Content Scarcity

Despite an accelerated shift towards online advertising spending, most traditional media companies (TMCs) are more reluctant than ever to believe the "content wants to be free" mantra. 

Everywhere you look, the diagnosis is bad: Disney's CEO Bob Iger this past week admitted that the fall in DVD sales is "sobering"; meanwhile, sales of Zagat's Guides are starting to erode.

Indeed, regardless of whether TMCs are accustomed to charging consumers or companies, content sure looks like it wants to be free -- though at the Monaco Media Forum, James Murdoch, News Corp (CEO for Europe and Asia, summarized what everyone would agree on: the "first rule of monetization is that if you aspire to charge for something, you probably should not give it away for free." Self-serving observation?  Sure.  True?  Let's see.



Do Media Executives Need a Lesson in Economics?

On the one hand, you don't need a degree from the London School of Economics to recognize that excess supply will drive prices down.  That's the basic concept of scarcity, but what the rise of video consumption and advertising is doing is differentiating between, not just video versus text, but mainly, real scarcity vs. false scarcity. 

Real scarcity is when there is actually more demand than supply.  False scarcity leads to a false sense of security about demand for one's product.

False Sense of Security

Hollywood's strategy was forever to create false, or forced, scarcity.  Examples are numerous, but the best one is the slotting of  a show at 9 p.m. on Thursday evening during the late 1980s, wedged in between stellar shows including "The Cosby Show," "Cheers," Night Court," etc.  Invariably, you could slot someone watching grass grow and in between those kinds of established shows, the 9 p.m. show would have built an audience. 

Fast-forward two decades and you saw how false scarcity led to the disaster at NBC involving Conan O'Brien and Jay Leno.  Though lower ratings for Leno's show harmed the lead-in to NBC affiliates' important 11 p.m. newscasts, the fact that audiences didn't follow this established star had more to do with Hollywood's tried and tired strategy of creating false scarcity for their offerings.

Getting back to video, the reality is that TMCs should wake up before it's too late by:

Realizing that creating false security by putting up paywalls with text content will prove futile;

Acknowledging that nothing will replace the billions and billions in their traditional businesses, but that doesn't mean that they should not be focusing on new revenue streams and businesses, even if that means becoming a smaller business. 

Of course, Hollywood executives swill never accept the latter and will fight to their last drop for the former.

Text Content is By Definition Easy to Duplicate, Thus Impossible To Defend

With articles, true scarcity is hard to create because content can be duplicated very easily. 

Even if the New York Times is behind a pay wall or a Vanity Fair article is only found in a printed issue of a magazine, nothing is stopping an online blogger to pay for a newspaper or magazine, only to turn around and paraphrase or quote from it -- that's fair use.  Some among the blogger's readership might be inclined to pay for the source content, but a large share will content themselves with the abridged version. 

Now replicate that phenomenon across hundreds of bloggers,  and you get the idea: there's a lot of supply created around that story, and while the advertising rates for Times and Vanity Fair content are much higher than all of the rest combined, it doesn't change the fact that there's a shift in equilibrium, especially when you toss in things like behavioral targeting and demand-side buying, where some advertisers don't even care if their ad is placed on the source publications.

Why Scarcity Works Differently With Video

With video, it's just not that straightforward or easy to increase supply, especially in the short-term. In two weeks I'll sfocus on scarcity in online video and what both TMCs and new media producers need to do for a better prognosis.

5 comments about "Content Scarcity ".
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  1. Ron Stitt from Fox Television Stations, November 15, 2010 at 12:13 p.m.

    I think the whole idea that you've paraphrased as "content wants to be free" was actually a little more sophisticated - "commodity content wants to be free, unique content wants to be expensive" (also parapharasing). Seems that's where you're going with this so looking forward to the next post.

  2. Joe Bencharsky from iNet Entertainment, November 15, 2010 at 12:18 p.m.

    The media and advertising community have not yet figured out how to re-think the internet model, content, value and monetization. They have been more about control than about value. (They equate the two. look at the GoogleTV battle!) Social media is forcing them to relearn that distribution and reach = $$$. And they also have not yet realized the "how". Content crates it's own value. It can be monetized. Thy just have to re-examine the raison-d'etre for advertising, marketing, and creation of scarcity in order to grasp the new paradigm.

  3. Jeff Bach from Quietwater Media, November 15, 2010 at 6:23 p.m.

    Two things jump out at me in this space.

    #1 - It seems to me that the aggregation crowd depends on building up a large audience of eyeballs against which ads can be sold. This is the same basic low-value, high-quantity game that TV uses. TV enjoys the fact that discovery is limited to browsing the TV Guide and clicking through what is still a finite number of channels.
    Overall, I find the word for this space to be COMMODITY.

    #2 - I think search engines (aka discovery tools) as well as social media have a MUCH BIGGER impact in the unlimited space one finds on the web. Instead of going to msnbc or youtube or watchmojo, a viewer can discover or read the Tweet about the creator/content and GO DIRECTLY to the creator's site. I think discovery tools and social media make it easy for an individual to forget the portal or the aggregator and go directly to the source. The ongoing fragmentation already abundant on the web proves this (in my mind anyway).

    SPECIALTY is the word for the content in this space. Ad-supported models do not work in low volume spaces. imo pay per view or subscription while not guaranteed either, fits this specialty space far better.
    Like Ron S. I see the TMZ-type low value content going to low-value sites that deal with commodities and cheap unloyal eyeballs. Specialty content will tend to stand alone and continue to have value to a smaller number of people who can only find it at the creator's site and will hopefully (if the creator does a good job) choose to support that content.

  4. Gregory Yankelovich from Amplified Analytics Inc, November 15, 2010 at 6:46 p.m.

    I just published a blog post on the subject of Content Wars in Historic perspective There I also looked on economics of content production and evolution of market conditions. The point I am trying to make is that digital distribution based on internet protocols and platforms will make a content a true king, but not just any content, the great content only.

  5. Fraser E from Opinions expressed herein are solely my own, November 16, 2010 at 7:55 p.m.

    The echochamber may have a "content wants to be free!" rallying cry, and consumers may want their content to be free, but consumers may not understand what they're asking for. In all the desk-slapping hysterics about how the old guard doesn't get it and about scarcity this and demmocracy that, never once have I seen anybody address the problem created by driving all content to be free: We end up with what we pay for. Think 24-hour-a-day cable channels of people getting kicked in the junk. Or think of 99.9% of YouTube.

    Setting aside the arguments that criticize what passes for "good" programming or "good" music or "good" content in any of its forms, surely we all understands on some level that professional content costs real money to produce, right? When we're all living in our Latte Utopia, after we've made content free to obtain, free to consume, and free to share; after we've removed every last dollar of incentive for truly talented artists and the truly talented technologists and producers who enable the creation of truly desireable content (which purportedly wants to be free), what will we be left with?

    Say what you will about individual pieces of content, but we won't have True Blood, we won't have DailyKos, we won't have the Tipping Point, we won't *have*. Ad nauseum.

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