Free, Fee, or Flee?
Bussiness Insider, Tuesday, September 29, 2009 3:11 PM
Big or small, how can companies charge for content and services online when a free alternative is often just a click away? Whatever Rupert Murdoch thinks, there's no easy answer.
A new study by Ramon Casadesus-Masanell of Harvard Business School and Feng Zhu of USC's Marshall School of Business takes a look at the problem by examining the business models of over twenty companies divided into four categories: pure fee-based models like iTunes; pure ad-sponsored models like Facebook; mixed models like WSJ.com; and tiered content models such as Match.com.
Of particular note, the study finds that once a free, ad-based competitor enters a market, rivals offering mixed strategies loose their relevance -- something Murdoch and other newspaper publishers seem to just be realizing.
The surest path to success, therefore, is committing entirely to one monetization method: ad-sponsored or fee-sponsored business model. "When there is an ad-sponsored entrant, the incumbent is more likely to prefer to compete through a pure, rather than a mixed, business model because of cannibalization and endogenous vertical differentiation concerns," according to the study.
Free or fee? How are publishers supposed to decide? By making honest appraisals of their own fare, and how it compares to the competition. Rupert Murdoch obviously believes The Wall Street Journal's content is worth a premium, and its successful subscription business backs it up. From Hulu to MySpace, News Corp. will now have to decide on which side of the fence its various properties lie.
Read the whole story at Bussiness Insider »
A new study by Ramon Casadesus-Masanell of Harvard Business School and Feng Zhu of USC's Marshall School of Business takes a look at the problem by examining the business models of over twenty companies divided into four categories: pure fee-based models like iTunes; pure ad-sponsored models like Facebook; mixed models like WSJ.com; and tiered content models such as Match.com.
Of particular note, the study finds that once a free, ad-based competitor enters a market, rivals offering mixed strategies loose their relevance -- something Murdoch and other newspaper publishers seem to just be realizing.
The surest path to success, therefore, is committing entirely to one monetization method: ad-sponsored or fee-sponsored business model. "When there is an ad-sponsored entrant, the incumbent is more likely to prefer to compete through a pure, rather than a mixed, business model because of cannibalization and endogenous vertical differentiation concerns," according to the study.
Free or fee? How are publishers supposed to decide? By making honest appraisals of their own fare, and how it compares to the competition. Rupert Murdoch obviously believes The Wall Street Journal's content is worth a premium, and its successful subscription business backs it up. From Hulu to MySpace, News Corp. will now have to decide on which side of the fence its various properties lie.
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Typo in 3rd graph, should be "lose" instead of "loose."