Content Wants to be Un-Free

Written by R. Scott Raynovich - Light Reading

Thursday, July 2. 2009 at 11:35 AM EDT 4 comments

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Following up on the thought about information wanting to be un-free, let's address the issue of whether more content should be free -- or un-free? The free-vs-not-so-free debate appears to be endemic in the content business. I believe there are a lot of misconceptions about this, and that the "Free Internet" soldiers are actually missing the story.

The free debate seems to be getting fired up, one of the catalysts being the release of the book, Free by Wired editor Chris Anderson -- who has been quite free with his use of Wikipedia material. (By the way, if he likes free so much, why is he charging for his book?) For those of you who don't know Anderson, he is a great purveyor of hype and myth, having been the author of one of the Internet's most dangerous myth-generating memes, the "Long Tail." His Internet firefight with author Macolm Gladwell can be found on the NY Magazine Website, entertainingly titled "'Dickweeds,' 'Vampire Squid,' and 'Morons'." Fun stuff!

The fact is, the media industry, throughout history, has only partially survived on free, ad-supported content. Much of it, especially in the entertainment sector, is a cash business. Free is death for the industry. Media companies are going to have to figure out how to charge more on the Internet if they are going to survive. Barry Diller has lined up in this camp. Jon Fine begs to differ. Who's right? The billionaire content mogul, of course.

Of course, the argument isn't totally black and white. It turns out that if you examine the content world right now, you'll find different models for different products. But if you look at trends over time, industries have often migrated from free to paid, rather than the other direciton. Cable TV is the best example.

If we carefully examine the media world bit by bit, what we find is that there are lots of nice businesses in paid content, and free content is largely at the bottom of the food chain. Let's go through the business sectors one at a time...

Television: I started watching TV on a black-and-white Zenith with rabbit ears. It was free. There were about four channels. There are now 800 channels and my TV bill is about $100 per month. Suddenly everybody wants to pay $20 per month for HBO. Where did the free go here?

Videos: You used to rent from Blockbuster for $3 per night. Now You have the convenience of digital pay-per-view, at $4. Not a bad deal. Not much change here, though the value of the experience has gone up (more convenience, and sometimes even movies in HD). And it's still not free.

Music: The poster child of everything that's gone wrong in the media industry. But the problem is not piracy, or that people won't pay for it -- the problem is the music industry hasn't found a way to innovate or upgrade the experience to keep pace with technology. Apple upgraded the experience and found people who wanted to pay, and they did. Shocking, isn't it?

The music industry needs to upgrade its experience online. How about the music mega-experience, where you pay a price to step into your favorite band's "virtual world," listen to special takes, see live concert video footage, and chat with the lead guitarist? Fans would pay a premium for that. I think it's coming.

Movies: Still largely a premium, paid business. When the blockbusters come out, people still pay up. 3D has the first chance in a while to boost the theature industry's prospects. Again, here, a higher-quality experience = higher revenues.

Internet video: Lots of children playing in the sandbox, hoping to discover a business model. Mostly crap. Few ad revenues. Model remains broken. Once the novelty of Internet video wears off, a lot of these sites will be in trouble. I think it will gradually migrate to subscription services and/or micropayments. The Free model here really isn't anything to speak of.

Newspapers: OK, so it's not just music. This industry is nearly gone. But some papers have gone to selling subscriptions online with some success. There may be a model here yet. One problem for newspapers is the same as that for music: failing to adapt to technological developments. The biggest issue in the industry, however, is still scale and the need to restructure -- and the costs of paper and union labor.

Various other Internet content (myself included): I break this down into two groups -- Low CPM content and High CPM content. High CPM content succeeds in having a more focused audience and higher quality demographics. Low-CPM content is just that -- mass-market schlock, with tons of inventory. I think this part of the Internet business is mostly plagued by artificially high inventory, fueled by venture capitalists and scads of money-losing operations that subsidize mediocre content. The economy will eventually shake this out, getting rid of the excess while a few orginal content providers survive. It's clear now that there's far more inventory than there are dollars.

That's how I see things. I hope I'm right that there will be more revenue, and paid content models over time. The key is for the media companies to focus on improving the consumer experience and product innovation so that they can demand a higher price.