ThreeDimensionalPeople Why don't you go outside and play with the three dimensional people?

Want to charge for content online? Make it three dimensional

Trying to save the consumer content industry (in particular newspapers and the record industry) by charging for digital content faces all sorts of problems. Distributing content today is trivial, so charging for it is like trying to eat soup with a fork - you won't end up with a satisfying meal. What’s needed is to change the product into something new. This could be as simple as a bundle with another product, or a more ambitious exercise to create new services. Either way, the right products – three dimensional ones, not flat digital ones - may make people happy to pay.

First, a confession. I'm a newspaper junkie. Have been ever since Matt got me hooked on the innovative-sounding Daily Telegraph. I then graduated to the pink pages and would consider this one of life's essential luxuries (not least, because it would act as a great sun hat if I was stuck on a desert island).

One of my first and least rewarding jobs was selling advertising door to door to small businesses for the since defunct Staffordshire and East Yorkshire Tattler (no URL available, surprisingly). I was 17 and not much of a salesman - I lasted about a week.  However, a more effective sales campaign by me probably would not have saved this magazine. The content was pictorial reports of garden parties and point-to-points, with some copy to support the advertisers of the day. Circulation a thousand, tops. Later in my journalistic “career” I worked as a cub reporter on the Leicester Mercury and before University did a work experience stint at the Economist, trailing the witty political editor Andrew Marr, sitting in on editorial meetings where Smart People discussed Big Topics. College and business school saw me dabble with a pen - for fun, not profit. I enjoyed hanging out with hacks, and liked being the master of my own product with no need for focus groups, and a release cycle of days, not years.

So, as a committed consumer, and occasional dabbler, I'd like to see newspapers and what they stand for survive. However, as a futurist in my early life at Nokia I've plotted enough trends to see where 30% declines in ad revenues lead. The Internet has pretty well solved the main problems newspapers are known for – disseminating information about what’s going on, and saying smart things about it. And they do this better on many levels. A Twitter page can show the collected insights of 15 different people I respect on a particular topic, not just one jaded Editorial writer. Or as Jason Jones points out on the Daily Show, they actually have news about today, not yesterday. The web has taken over the many of the easy jobs that newspapers had. As Clay Shirky points out, “Society doesn’t need newspapers. What we need is journalism. For a century, the imperatives to strengthen journalism and to strengthen newspapers have been so tightly wound as to be indistinguishable.”

Search engines index online newspaper sites and use that to answer consumers’ problems. They deliver a boat load of value to the user, keep a bit for services rendered and may arguably deliver some to the content source itself. Unfortunately search engines deliver eyeballs, but the newspaper industry hasn’t figured out how to monetize them successfully. Google does not make people buy more newspapers – the publishers’ choice of business model is not their concern.  Rupert Murdoch recently lashed out at Google, complaining they are stealing their copyright. This strikes me rather like a horse complaining that it’s been led to water, but has not been forced to drink. Rather than figure out how to do something with the hordes of people search engines are delivering, industry veterans are running in the other direction. A variety of pay wall concepts are emerging (both micropayments and subscriptions) - many have been tried before, none have worked. In addition to Rupert Murdoch vowing to charge for content, Steven Brill’s Journalism Online has just signed up 500 newspapers for their subscription model and my very own FT has been encouraging others to put walls up.

While subscription models will work for a time with differentiated content that is difficult to share, removing great swathes of mass market content from the web is a reactionary move to hold onto a base of declining value. Google is not the enemy, they are simply better at playing the new digital game in which newspapers now find themselves competing for their life. Regardless of how it’s done (subscription, micropayments etc) creating pay walls won’t work for two main reasons. First, basic economics says price of a product will tend to its marginal cost – this is, in the case of digital information, zero. Consumer demand will route around these roadblocks and drive the price down. Second, the web is the new reality here, and it is based on the idea of stupid, simple links that do not have an authentication mechanism or a smart tollbooth built in. No single pay scheme will aggregate all “content”, which now ranges from high journalism to your buddies’ baby pictures. If it did, there’d be demand for someone to operate outside it.

