Rich Media Realities
I wrote a post on my personal weblog several months ago called The Future of Media where I invited anyone to take my content (actually my RSS feed) and do anything they want with it. I suggested that there were four things that content owners needed to do to maximize the value of their content. These four things are:
1 - Microchunk it - Reduce the content to its simplest form.
2 - Free it - Put it out there without walls around it or strings on it.
3 - Syndicate it - Let anyone take it and run with it.
4 - Monetize it - Put the monetization and tracking systems into the microchunk.
I still believe that this is the best formula for maximizing the value of content online.
But since writing that post, I have been contacted by many different content owners and participants in the media and entertainment business and through the ensuing conversations, I have learned that there are a myriad of reasons that content owners aren't going to free their content as easily as I will free mine.
As I have engaged in these conversations and listened to the business reasons, legal reasons, fears and concerns of content owners, I have come to the conclusion that my nirvana scenario isn't going to happen anytime soon.
So I have spent some time mulling over these conversations, mixing my views with the realities of the marketplace and I have come to the following conclusions:
1 - Content owners should make all of their content available online as soon as possible and they should make it available in both free ad supported media and paid media with no advertising. The surveys are being done as we speak and its clear that many more people want free ad supported content, but there is certainly a significant market for paid downloads that content owners should support.
2 - Media type doesn't really matter. The same business models will work for audio, video, text, games, etc. There really isn't any distinction between various forms of media when it comes to online business models. Bits are bits. This means that music MP3s should be made available as free ad supported content as well as paid downloads. That's already happening with podcasting, but it should happen with all music content. If Pepsi will pay a $20 cpm for a pre-roll ad in the latest Beyonce track, I should be able to get that track for free as long as I listen to the ad before hearing the song.
3 - Free ad supported content should not be DRM'd. And it should not be possible to fast forward through the ads. Just like many DVDs come with previews that cannot be fast forwarded, so should ad supported content. If you don't want the ads, pay for the content. The ads should be delivered in real time and targeted and should be measurable. This model will support pass along (ie file sharing) as content owners will make more money as more ad impressions get served. These free ad suppored files should support a payment mechanism that strips the content of ads if you want to "own the files".
4 - Paid content models are going to require some form of DRM (at least in the near term) to enforce the payment mechanism for many content owners, but the current state of DRM technology isn't going to cut it. The existing DRM technologies do not provide for enough portability (they really need to support every playing device that a consumer would ever want to use and they aren't even close). And many content owners will live without DRM as companies like eMusic are demonstrating in the music market. Over time, many content owners will move away from DRM as they make more money with free ad supported content and the value of paid content declines. Ultimately DRM'd content will be limited to very high value niche media.
5 - The market must move to variable pricing. David Pogue wrote a critque of Google Video in today's New York TImes where one of his complaints was the lack of a consistent price point (as compared to the $0.99 for every song in Apple's iTunes store). But in this regard, Google has got it exactly right. Online content needs to be a marketplace just like everything else. Reruns of I Love Lucy are not worth the same amount of money as the latest Extras episode. The same is true in music. Beyonce's "Check On It" is worth a lot more right now than The Foundations Build Me A Buttercup. But they are priced exactly the same in iTunes tonite. It doesn't make any sense and it won't last as a business model.
6 - Content must be made available in RSS so that consumers can subscribe to it. If I do a Google video search and find Charlie Rose and realize that he's really great, I should be able to subscribe to his show right then and there. RSS needs to support both the paid and ad supported business models described above. Not all content is going to get consumed in a streaming mode and RSS is vastly superior as a delivery mechanism than manual downloads.
We are witnessing a seismic shift in the distribution of rich media content right now. In the past five years, we have gone from no legitimate marketplace for rich media content to a world where almost all music is available online and where video is moving online very quickly. For the most part, it's a paid download market. But that isn't going to last in my opinion. Ad supported business models will take off in the not too distant future and will co-exist with paid downloads. Consumers are going to get the choice, not only of what media they want to consume, when they want to consume it, and where, but also how they are going to pay for it and what they can do with it.
It's an exciting time with a lot of change afoot. And that should be a recipe for some good venture opportunities. If you see this world evolving similarly to us and are building a company to take advantage of this opportunity, we'd like to hear from you.
January 19, 2006 09:02 PM, By Fred Wilson
Tags: advertising drm media rss
Comments (8)
I am curious as to which way you break when it comes to some of the issues you address that have a bit of built-in cognative dissonance.
