 Alex Baxter Frank Cutitta Paul DeBraccio Judy Franks Jay Lauf Daniel Lagani Ken Sonenclar Domenic Venuto Marta Wohrle Matthew Yorke |
|
By Domenic Venuto
The notion that news must be free on the Web is a game of chicken. It is a game that requires nerves of steel, much bravado and an irrational belief that the other person will give in first. In the version we are seeing play out daily the question is which news organization will remain? Which one can hold out the longest before caving in and swerving off the free content highway? The Rocky Mountain News didn’t make it and the Tribune’s nerves, despite all its bravado, are frayed. The model will change to a paid model but not until more newspapers close their doors.
People will pay for content—there are plenty of examples where they do—they have just been trained by the industry to expect online news content to be free. This isn’t the industry’s fault. It simply occurred out of necessity and the online world having no physical barrier or boundaries—suddenly the New York Times is competing with the LA Times, the Chicago Tribune and Reuters.
Think of it this way. If someone offers me a product at no cost, that looks and feels the same and has the same brand promises of quality and integrity as a similar product that I have to pay for, I will always choose the free product. I would be stupid not to.
If I am the person selling the product, my choices are limited. To remain in the market, I too have to give my product away for free and work out another way of making money. Alternatively, I can keep charging for the product but work hard at trying to differentiate it from the free one.
If I choose the first option and give my product away for free, I will only remain in the market for as long as my cash reserves hold out or until the other guy goes out of business, whichever comes first.
If, however, I decide to continue charging consumers for my product, even though someone else is offering the same product for free, I might try to use clever marketing tactics to convince my customers it is worth the price. In this scenario, I will only be successful for as long as I can acquire more customers than I lose—which will happen once they realize they have been paying for a product they don’t have to pay for.
This has happened before. Think back to the online e-commerce in the 12 months before the bubble burst. Traditional retailers and distributors were competing with well-funded online start-ups challenging their business model. To gain market share, these new online retailers started enticing consumers with buy-one-get-one-free offers and free shipping. Consumers came to expect zero delivery charges—a completely unreasonable expectation when these costs were real. There were even cases where online retailers were selling product below cost to attract customers. The game of chicken started. There was no loyalty. The consumer got what they needed at the best price and moved on, searching for the next deal guaranteed to be out there.
Clearly, this was an unsustainable model that only lasted until the online start-up’s cash reserves ran out. When the bubble burst and attention to profit returned, those online or physical retailers who survived could now afford to charge shipping without consumer backlash. Attitudes were changed.
While unfortunate, the bankruptcies and closures of many newspapers are a necessity. It’s the only way we are ever going to challenge the business model that news on the Web should be free and only supported by ads. We will continue to see newspapers and local content creators closing their doors throughout 2009 and into 2010. This will leave news to consolidate with a few major players such as the Wall Street Journal, BBC, New York Times, Washington Post, Reuters, Bloomberg and perhaps the Associated Press in a different form.
It will be these institutions and a handful of online-only news organizations that will supply the majority of national and international news. To remain viable, these sources will then be able to supplement their advertising revenue with some form of subscription-based revenue. With only a few sources now supplying trusted content, consumers won’t mind paying for it. The decision will then be what format (per article/micropayment or time based) and on what platform (mobile, Web, print or television).
The only question then is who provides regional and community news coverage? My next article will cover who I think will fill this void.
Domenic Venuto is SVP and Head of the Media and Entertainment Practice with the New York City office of Razorfish, one of the largest interactive marketing companies in the world and one of the largest buyers of digital advertising space. He can be reached at domenic.venuto@razorfish.com.
Domenic Venuto Archives
|
