Did we ever pay for content?

In an essay that, on first blush, ranks near to Clay Shirky’s seminal thinking-the-unthinkable think piece, Paul Graham argues that we never paid for content:

In fact consumers never really were paying for content, and publishers weren’t really selling it either. If the content was what they were selling, why has the price of books or music or movies always depended mostly on the format? Why didn’t better content cost more?

A copy of Time costs $5 for 58 pages, or 8.6 cents a page. The Economist costs $7 for 86 pages, or 8.1 cents a page. Better journalism is actually slightly cheaper.

Almost every form of publishing has been organized as if the medium was what they were selling, and the content was irrelevant. Book publishers, for example, set prices based on the cost of producing and distributing books. They treat the words printed in the book the same way a textile manufacturer treats the patterns printed on its fabrics.

Information – Bloomberg terminals, stock newsletters – is a different business. Publishers flatter themselves when they argue they are in it.

What happens to publishing if you can’t sell content? You have two choices: give it away and make money from it indirectly, or find ways to embody it in things people will pay for.

The first is probably the future of most current media. Give music away and make money from concerts and t-shirts. Publish articles for free and make money from one of a dozen permutations of advertising. Both publishers and investors are down on advertising at the moment, but it has more potential than they realize.

I’m not claiming that potential will be realized by the existing players. The optimal ways to make money from the written word probably require different words written by different people….

The reason I’ve been writing about existing forms is that I don’t know what new forms will appear. But though I can’t predict specific winners, I can offer a recipe for recognizing them. When you see something that’s taking advantage of new technology to give people something they want that they couldn’t have before, you’re probably looking at a winner. And when you see something that’s merely reacting to new technology in an attempt to preserve some existing source of revenue, you’re probably looking at a loser.

  • penas

    I’m all with you. The prix fix of papers, books and specially music records, regardless the size of the symphonic orchestra or banjo music. Also we mostly never paid for AM radio, TV, cocktail lounge music – you can include some real good joints on that.

    These formats used content to attract audiences or customers, thats all.

    Thank you for allowing me to see this so clear now.

  • I have never paid for content, no.

  • It’s good to take an extreme position to try and evince some insight, however, the idea that publishers sell paper is a bit of a reductio ad absurdum.

    A counter argument would be, well, what about books by authors that don’t sell. A best selling author and a poor selling one are both printed on the same paper. If the publisher were selling paper, wouldn’t there be equal demand for both?

    As far as selling “information”, an example of this was corporate libraries before the web. Many of them subscribed to newsletters that were the equivalent of today’s blogs in specific industries and often paid thousands of dollars for the insights. Something like “SeekingAlpha.com” may have been such an investment newsletter.

    We still pay for books. I just bought Dan Brown’s “The Lost Symbol” ebook from Barnes and Noble for 10 bucks. Was I really paying for electrons? If so, why didn’t I just stare at an extension cord?

    I think for many in the 21st century economy is they are suddenly immersed in a world of showbiz where only the very best earn any money at all. When you work in factories, you make wrenches, and people pay the $10 for a wrench, and you get your $20 an hour for working there, and its all very widely disbursed. There are few “super star” wrenches who get all the glory while “wannebe” wrenches lurk around WalMart…hoping to get discovered.

    • dugfromthearth

      When you paid for the ebook you were not really paying for the content. The content is available to you free from the library. Or by borrowing it from a friend. What you paid for was the form of the content in an ebook that you own. You paid for a more direct and faster means of accessing the content.

  • Carson

    In supply chain “process models,” the old model (just to repeat it) is that Time and the Economist (and newspapers and other media) are in the business of producing an audience. Content plus the means to make it available are the means by which they produce their audience, which they in turn sell to their customers, the advertisers. The cost per page isn’t the issue, it is the cost of producing an audience member versus its market value, once produced.

    As production and distribution technologies and economics change, there are new ways to create an audience — USA Today added color, WSJ added regional copies, newspapers added internet and handheld distribution — and older modes of producing an audience using giant presses were less competitive and they started disappearing.

