Tuesday, September 29, 2009

What is content and what is its value?

Friend and colleague Thom Falter (see his site here) sent me this article lately and I've been mulling it over. It's written by a software developer turned venture capitalist named Paul Graham. It's on the nature of publishing, content and physical delivery media. It's really a great read and his logical assessment of the history of publishing and content strikes a true note to me. A few excerpts...

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?

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.

People will pay for information they think they can make money from. That's why they paid for those stock tip newsletters, and why companies pay now for Bloomberg terminals and Economist Intelligence Unit reports. But will people pay for information otherwise? History offers little encouragement.

What about iTunes? Doesn't that show people will pay for content? Well, not really. iTunes is more of a tollbooth than a store. Apple controls the default path onto the iPod. They offer a convenient list of songs, and whenever you choose one they ding your credit card for a small amount, just below the threshold of attention. Basically, iTunes makes money by taxing people, not selling them stuff. You can only do that if you own the channel, and even then you don't make much from it, because a toll has to be ignorable to work. Once a toll becomes painful, people start to find ways around it, and that's pretty easy with digital content.

Those are just a few highlights. Go read the whole post- it's an extremely lucid read. My take away from this is pretty clear- content has little to no inherent monetary value. The monetary value is in any delivery mechanism that allows people to distract themselves in a manner that fits their personal experiential tastes and preferences. What they actually distract themselves with is, as the author puts it, "undifferentiated slurry".


Brian Roberts said...

This reminds me of the time Big Idea decided they would create "different value expectations" in the audience regarding different types of releases... 3d VeggieTales "go get grandma, Big Idea made a new one!" releases vs. 2d Larryboy "Cheap stuff for the kids to watch alone". When I asked marketing how much different the price would be for the cheap stuff, they stared at me blankly and said it would be the same.

Ian said...

Is this depressing or liberating?

Ian said...

Perhaps the missing ingredient in this guys equation is quantity? Surely publishers will pre order more copies of something if they think the quality of the content will trickle down into a higher quantity of sales.

A lot more copies of a Pixar film would be printed on DVD ahead of release than would be of almost any animated film from another producer, in part because of the reputation Pixar has as producing great quality content.

So while people may accept a set expense based on the medium, the question of whether the purchase will be made or not will be informed buy the impression one has of the content. As a result profits are influenced by the impression given of the content quality and a publisher who has good quality content would be mad not to promote (or sell) that fact.

This is why over half of the teaser for the upcoming Dreamworks film is given over to telling you what other “great” films Dreamworks have made in the past. The greater the expectation of quality, the more bums on seats, more profits, regardless of a set ticket price applied to all movies.