Advertising and newspapers have existed for ever, but online ads have so far failed to move the needle in terms of revenues. Some suggest hyper-targeting the ads is the answer. There’s something here, but current ‘contextually relevant’ adverts that push their products based on keywords are not compelling - a knife company was recently horrified to see its products presented online next to a story about a stabbing. The other danger is if they work too well they’ll face consumer pushback. (“Honey, why is our online newspaper constantly showing us adverts for divorce lawyers?)”. Ads that are increasingly targeted on the reader’s every move will become as suffocating as being wrapped in Clingfilm (I had that done once in a Spa in France, and trust me, it’s suffocating).

Instead of trying in vain to charge for a product that prefers to be free or ever more vigorously push ads that people don’t want, content owners may be better off changing the product that they’re selling.

One way to do this is to make a bundle with other more robust business models. This is the logic for Nokia's Comes With Music – providing buyers of certain devices with unlimited song downloads to keep. This extracts some of the margin from the device sales to give to the content owners.

iTunes got there first, and has spent more time building additional value on top of content. They now sell a quarter of all songs in the US, but really it is not a digital music store. It is a seller of ‘instant gratification so you can play that song your girlfriend has just mentioned’ and of ‘the ability to take your music with you on your run to inspire a new personal best’, and more recently it is kicking the tires with smart recommender services that help you more easily navigate your collection. These experiences are what people pay for, not “content”.

This seems to point to a fruitful direction for content companies. Take a step back and ask what user problems are you being paid to solve. Think for a minute about a newspaper. Its value is not just in the printed words it carries, no, it is far more nuanced. It does the difficult job of filtering 10bn pages of the web into a manageable chunk (It is personalized). It is totally portable with a ‘screen size’ that can be changed instantly (It is contextually relevant). It is instant on. It conveys self expression – oh, you also read the WSJ? Good chap. It can be used as a note pad, a fly swat, a door stop, fish and chip wrapper or even, as mentioned above, a hat. (It can be combined with other products). These are implicit sources of value that I suspect have helped newspapers stay relevant, more so than the words on their pages, which if good enough, will be instantly distributed, regardless of the height of the pay wall.

Turning “dumb” products into three dimensional services could involve many things, but a place to start experimentation could be adding i) personalized and ii) contextually relevant information and services to the content, and iii) working with other companies to make your product work even better in conjunction with theirs.

This will involve many of the mostly-content companies transforming themselves into mostly-services companies. Certain commodity elements – dare I say it – even that Kabul reporter – will need to be outsourced to people who specialized in those areas. The challenge that many small newspaper companies will face is to build the infrastructure themselves. An individual subscription to the FT or WSJ is just about manageable, but a better model, especially for the small guys, may like the one proposed by a new startup called Kachingle. Here you start with a (Big) assumption that a large number of people will be willing to pay a small monthly amount, say $5 into a pot that is administered centrally. This cash pile is then shared out among participating content providers who have signed up to the system, and then doled out according to the actual traffic (which can be measured by cookies or manually clicking an icon on the site). So if the FT signed up for this, they would leave most of the content open to the web, but recognize when one of the participating members was visiting, and the system would register them a share of the cash. If readers consistantly read more FT than the Wisconsin Gazette then the FT will get more of the cash.

As my friend Jim Griffin, who is running a similar scheme for the record labels, points out, you need a fair way to split up the cash. The digital trails we leave around the web can be just that - as that is our attention. As long as we know we are benefitting the sites we visit, and can have some control about who gets our cash, this scheme has legs. All sorts of questions about whether such a scheme could ever reach critical mass, or whether this could be federated etc. But unlike the pay wall ideas above, it is based on having content available to the web for free, and providing additional services on top for people who pay. So a reader who does not pay sees the content, but when they are a payer, they see the content rendered in three dimensions – personalized, contextual and useful. The kinds of services that we’ll see are up to the imagination of the content companies, and we’re only now scratching the surface of what we could do with a new mountain of data. Whether its personalized alerts about stories of interest, delivery to your car of phone, offers from companies that you actually want or some angle of social networking (these people like the articles you read…). Who knows, we’re still early in the transformation, but we need to start coming up with ways to create positive, not negative, lockin.