    Some business models do sell content. Charles Spurgeon published one-page sermons on Mondays following his Sunday sermons and sold them for a penny in London. At the peak, he sold 250,000 a week, more than some newspapers, and the audience he produced was attractive enough that he could sell it (to advertisers). But that wasn’t his business model — he was a preacher and he was selling content: the audience paid Spurgeon a penny to read Spurgeon. Book authors often sell content. Some small political or cultural or religious publications sell content and have not advertisers.

    But large news distributors (papers, TV, magazines) have a different business model: they are using news (primarily, speaking economically) as a tool to produce an audience. The content is a means to an end; they aren’t selling the tool (content), they are selling (primarily) the thing it makes, the audience. This changes the accounting ratios used for valuation. To help the ratios, newspapers and TV have long outsourced a lot of content creation and generate value just from their role as distributors in the audience-creation business — Major League Baseball, for example, produces content (as does the AP covering baseball) that they sell to these distributors who use it to create an audience that they sell to advertisers.

    I know this is all well-known — I’m just saying that doing cost-per-page is often not the ratio of interest because pages are not the product, audience members are.

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  • Andy Freeman

    Craigslist proved that we bought newspapers for the advertising.

    • I’ve told the story here about the Sunday NY Daily News (when I was its editor) getting back more than 100k readers when we got coupons back in the paper after a strike.

  • Jim Grinstead

    Format probably has little to do with it — we never put a value on content. Every knows, as Carson outlined well, that we were in the business of building an audience, not selling information.

    A fellow publisher friend once advised me that the single-copy price of a newspaper should never be more than a cup of coffee (this was pre-Starbucks). That kind of thinking showed that we didn’t value content, we just wanted more readers/viewers.

    Format is not the issue. The business model is broken and since we never put a price on content before, the public, quite logically, isn’t buying the argument now.

    What has been missing from the discussion is the question of what the advertisers plan to do. Macy’s and other department stores build business on full page ads. How do they intend to replace that marketing tool if newspapers go online and/or reduce frequency. Those needs are still out there and it makes some sense to talk with our customers and see what we can do to help one another.

    As for content, we probably can make some money using a micropayment system, but we have to do what we’ve always done — sell the convenience. It costs more to have a newspaper delivered to your home than to a box next to the bus stop. Consumers understand this.

    If we add convenience of delivery/discovery to information, we’ve increased the value and can charge for that service. But it’s tough to argue that consumers should suddenly place a value on something that we didn’t even put much value on in the past.

  • The NYTimes has an article today that appears to indicate that at least some folk pay for content — the piece also points to what might be some lessons for hyperlocal news…

    In the piece, we see a community paying for exceptionally “hyperlocal” news. (i.e. news of a family cutting down a tree and an 89 year-old man being tuckered out by the task of directing traffic…) But, there are some other interesting bits in there. For instance, the idea that the newspaper serves as an archive of community events and, in some cases, can even be used to document home births so that birth certificates can be issued. (Did anyone think of Obama when reading that?) It appears that the 843 writers (scribes) for the The Budget are “paid” with free subscriptions if they write with sufficient frequency (12 times/year).

    I was quite intrigued to see that The Budget has been using, for years, an idea that I often argue for… That is aggregation of local news with national news on a single platform. The result is a paper that addresses a broad spectrum of news needs without compromising its focus on local news. And, this is done without forcing people to subscribe to multiple sources since the national publication is included with the local publication… Now, if only we could convince the hyper-local Internet publishers to stop building their own tiny web sites and instead find ways to integrate their work into the broader scope national news sites.

    bob wyman

  • Mina

    Who decides what is “good” or “better” content?

    • The market, no?

      • Mike Manitoba

        In other words, start writing like Glenn Beck.

      • cm

        It depends on your business model.

        Are you in business to produce a certain product? ie. the most informative news you can for a selected audience?

        Are you in business to merely make the biggest profit you can? ie. generate the content that gets the most readers and ad dollars?

