You Get What You Pay For
Seeking other sources of revenue to supplement sagging ad sales, publishers are mulling over a long-held notion: charging readers for the online content they're consuming. But with that decision comes a lot of questions that need to be answered: How do you balance the content between what's free and what's not? How do you evaluate what content will sell? At what price point should your content be offered?
To help answer these questions and more, Publishing Executive Inbox recently interviewed Michael Lonier, CIO and vice president of operations for The Deal, a multimedia publishing company covering the merger-and-acquisition market. The Deal is a model for publishers looking to make money off their online content to follow, as its online content resource The Deal Pipeline will generate two-thirds of all company revenues this year via enterprise licenses.
INBOX: What steps must publishers take within their own organizations to make a paid-content subscription model work?
MICHAEL LONIER: This is a complex subject with the potential for transforming or changing business models and processes, sales, marketing, content itself, and technology platforms, so there's no one answer.
The first steps are strategic—where/from whom does the revenue come from; where/what is the value of the content, particularly unlocked value; how feasible is it to unlock that value and augment or create new content and revenue; and what changes are necessary internally to do so. How does your company culture relate to this potential new strategy? Is it willing or unwilling to build and market new products, take chances, do what's necessary to survive and flourish?
What resources does your company have to accomplish this strategy? How can it get the resources it needs that it doesn't have? How will these factors affect time-to-market and market risk? In other words, a full-blown SWOT analysis aimed at transforming the business is necessary.
INBOX: Why has The Deal been so successful in this arena?
LONIER: The Deal has been entrepreneurial from its beginnings 10 years ago, supported by patient investors. It also has a unique set of proprietary content that when repositioned—i.e., transformed—within The Deal's market, found greatly increased value in its users' workflows.
The Deal identified a transformational strategy focused on unlocking its proprietary content value, supportable by its resources and culture, so it was able to execute across editorial, sales, marketing, operations and technology.
INBOX: How can publishers take advantage of existing media channels to optimize their paid content offerings?
LONIER: The answer varies by publisher, product and market. It's difficult to transcend long-standing price points and audience perceptions about who a company is and what it does without a transformative go-to-market product plan. Even with a significant transformational product and message, publishers need to overcome their own heritage brand, either with an expansive product or expanded audience, in order to increase yield.
Transformational paid content, as opposed to incrementally enhanced paid content, is almost a new channel itself by definition. So its relation to existing channels can be problematic. Free online content competes with paid content. Unless the content is very proprietary and used in free sample quantities, it's difficult to use free content to drive users to paid content. Webinars can build brand in a marketplace, but typically are a marketing, lead-gen service to sponsors. So again, the link to paid content can be tenuous. For print, study the Bloomberg Markets magazine model.
INBOX: What challenges present themselves for publishers rolling out paid content models for the first time?
LONIER: The biggest challenge is getting people to buy it! It has to have a value to users that overrides the ever-increasing noise in the digital world, and the ever-increasing value of the "free" content available there. Think niche … and niche for people who are willing to spend money for valuable information they can use to make more money in their businesses. If the user won't pay, then necessarily you need to identify someone who will.
In the consumer world, content has to be entertaining or interesting enough to both engage users in a huge world of choice—e.g., over 100,000 iPhone apps and counting—and be "worth" whatever the product price when users can probably pick from several free similar products. How does your audience even find your product amid 100,000? They either already know about it (i.e., marketing) or it's highly ranked on common favorites lists (i.e., marketing), just like search engine optimization.
Paid content in either the b-to-b or consumer world rests on much more sophisticated, digitally savvy marketing than publishers have ever used before.
INBOX: As consumers have become conditioned to go online for free content, how can publishers convey the value proposition of a paid-content model?
LONIER: Part of The Deal's strategy was a transformation of its business model from "subs and pubs" to a high value information service. It went from a telesales subscription sales model to a direct relationship sales model, where customers become licensing companies and institutions rather than individual subscribers. The Deal Pipeline is sold as a transaction information service to support deal flow, client intelligence and market knowledge, leading to greater profits within those licensing companies.
The Deal's transformed direct sales team and surrounding marketing are designed to convey and support the high value of The Deal Pipeline information service to licensees. Content may be everywhere, but you can only get The Deal Pipeline in one place.
INBOX: Looking ahead, do you envision an environment where publishers are more reliant on paid content than advertising for revenue? If so, how and when?
LONIER: There have always been all sorts of publishers, and that diversity will only increase. Gideons gives away Bibles, and Apple charges $0.99 for nearly every song ever recorded. Google is busy scanning and storing every extant book (and magazine) in English that it can find in libraries around the world. A "free" Google search of "war" in Life magazine (the weekly, 1936-1972) produces a results' set of 882 issues in .59 seconds (405 issues in .38 seconds for "Vietnam war"). You can read the entire July 10, 1972 issue online, with a California girl on the cover—if you ever wondered where the SI swimsuit issue came from—and Cambodia and Mario Puzzo inside.
It's no longer clear exactly what a publisher is today. So business models, likewise, will become increasingly diverse, and paid content will range from direct-to-publisher to bundles of minutes, access or products—like cell phone usage charged by telephone and cable companies, and Internet service providers. Affinity and cross-marketing deals will multiply. Marketers will never be far from the varied audiences these arrangements produce.
What will be different is that publishing businesses will become increasingly flexible, adaptable, opportunistic … and risky. But if you build it, and they want it, they'll buy it. When? Now. Right now.