Issue #3 (whose principles seem to be implied in #1 and #4) has a problem: in order for the user to be unable to avoid the ads they cannot be given complete control of the content. This mandates some sort of viable DRM. Commercial DVDs force you to sit through the "coming attractions" by using DRM; when I rip the DVD to make a copy the removal of UOP codes happens automagically along with region unlocking, etc. To prevent users from skipping the ads or editing the content to remove the ads it becomes necessary to use some form of DRM (in this case the "R" that is being managed is the content creators mandate that you have to watch the ad to get to the feature.)
Which desire trumps the other? Ad-supported content or DRM-less content?
Posted by Jim McCoy , January 19, 2006 11:22 PM
Indeed, you are on the money in your insight. Makes total informed sense.
I would add that what about the ability to distill (through the nose, just kiddin'--you know what I mean) what open source crews add to the mix. Or am I livin' in a string theory parallel universe.
Also, I have to give you some credit for appreciating Google Video: now that's what I call an embarassment to commen sense!
Posted by Marina Architect , January 19, 2006 11:47 PM
Free is good. Until you're the content creator, where people get value out of the content, but don't click on the ads. When people stop clicking--the equivalent of flipping to a movie during the Super Bowl--you stop making money in this model. The only likely way is through CPM ads, at which point the content creator becomes so dependent on the large corporations who will market and advertise for brand almost indiscriminately that it affects the content.
People actually do pay for value--ALL THE TIME. iTunes is a paid model and it works. You pay for the software you use, even when you think you haven't; it's called a "bundle". The audience will tire of ad-supported everything, CTR will not go away but it will no longer be the engine of growth it is today, and microchunking might happen but it won't be monetized through ads for very long; the audience will tire first.
So free is good. But it's just a tactic.
Posted by Charlie Crystle , January 20, 2006 12:08 AM
I second Jim's comment above on ad-supported vs DRM-less content. Let me raise another issue:
Image you download a series of ad-supported music and then have to suffer through a commercial between every song! It would make FM radio feel like satellite. Now, how long do you think it will take for someone to develop a program that strips the ads out of the media? I give it 24 hours after the first programmer has to live through the above scenario.
I just don't think it will work. You use DVDs as an example. Well most people I know hate the mandatory commercials (ask any parent who is trying to get the movie on while their kid is screaming in the background). We paid for the disc, why are we forced to view the ads?! Someone will come up with an easy way to strip out the the ads. And when they do, most people will use it and the model will break.
Posted by Daniel Hallac , January 20, 2006 08:47 AM
Fred,
I would still like to interview you for my podcast, to talk about the future you see for podcasting.
Let me know if you are interested.
rob @ podCast411
Posted by Robert Walch , January 20, 2006 06:54 PM
Fred, interesting post, completely in-line with what we are seeing in the marketplace. Although conceptually I am in agreement with you, I difer on how to implement such as business model, at least in the immediate future.
Our current research suggests that 10% to 15% of users are willing to pay for content if it's very relevant for them; the other 85% rather interact with an advertiser to get access to the content.
In my opinion, you need to de-couple consideration (how do you pay for the content) with the content itself. So it is not really about new variable DRM systems but more about mechanisms for obtaining 'credits' that can be used towards media purchases. So from a consumer standpoint, a decision can be made on either purchasing credits with money or interacting with advertisers to get them. That's the model that is working for us at Tokenzone.
The other benefit of this system is that it is way easier to manage. You can add and remove advertiser interactions easily without having to deal with dynamic content changes.
Posted by Ricardo Arias-Nath , January 22, 2006 11:09 AM
You got me thinking and I like it. But I wish I had some answers to offer.
I think the "realities" might be better described as "guidelines".
Content - wants to be free. It's natural state. DRM and advertising get in the way. But I think all of the models will work.
Content can create brand. And if your brand is more lucrative than your content, you are probably wise to give your content away for free. What's this and your personal blog about anyway?
But I like your model. and it transcends content, I would broaden it to apply to services.
1 - Microchunk it
2 - Free it
3 - Syndicate it
4 - Monetize it
ie unbundled web services driven real estate
etc. web services for faxing. VoIP. Digital Printing. Data Processing. CPU. Travel...
Posted by Eric Dawson , January 24, 2006 01:35 PM
Great post, but there is slight problem with number 5 (supposed to be 6?). RSS is great for those that understand it, but what about those who don't? The vast majority of internet users have no idea what RSS is or how to use it. I think it is time content owners looked for other mechanisms of distribution to reach the mainstream audience. I think in your video scenario, a streaming mode will win. Why? People understand services, not feeds.
Posted by Jeremy Stein , January 19, 2006 11:09 PM