The Content Bubble

Magazine and newspaper revenues are dropping like bison off of a cliff. Newspapers such as the Seattle PI are fleeing to the internet. Finding that advertising has failed them, some publications are stripping down to make last ditch efforts at online business models, where their only current hope of revenue is...drum roll please...advertising. Not good.

Since the dawn of Google ad revenue, internet gurus have been telling us that the future of everything lay in generating more traffic*. That thinking is reminiscent of the kind of thinking that created Dow, 30,000. Quick money or a quick audience is intoxicating, and it breeds an optimism that is hard to resist. But whatever it looks like, gravity never falls up. Read here why the New York Times, which pays good hard cash to create complex graphics and designs, doesn't want blogs freely reproducing that content just to get in-bound web links. Web traffic alone isn't all that it is cracked up to be.

And the fundamental laws of supply and demand still apply.

"Today the average 14-year-old can create a global television network with applications that are built into her laptop. So from a very strict Econ 101 basis, you have the ability to create virtually unlimited supply against what has been historically relatively stable demand." via adage. (Thanks Rob.)

Previous economic models in publishing relied on what we understand to be true models of supply and demand. Somewhere in the middle, the supply and demand curves intersect at a profitable exchange. X amount of product sold at Y price = optimized revenues.

Introduce the internet, where publishing is easy and cheap, and the supply curve runs straight to infinity. You can guess what happens to demand--it goes straight to "give it to me for free."

We have seen two recent major deviations into the economic twilight zone. First in the tech bubble and then the housing bubble. In each, all sensible readings of economics were thrown out the window, and each led to a major crash. This current publishing crisis is the content bubble. The upside down logic of online content distribution has said, 'give it away for free and you will later find a way to capitalize on web traffic.' Or, 'increasing your traffic will lead to increasing ad sales and increasing revenue.' If you substitute the word 'subscribers' for the word 'traffic' you get the same logic that is bringing down the print publishing industry overall.

The new logic will have to be: give a little of your content away for free, as bait, and charge for the rest. In other words, use a little of your own content as advertising for the rest of it that is protected for subscriber or paid use only. I currently pay $9.95 a month for The Wall Street Journal online. And it is worth it. I would happily pay as much or more for the New York Times online. And we will, or we won't be reading it any longer. Either they will charge for and protect their content, or they will go out of business. That goes for the rest of the publishing world. Publications are going to have to create scarcity as a fundamental ingredient for profitability. Making content that is desirable, useful, or valuable, enough to be worth a price is the starting point. Making it scarce enough that consumers will pay to get to it will make it profitable.


*more traffic = higher ad exposure = increased revenue. Read here where I detail how a permutation of that logic is failing the print model. And here at The Big Money where they say the same thing several weeks later and name some more names.