Leveraging the web: how people are willing to pay for content

December 16, 2011 · by David Campbell · media economy, photography

Five pounds e1324057333318 Leveraging the web: how people are willing to pay for content

Will people pay for online content?

Here is a recent example, and a recent thought experiment, that gives us food for thought in the often fraught discussion of how people can leverage the benefits of the web (global access and ease of distribution at reduced cost) to generate income from creative content.

The example comes from the comedian Louis CK who asked:

If I put out a brand new standup special at a drastically low price ($5) and make it as easy as possible to buy, download and enjoy, free of any restrictions, will everyone just go and steal it? Will they pay for it? And how much money can be made by an individual in this manner?

Louis CK has provided an admirably transparent account of his thinking and production process, revealing the costs, revenue and profit. His experiment has been analysed in detail by Mike Masnick of Techdirect in two interesting posts (here and here). In short, he broke even after just 12 hours, and is now in profit to the tune of $200,000 or more.

On the purchase, page Louis CK put a message directed at prospective purchasers:

I made this video extremely easy to use against well-informed advice. I was told that it would be easier to torrent the way I made it, but I chose to do it this way anyway, because I want it to be easy for people to watch and enjoy this video in any way they want without “corporate” restrictions.

So Louis CK’s experiment made it easy for ‘pirates’ to take his content for free, avoiding all payment. Perhaps some did, but more than 100,000 people paid. That’s a pretty decent demonstration of willingness.

Which brings me to the thought experiment. Piracy is regularly cited as a reason for declining revenue to creators, and some of the figures bandied around – in the tens of billions of dollars – are breathtaking. At TorrentFreak they speculated “what might happen if all US BitTorrent users made the switch to Netflix.”? In other words, if all US file sharers, who were paying producers nothing, suddenly stopped passing around films for free and became paid customers of the online video service Netflix, how much money would be raised?

The answer: $60 million. Not to be sneezed at for sure. But that’s small change when Hollywood takes in $10 billion in ticket revenue annually and a major star can personally command $20 million to appear in a major film. It’s some three hundred times less than the loss from piracy claimed by the industry’s lobby, the Motion Picture Association of America. And its equivalent to the MPPA’s annual budget.

Let’s be clear about one thing – making these points is NOT a defence of piracy. But we need to critically assess claims about the impact of piracy, not to mention factor in those findings that suggest ‘pirates’ actually spend far more on legally acquired content than the average consumer.

Is there a lesson from this for domains like photography and journalism? I think so. While people continue to tell pollsters they won’t pay for daily, general news online, clearly there are increasing examples of people being willing to pay online for quality content with lasting value, even if they can get a copy for free.

Leveraging the web to make such content available for purchase requires creative producers to shift their starting position. Too often I’ve heard people blame the plight of creative industries on the alleged moral failings of potential consumers or fans. It’s time to move beyond the claim that most people using the web are feckless thieves just waiting to steal content. If you make quality content available in affordable, easily accessed formats, and you make it easy for people to find you and pay for that content, then you can leverage the web to find those who will part with their hard-earned cash for your work. That responsibility lies with the producers not the consumers.

Photo: Community Friend/Flickr

10 Responses to “Leveraging the web: how people are willing to pay for content”

  1. Thanks for the post – I’ve been hearing this more and more, that people who download purchase more in the long run. The Netflix analysis is extremely helpful in understanding what is at stake, and the true cost of lost profits. I’m finding that downloading is just a way to sample a much wider variety of media before I spend the hard earned bucks (not to mention greater access to obscure material that was much harder to find in the past).

    All the best!

  2. Additionally:

    Isn’t it peculiar that we contemplate how to prevent people from making copies in a world where copying has become the key productive activity. It brings to mind Marshall McLuhan’s image of the stagecoach seen in the rear view mirror of the car. We drive into the future looking backwards: problems with copyright are problems of analog business models as seen through the rear view mirror of digital media. What content sellers, mass media corporations, are asking for is impossible and stupid.

    Let’s look at it from a different starting point and ignore the customers for a moment. Let’s instead begin on the foundation that in a digital world, you can’t sell content. It’s a simple fact, the conditions that existed in the mass media age that made it economically lucrative to sell content no longer exist. The transition from analog to digital is revolutionary in this regard. Digital means the end of expensive copying and the beginning of cheap digital cloning. In the digital world, there is no original. And there is no copy. There is cloned media, which is identical to the original, and every other clone, in every respect. Where mass media content sellers built an empire taking advantage of analog noise – every copy made of a copy reduces the quality very quickly – and capital intensive means of production and distribution, the digital world utterly destroys the foundations of their business. They sell copies of content and the digital world just abolished the notion of a copy. Then it handed every single one of their customers the means of production and distribution. So is piracy undermining mass media corporations selling content? Or did digital technology just destroy the foundation of their business.

