How do you make money if content is free?
About a month ago, I responded to a blog by Chris Anderson, author of The Long Tail, inviting his readers to help him market his new book, Free. The deal was, I would give him the names of three people I am close enough with to send a signed copy of his book, and if after seeing their names and explanations of what they do, Chris felt it would further his marketing efforts, he would send 4 books, allowing me to keep one for myself. And, he would also include his own pre-paid shipping forms so that he could see the books actually went to the people I told him they were going to. Ah, tracking the shipping. Smart guy.
Anyway, I was one of those selected to get 4 books, for which I — and now three of my friends — are very grateful. Free is a good book. It’s already stirring controversy, and a couple of lobbed grenades between Malcolm Gladwell and Seth Godin. The book will force you to think harder about some important issues that the broadcast industry is facing right now, which is why Free should be on your bedside table ASAP.
“…the marginal cost of digital products, or the cost of delivering one extra copy, is approaching zero. The fixed cost of producing the first copy, however, may be as high as ever. All those servers and transmission lines, as cheap as they may be per gigabyte, require large initial investments. The articles still have to be written, the songs recorded, the movies made. The crucial business question, then, is how you cover those fixed costs. As many an airline bankruptcy demonstrates, it can be extremely hard to survive in a business with high fixed costs, low marginal costs, and relatively easy entry. As long as serving one new customer costs next to nothing, the competition to attract as many customers as possible will drive prices toward zero. And zero doesn’t pay the bills…Obscured by the breezy tone of Free is a sobering message. ‘Everybody can use a Free business model,’ Anderson admits, ‘but all too typically only the Number 1 company can get really rich with it.’ ” *(emphasis added)
The largest consolidated radio companies find themselves in this terrible position not because radio has inherently high fixed costs. To the contrary, radio has very low operating costs compared to most other media. But Clear Channel, Citadel, Cumulus, Entercom and CBS are paying high fixed costs just to service their massive debt. If they hadn’t leveraged themselves so absurdly, radio would be doing pretty well, even in this recession.
It has long been my contention that I am much more likely to willingly pay $50 to see the art works in the Louvre than I am to spend my valuable time, but no money, to see the drawings in my neighbor’s garage. But Anderson raises an interesting point: As content itself becomes ubiquitous, time is what increases in value. No one has the time to see each new video posted on YouTube. No one has the time to check out every new and interesting web site. No one has the time to listen to every new artist and song posted on MySpace.
As choices for information content proliferate to the point of infinity, and attention becomes more and more scarce — and thus, valuable — what is your station doing to deserve my attention and time?
What can I hear on your frequency (or stream) that I can hear nowhere else? And, is that exclusive content remarkable enough to sustain itself through a premium subscription, or by building a large enough tribe of enthusiasts that you can monetize it and still make an acceptable profit margin after paying the talent that produced it?
If not, welcome to the United Airlines business model. The line to speak with the bankruptcy attorney is getting very long…