A version of this piece was published in Marketing in 2008
In November Rupert Murdoch announced that following News Corp’s acquisition of the Wall Street Journal he “…expected to make it free”. I wasn’t at the announcement but I doubt there were many gasps of surprise from the audience.
More interesting though was the recent u-turn on this decision, Murdoch instead opting for a hybrid model. Content that is relatively easy to find elsewhere will be made free but the specialist content, in other words, what most people buy the subscription for, will still be subscription-based.
So what does this mean for marketers? Is the hybrid model the way forward? No doubt Murdoch’s bean counters created innumerable financial models and decided the best way to maximise profits was to drive more traffic by offering content for free, and hence increasing advertising revenue, but at the same time keeping the crown jewels under lock and key for subscribers only. Perhaps not so surprising given subscription revenues are estimated at around fifty million dollars a year.
But before we all run around implementing hybrid models lets stop and have a think about what’s really driving the digital market - customers. What does the internet offer customers? Well many things, but the overriding driver, and what’s changing market economics the most, is one simple word – choice.
Consider Pirate Bay, a peer to peer file sharing ‘solution’. Or in other words a method for people to download paid for content for nothing. Before the authorities got their way Pirate Bay had 10 million customers. The choice these customers made was not to pay for content.
Take the US hit show, “Lost” as an example. The show could be downloaded in the UK shortly after it had aired on the East coast of the USA and before the West coast had even seen it. It was coming to terrestrial TV in the UK, and therefore was going to be free anyway, so the downloaders didn’t really feel like they were doing anything wrong.
This is of course questionable logic, and I’m not advocating illegal downloads. The lesson though is clear. The internet has given consumers much more choice and what people want is what they don’t have to pay for.
So what does the future hold for the subscription model? It isn’t dead, but the prognosis isn’t healthy.
Consider another huge subscriber model business – online dating. Take a look at your teenager daughter’s FaceBook page and you’ll probably see a profile that states she is single and interested in, “meeting men”. Putting aside the obvious alarm bells this rings as a parent it’s also likely ringing bells at match.com and all the other subscription dating sites.
A more direct attack has been mounted by Plentyoffish.com, the owner of which proudly announces on his site that he is the sole employee, runs the site from his Vancouver apartment and that it is 100% free. A real life cupid? Reports of $10 million a year in advertising revenue suggest not.
So maybe Murdoch will need to re-think his hybrid strategy for the Wall Street Journal. But what he’s probably sweating about more is how the pesky internet might interfere with subscription TV.
Take a look at Kangaroo for example, the joint venture between BBC Worldwide, ITV and Channel 4 purporting to offer over 10,000 hours of programming from kick off. Not all of it is planned to be free, but it seems pretty clear that the Kangaroo concept isn’t built around a revenue model that takes much from the consumer’s pocket.
So will consumers continue to stomach paying £40 a month for 100 channels when you can pay nothing for the ever expanding wealth of free shows available online? For now, probably yes, because the choice isn’t there yet. But choice is something the internet offers in ever increasing levels. And while consumers are of course unique, they share one attribute – everyone buys free.