    We’ve got to stop pretending this has anything to do with The Culture of Free – also technologically determined; the internet reduces transaction costs almost to the point of free – or that it has anything to do with people stealing content. It’s not difficult to figure this approach is strategic on the part of the mass media content industry. They simply pretend they still have a business and try to wrestle whatever value they can from lobbyists over perceived injuries. They turn a technical transformation into a moral problem. They hope to collect taxes and become lords of media. The level of denial is astonishing. And we buy into it. Because the TV says so. And it’s our stagecoach too.

    {Having said that, Apple has shown with iTunes and the App store that you make way more money selling a lot cheap than you do selling something expensive to a niche. For the user, formerly the customer, it has to be more convenient than free. Cheap and easy. Meanwhile, Hollywood is trying to legislate a return to the analog era (using digital technology! ;-) charging mass media rates and trying to recreate the inconveniences of the analog era, snapping their bullwhip and clicking their heels to make the car move forward, racing the stagecoach in the rear view mirror. }

    • Brad, thanks, you hit a number of nails right on the head. I agree entirely that what we face is a digital revolution that has fundamentally changed the economic landscape and structures, and most big content providers are trying to deal with this through denial or moralising or a combination of both.

      Your points about how even the idea of ‘original’ and ‘copy’ are transformed demonstrate a new conceptual approach is needed to grasp the practical problems. Similarly, a recent post pointed to the ‘misleading metaphors’ that drive much of ‘the war on online sharing’. The study it links to is well worth a read for those interested in this deeper problem.

  3. Digital content has certainly widened access and with it, copying and sharing has proliferated. Let’s not pretend it didn’t exist before the internet, though it is certainly easier now. In my opinion, the best way to tackle this issue is to acknowledge that there is for the moment a sliding scale, and it’s not going to go away anytime soon. For example, if I can get something for free – a sample if you like – that I need, appreciate, or just simply enjoy I personally am more likely to purchase something related that the free sample doesn’t offer me, if it is for sale and at that most difficult of all quantifiable factors; ‘the right price’.

    In relation to photography, journalism and news I don’t think there is a ‘one size fits all’ solution to the problem of who is going to pay for this content and indeed I think part of the problem is assuming that there is such a model. I believe revenue will become much more diverse in the future. I think of projects and work that may be funded by a combination of unrelated personal income, sponsorship, donations, publication fees etc. Indeed, I think this has always been the case to some degree and we forget that journalism has never really been a money maker in and of itself, except in a minority of cases. People don’t really pay for journalism expecting to profit financially from it. How often have you heard the phrase “He made his millions as an investigative reporter…”

    To bring this back to the debate of piracy and paid content, I don’t think we should be afraid of giving things away for free, if we see it as part of a business strategy that includes generating revenue from multiple sources. If our knowledge and culture becomes seen purely in terms of how it can be financially commodified, I think we are in trouble. Again, I think there should be a sliding scale, related to your own personal set of values. If I get paid to take someone’s portrait and that person wants a copy, maybe I’ll email them a decent sized copy for nothing. If they want a framed print, maybe I’ll charge them at cost. If they want a private family portrait session, I’ll negotiate a price. If one of my non photographer friends buys a new camera and asks me in the pub how to change this or that setting, or how to go about getting this or that use from the tool, am I going to tell them to enroll in one of the basic photography classes that I teach? Not likely (though maybe I should). Maybe if they want to spend a bit more than a half hour over a pint I might offer to do a couple of sessions with them. Maybe we’ll negotiate a few private classes and some money will change hands. Maybe not. Maybe I’ll do it for the price of a pint because they’re my good friend. Maybe I’ll get a call from a friend of this friend asking for some private photography classes and offering to pay good money for it.

    Maybe, over time, there will be a combination of all of the above.

    Ultimately I would like to see us move toward a free and open culture where the financial reward is irrelevant, because we as a civilisation have moved beyond money, viewing it as the crude and arbitrary indicator of value it actually is. Of course in the meantime I have to continue to work for money to pay bills, buy equipment, pay to have machines fixed and maintained, buy food, put my kids through school and oh, well, just about everything else really. But I’m trying to do my bit to push a little toward where I think we should be headed. I’m not naive enough to think I will see it happen in my lifetime (I would be delighted and amazed if it did though!) but I feel like I should do something, give something, even if it feels insignificant and pointless.

    One thing I think the advent of the internet has shown is that many of us value knowledge and cultural exchange above dollars and pounds, even if we have to continue to earn money and have to price our work. Something that is becoming harder and harder to do in what is a rapidly changing financial environment, and a problem that is confronted by almost everyone. How much do you charge? How much are you willing to pay? How much is it worth? These are constant questions.

    If you’ll allow me to over simplify for a moment, the real question for me (and the one we often don’t have time to ask or answer as we compare the cost of apples and oranges) is what do we want to work towards? A free and open culture? Or a closed and gated one? It is a question of choice, and one that goes beyond the boundaries of photography or art and cuts to the very heart of the fabric of our society to include food, healthcare, education and housing. I personally think that the decision is always an easy one. The difficult bit – whatever you choose – is turning that decision into a reality.

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