With the New York Times finally erecting its paywall last week, I thought it was relevant to write about the subject of content, and how we value it. A good friend of mine is a film director and the closest person I know to a professional creative person. Despite having directed multiple studio films, my friend still hasn’t found financial success. He is currently living on the floor of his brother’s house, and is pretty much broke. And at age 36, he has no plans of giving up any time soon.
I once tried to explain AOL’s business strategy to him – I told him we are trying to produce high quality content for the web – and his response has been ringing in my head ever since: “your first problem is that you’re calling it content.” He doesn’t live on the floor of his brother’s house so that he can create “content.” He does it to create artful, beautiful, and emotional experiences. He does what most of us dream of doing as kids and most of us eventually give up on. It occurred to me that calling it content commoditizes it and sends a message to the creative community that quality doesn’t matter. It’s not unique to AOL either, everyone in Silicon Valley calls it content - it was eye-opening to see how repulsive that was to my friend and probably to most of Hollywood and the artistic community.
Journalists and reporters are also artists of a certain kind – maybe better described as passionate professionals. The business model of news distribution is changing dramatically, and we all agree that journalists need to get compensated if we want them to continue the important work they do. But I would argue that charging consumers to read news articles is not only bad for consumers, it’s also bad for journalists.
I have had a chance to work with hundreds of publishers over the last several years, first heading up business development for Digg, and now as VP of business development at AOL. Publishers have two revenue models: subscriptions or advertising – and in some cases both. The benefit of the advertising model is that the publisher and the writer have mutually aligned interests. They both want as many people reading each story as possible. The writer gets famous, and the publisher has more pageviews on which to sell more ads. However with the subscription model, the writer and publisher have misaligned interests because while the writer still wants broad distribution, the publisher wants to keep the best stories locked up for only the paid subscribers to see. The better writer you become, the less distribution you get.
The New York Times released what seem like complicated rules allowing readers to access up to 20 free articles per month, but the first five clicks from Google don’t count toward that 20, nor do any clicks that come from Facebook. They are trying to delicately balance the conflicting needs of getting massive exposure for a story while still protecting the value of a subscription. While I think they’ve done an elegant job with a complicated problem, I worry that the underlying model just isn’t feasible.
The fundamental question is whether readers will pay to access stories from one publisher when others offer the same news for free? Even if you believe that the New York Times writers have the best prose, analysis, and access to newsmakers, is it really $180 a year better than all the other free sources on the web combined? Then consider that you are probably reading the article on a three-inch screen while stopped at a red light, and it’s even more difficult to justify the subscription model.
If writers need to get paid, subscriptions don’t work, and ads aren’t paying the bills, then what will work? I think the answer is out there. One possibility: Netflix reportedly bid close to $100 Million to distribute a TV show with David Fincher and Kevin Spacey. Netflix is a brand that offers a broad range of value and convenience to consumers, and is enhancing that value proposition with top tier premium shows. That’s a much easier sell to a consumer than an individual publisher charging to access its own news articles. I also think there are ad models that will work, but that’s a subject for a different post.
By analogy to what Netflix is doing, an aggregated news reader like Flipboard (or AOL’s upcoming Editions) is something that offers value beyond just the articles. I could imagine paying a subscription to Flipboard if it gave me access to multiple premium sources, I could read the articles within a really slick interface, it made smart recommendations for me and constantly added features that made my news reading experience better. Then Flipboard could share that subscription revenue with the publishers. I think the money is there to pay for the cost of creating and publishing the news, but it is going to take more creativity than we have seen so far in the publishing industry. As business people, we need to do better. Let’s start being more creative about how to get creative people paid.