available and some content can be for pay. The “for pay” content is sold for a small amount per read. This model replicates the iTunes model for music, and has a similar transforming potential for written content. This model can work at the blogger end of the publication schedule right up to New Corp.

Some bloggers have already been experimenting with micropayments, often providing blog content for free and seeking a small payment for an ebook. This model was discussed for WSJ but generally slammed by the blogosphere, many of whom deplore the idea of paying for news.

In other media we pay. We pay because we want a measure of independence and quality. So why not on the web? Why do we suddenly feel we have the right to free news? I think our perspective has got skewed by television. We feel we don’t pay for news on TV, we feel it’s beamed for free into our homes. It’s free content (or nearly free, if you pay a licence). What we fail to realise is that in the TV business model we are the product. Television funded by advertisements sells those advertisments based on viewer numbers.

Back to the original question; I think both are right. The bloggers are right in that our expectation for free content is not going to disappear, and there’s so much of it available. The commentators are also right, content driven sites are already facing the challenge of finding a sustainable revenue model. It’s unlikely that one model will fit all – and it’s unlikely that it will feel as “democratic” as the blogosphere expects.

coin photo from dichoheco via flickr

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