        If you’re purely market driven then you’re going to slowly slide from the first group (if you were ever there) to the second group.

        You just need to look at how some publications like Nature and National Geographic have sacrificed integrity and quality for profitability. Both these publications have made huge efforts to become more appealing and easier to digest but as a resu8lt are no longer of interest to their core readership of years ago.

  • This is spot on Jeff, did you ever hear of a newspaper having extra pages to accomodate all of the day’s news on one day, then less on another because there were less stories?

    It’s all about filling pages – the medium – rather than the actual content or the quality of the content, which is just a vehicle to sell the medium.

    • cliff barney

      newspapers do occasionally add pages for a big unexpected story, e. g. 9/11. however normally newspaper size is determined by the amount of advertising; a paper will strive for a particular ad/news ratio and adjust the press run according to that formula. the “news hole” is what’s left after you insert the ads.

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  • Am I the only one who thinks this is a ridiculously silly piece?

    Does anyone honestly believe people are buying paper when they buy a book? Or a blank CD when they buy an album?

    Yes, there are all sorts of interesting points to discuss when it comes to price and value of publishing products, but arguing that people have never paid for content is just reductio ad absurdum.

    • Ann,
      It’s about the pricing and underlying economics: pricing on cost vs. pricing on value.

    • Good point AnnB: It’s another example of ignorance regarding the business world and doing product line pricing and profitability. Of course your costs matter! And, of course, if there’s a more efficient way to deliver your product then that will drive down the cost.

      Newspapers made the mistake in giving away their valuable content for free online and not looking at their costs and profits soon enough from online. That’s why so many poorly run papers have gone under.

    • Bob P.

      I’m with you AnnB. I’m certainly no advocate of paywalls, and I think Jarvis is right about many things. But this Graham piece is a bunch of nonsense, He might be thinking to hard

  • i agree that free content is everyones right but the content giver has to cover his costs so its fair to pay for it.

    • True of any product: It has to work in the marketplace, in other words.

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  • Pablo Aslan

    “Give music away and make money from concerts and t-shirts. ”

    You don’t really think this is the future of the music business, do you?

    • John

      For bands, it’s the present…more or less. Most don’t make significant money on selling their recorded music, but on selling their live events and related paraphernalia. Of course, the big bands are exceptional, but that’s not most musicians.

  • Hi, Jeff — I wrote several pieces on the fact that we have never paid for content back in March, when Seattle was in the grips of anxiety about the PI. The first was “No More Free Content

  • Graham’s article is excellent.

    It is a bit like The Selfish Gene, sometimes you have to look at the right bit to see what’s going on.

  • Another analogy is that the idea that the Car Industry only exists because the Petrol Industry needs it.

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  • cm

    The logical conclusion to this is: Do we ever really pay for anything? We just pay for the convenience and packaging.

    Take food as an example: We’re biologically driven to eat food for nutrients. You can go to a fancy French restaurant and buy a plate with almost nothing on it for $30, or you could get the same nutrients at the vegetable store for $1 or pick your own in a wild meadow for $0. So what the hell are you actually paying $30 for? It sure isn’t the nutrients.

    Cost, price and value are only very loosely linked. Clearly if price > cost, you’re screwed and you don’t have a profitable business unless you can find some other revenue stream.

    Sure, content providers could give in to piracy and adjust their business models to fit (eg. concerts rather than song sales), but surely the content provider is the person that should decide what business models they want to use. It surely should not be chosen by the pirates.

    The Economist and Time don’t sell the same product at all and comparing them on journalistic quality is severely broken. Nobody is buying Time for quality journalism. They’re just buying a semi-digested news smoothie that doesn’t need any thought: glug, glug, glug. The Economist is going to give you the news behind the news and is going to require that you actually do some thinking. Not everyone wants that.

    It isn’t really clear that you can always just rely on giving content away. Give away the song and make oney on T shirts… until they pirate your T shirts too!

    [And, btw, I’m an open source developer so I know a bit about giving stuff away for free. I make money from that when people ask for changes or when people want to use my software in a non-open source fashion].

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