In the early days of the Internet, the newspaper industry made a terrible miscalculation. Under the belief that the first newspaper available on the Internet would own the space, publishers worked furiously to make content available – largely for free.
The trouble with giving something away for free is it becomes terribly hard to start charging for it later.
Even free evangelists like Mike Masnick understand that you are forced to make money off of things around the free, as opposed to the free product itself. Masnick often cites musicians as the case study – just accept the fact that you’ll never make money off the music and instead sell concert tickets and t-shirts.
So the newspapers pooched the deal when they went online for free, undercut their own business, and now cannot move to a pay model.
The video content industry would be wise to learn from this, but often seems doomed to repeat the mistakes of both music and newspapers. More and more programmers are handing their content out for free; and not just the broadcasters who have always been free. They seem to be operating under the same ridiculous construct that killed news – “this is the future, so we better get on board or be left behind.”
But television isn’t music, nor is it newspaper. There is an absolute glut of news and music in the world. Anyone can create either with minimal effort.
Compelling, stimulating, on the edge of your seat video is something altogether different. Any monkey can pick up a camera and shoot video. YouTube has proven that. But very few people watch YouTube 160 hours per month. News doesn’t approach that figure and neither does music. Only TV generates that kind of consumption.
Video is different.
Programmers need to figure that out and do it quickly. Giving away compelling video for free is a recipe for disaster just as it was for news.
Fortunately, programmers have a tool the music and news industries never did – the app store. Just yesterday Warner Bros made news by releasing Inception and The Dark Knight as apps.
While The Daily is attempting to create an app based news outlet (and charging 50 bucks a month for it), I expect that pilot program will be dead by this time 18 months from now. There is simply too much news available for free.
For programmers, however, it’s not too late.
Programmers should follow Warner Bros lead and immediately start thinking of ways to protect their content within their own apps. Why give the content away for free through Hulu, or your own website, when you can do it through an app, and protect the content.
Video delivered via apps (whether desktop or mobile) would allow rights management, and provide a revenue stream, not a revenue hole. Want to watch Lost via your iPad? There’s an app for that.
The High Cost of Free
The suggestion that content owners move to an app delivered model should scare the bejeezus out of the free radicals like Free Press and Public Knowledge. They want content to be freely accessible to all. This model flies in the face of that.
The fact is there is simply no business model in “free” for the video industry. Broadcasters have come to realize this and are pushing four fold increases in retransmission consent deals so cables paying subscribers can underwrite the free viewing of others.
Everytime you see your cable bill rise, thank “free”. But that’s an unsustainable model. More people will get tired of price hikes, and switch to free. As more people switch to free, and fewer people pay, more content will go away – unable to pay the bills on a declining number of subscribers.
True A La Carte
Moving to an app model should be cheered by anyone who advocates for a la carte. Under an app model, programmers could make all of the content from a channel available (which would likely be very expensive) or have different apps for different shows.
Buying all of the content from a channel would be the realization of those who pursue a la carte cable. Alternately, you could buy all the episodes of a show under something like the Kindle model – that is the app is free, and you buy content within it on a per show basis.
But wait, you say, doesn’t iTunes already do that? Yes, but as GigaOm notes in the article linked above, iTunes movies are available in fewer countries, so apps open up a whole new market for content creators.
Net win for the programmer.
Granted, programmers would need to pull their content from sources like Hulu and Netflix, and invest in the development of proprietary applications, but the cost of that over the long term is significantly less than the cost of going out of business.