Premise 1: Content wants to be free.
Premise 2: Content creators and owners need to make money in order to produce more content.
Unmovable object, meet the irresistible force.
In 1994, my earliest experiments with HTML led to the creation of a web-page for a crank-calling duo known as The Jerky Boys. As a twenty-year-old college student, I was tickled when this page was added to the Yahoo index on a server at Stanford called Akebono. At the time, it was unfathomable to me that this small index would evolve into a multi-billion dollar company. And it was equally unfathomable to me that I would emerge as the definitive resource for all things crank-calling. Well, one of those things came true.
Within the next three years, major media companies began to dominate the online landscape. Though "new media" was all the rage, the traditional media companies were driving the high-quality content. Their urgent desire to stay relevant was a boon to consumers; we got a treasure trove of easily accessible, high-quality content all for the low, low cost of...wait, it's free?
But that couldn't last. Out-sized valuations, impossible business models, and difficulty generating revenue led to the dotcom crash and caused the media vanguard to slow down and think about their business models. In short order, the New York Times launched TimesSelect, a for-pay premium section of nytimes.com. Time Warner moved 14 of its magazines "behind the curtain," making them available to print subscribers, single copy buyers, and AOL members. The problem is that you can't give something to consumers and then take it away, unless yours is the only game in town. And this is the very reason that there still exists a page on The New York Times website that announces, "Effective September 19, 2007, TimesSelect has ended. Content previously published for TimesSelect is available free to all NYTimes.com visitors."
And now history has started the cruel process of repeating itself. While the cause-and-effect is different this time around, the interplay between the broader economy and online media properties has yielded a familiar story. The growth of the ad market is insufficient to keep up with the incredible growth of content. Old media, new media, user-generated communities, and a litany of other online properties are competing for a finite pool of ad dollars. In a market segment that's very close to home for me -- online video -- I've watched companies that tied their fates too tightly to advertising fail (Revver), dramatically change business models (VideoEgg), and discontinue an entire line of business (Brightcove).
The reality is that, for the most part, the best content isn't free. You might not be paying for it, but the advertisers certainly are. And when consumer spending declines and advertisers get less bang for their banner or pre-roll buck, the cost burden shifts. For the Seattle Post Intelligencer -- a paper with a 146-year history, making it the oldest business in its city -- the costs were enough to drive the printed paper out of existence. Its reinvention as an exclusively web-based "community platform" notwithstanding, one has to wonder if the PI's disintegration is the proverbial canary in the coal mine.
Still, it's not all doom-and-gloom. In fact, almost all projections point to continued growth of the online advertising market. And there will always be businesses that can thrive with an ad-centric model. But if you are a content owner, you would be wise to hedge your bets and explore other avenues for generating revenue.
Look at television as a model. The expansion of cable networks has dramatically increased the number of television channels available to consumers. The amount of ad dollars spent on TV advertising dollars has risen as a direct consequence. However, that money is spread across a broader number of properties. So what were their options? Bring their costs down or their revenues up. The TV networks have largely focused on the former, and that's meant -- for better or worse -- the proliferation of cheaper-to-produce reality TV shows, The Real Housewives (many of whom are unmarried, employed, or both) and Jay Leno in prime time. Others have bucked this trend and begun pumping money into production. The president of AMC Networks, in discussing the network's hit show Mad Men, said, "The network was looking for distinction in launching its first original series, and we took a bet that quality would win out over formulaic mass appeal. In our view, there's no doubt it paid off."
It's unclear whether the collapse of the paid models for Time Inc.'s online properties and TimesSelect resulted from a failure of execution or an inherent reluctance of their audience to spend money. Convincing people to spend money on content hasn't posed a problem for Apple's iTunes store NetFlix despite relatively easy access to free, if ill-begotten, versions of the very same media. Though content may remain king, user-experience, branding, and myriad other factors play significant and prominent roles in the king's court.
Returning to the television analogy and extending it further, I might go as far as to say that online media companies need to find their inner HBO. Over the past decade, the network has reinvented itself. Though its full name, Home Box Office, still evokes cinema, the channel's real success has been with its original programming. So I say that you should develop your own incarnations of The Sopranos, The Wire, and True Blood. Will people pay for excellent content they can't get elsewhere? Fahgetaboutit.