August 7th, 2007
The New York Times has reportedly decided to abandon TimesSelect, its experiment with paid content on the web. This comes as no surprise since the pay wall was controversial, both internally and externally, from the beginning, but it’s even less surprising when you look at the fundamental economics of content in the digital media age that may soon put the final nail in the coffin of paid content.
The ability to charge for content in non-digital media like newspapers, magazines, and cable TV was based on a limited supply of content and monopoly control of distribution. The web and digital media have generated an overabundance of content — not just a spike in high-quality content but, more disruptively, and even larger spike in “pretty good” or “good enough” content. The web has of course utterly destroyed distribution monopolies. Anyone can create and distribute content on a meaningful scale.
Search in particular has played a pivotal role in transforming the economics of content — as the dominant content intermediary on the web, search has made it possible to make money on “good enough” or borderline crap content simply by ranking well in search results (e.g. try searching for “travel france” on Google and clicking the first organic result).
The new economics of media make charging for content nearly impossible because there is always someone else producing similar content for free — even if the free content isn’t “as good as” the paid content by some meaningful metric, it doesn’t matter because there’s so much content of at least proximate quality that the paid content provider has virtually no pricing power. As smart, talented, and insightful as the New York Times columnists behind the paid wall are, the are too many other smart, talented, insightful commentators publishing their thoughts on the web for free.
The WSJ.com remains the last great bastion of paid content on the web, and with the News Corp acquisition, the pressure to tear down the walls will likely be too great to resist. Even if it’s true that the WSJ has the highest quality business content bar none, the web is so awash in good, great, and utterly crappy business content, all free, that WSJ is holding onto its paid subscribers through sheer brand strength alone.
I should caveat that the “death of content” applies most immediately to text-based content, since the barriers to producing quality text-based content are arguably lower than that of any other content, i.e. video, audio, photos. The value of long-form text content — arguably the hardest type of text-based content to produce to any standard of quality — is being constantly eroded by the proliferation of short-form text content.
Blogs have played the most disruptive role in the devaluation of text content because many bloggers have content “business models” based on personal branding.
Video content still retains its value — and thus its pricing power — because the barriers to creating certain types of video content, e.g. The Bourne Ultimatum, are still high. But shorter forms of video content that are easier and cheaper to produce will eat away at the value of long form content as people spend more time with video content that didn’t cost a lot to produce. I don’t see the collapse of feature films as paid content any time soon, but we could be headed in that direction over the long term.
The other form of “content” that is being devalued as paid content is software — Google and thousands of Web 2.0 startups are giving away software for free and using ad-based business models. It’s all part of the same phenomenon.
The next paid content economy to come under assault — mobile.
UPDATE: Niche vs. Mass Paid Content
Many commenters below have rightly observed that paid content still thrives in niches, which makes sense in economic terms — the smaller the niche, the more scarce good content is, so the more likely people are to pay for it.
Perhaps it’s more accurate, then, to speak of the death of MASS paid content, which is what TimesSelect represents. But the economics of niche paid content is very different from the economics of mass paid content of days past.
Most importantly, while niche paid content may well be a business that endures, it probably won’t be a business that scales — which fits with the larger observation that original content businesses don’t scale anymore.
The smallest paid content niches will likely be the last to come under pressure from the radically changing economics of content — and that day may seem far away or even unlikely ever to arrive — but that doesn’t mean it won’t.
Ten, even five years ago, mass media content businesses based on monopoly distribution and limited content supply seemed like they would last forever…