Category Agate

Netflixifying news? Think again…

“Netflix for News”. That’s a phrase I’ve started hearing in the last month.

It refers to an idea about how to save the news industry. I think most people who say it are suggesting a single subscription which users would pay, but which would give them access a wide range of news sites – a kind of super-subscription.

If we take a business model which has had recent success elsewhere in the media, the idea goes, we would solve everything.

Spotify has done it for music, Netflix have done it for TV and movies, why not do it for news? Subscribers would be paying, news organisations would have a new revenue source, and online media would be saved. Hurrah.

It’s easy to see why this idea has surfaced. Spotify has been at the forefront of transforming an industry ravaged by piracy into one that has returned to growth, with streaming increasingly driving it. Netflix is putting unprecedented amounts of money into amazing new commissions.

The news industry most definitely needs to drive direct consumer revenues, and so dreams of similar things happening.

Seems simple. Will it work?

Well… there are a few reasons why it might not be the ideal model.

Firstly, to state the obvious, music and TV are quite different from news. Music persists in a way that news does not. One person might listen to the same piece of music tens – or even hundreds – of times and still enjoy it.

People spend hours bingeing on box sets, sometimes years old. The ‘value-creating life’ of music, especially popular music, can be as long as decades, with TV and movies not far behind.

News, in comparison, tends to be short-lived. Its value-creating life can be as short as minutes or hours. Very few news stories hold significant economic value (or attention) for longer than a few days or weeks.

This means the model for getting payback has to be different. News requires constant re-investment by news companies to continue to have value, which needs be realised immediately. The investment and payback cycle for other media is typically a lot slower.

Is all news equally valuable?

In addition, news products tend to have more variable pricing. Unlike music, which broadly costs the same regardless of what it is, newspapers have always had highly differentiated pricing and products.

How do you equate the value of The Sun and The Times? Are they worth the same? Does someone reading one long article in The Times account for the same amount of value as someone else reading a short one in The Sun?

This is the challenge faced in a super-subscription environment, where the user pays the same regardless of what they read or how much they read.

How do you divide it fairly? Who should get what? And how do you ensure that making more investment in content, and getting it more widely read, delivers more revenue? Without that promise, why would anyone invest in expensive content instead of cheaper commodified stuff? You only have to look at today’s internet to see the answer to that question.

Algorithmic perversity

A super-subscription business model means that an algorithm decides how much individual news products are worth. It’s impossible to make an algorithm for this without producing perverse outcomes – I speak from experience.

If your algorithm pays publishers based on how many articles get read, publishers with long reads get punished. If it rewards “dwell time”, publishers who are good at producing very pithy articles get punished. If it tries to identify a user’s favourite publication and give it a bigger share, other unfairly lose out.

Algorithms like this, however sophisticated, create winners and losers and limit the ability of publishers to diversify their products and business models. On the contrary, they incentivise publishers to adjust their product in order to game the algorithm, rather than to please their reader.

That quickly becomes messy, so to minimise it, the provider needs to keep the algorithm opaque and ever-changing. The whole business model becomes shrouded in mystery. Nobody can ever know quite how the amount they are being paid has been calculated.

If you want to see that problem come to life, just look at how the Google search algorithm and advertising algorithms work. Key to the way they function, and acquire power in the market, is that almost nothing is disclosed about the way they function. Nobody is allowed to know quite how they operate. Those who control the algorithm are totally in control.

Not quite as simple as it looks

So “Spotifying” or “Netflixiating” news has a few challenges, even at a glance.

Perhaps they might be reduced by ensuring there are a number of competing services out there. This, though, raises its own issues.

For example, if services try to compete by doing exclusive deals with publishers, consumers will be left with a choice of incomplete services and might end up having to subscribe to several of them in order to get access to everything they want. Sound familiar to any Netflix and Amazon Prime fans? But if all the competing services have essentially the same offer, how many of them will survive? A competitive market for this sort of thing can be hard to sustain in reality and the consumer offer will be damaged.

So what’s the upside?

There is one outstandingly good thing, though, about these super-subscription models.

They are good at signing up large numbers of subscribers. If you want a subscription product to get to millions of customers, keep the price low – £10 per month or less is what you’re aiming for – give consumers a big choice of content, all included, and try to be the one subscription everyone needs. You’ll find loads of takers.

By comparison, it’s much harder to get people to commit to a relatively restricted product (like a single newspaper, for example) than a massive offering. That’s why subscription success tends to be limited to an exclusive group of high value publishers with affluent audiences.

The largest barrier to making subscription models work is getting that commitment from readers, so giving an immense amount of content in return is a good way to get them to pay.

Even if you could make it work, you shouldn’t want to

But there’s still a huge, massive problem with the whole idea of super-subscriptions.

Once you’ve persuaded all the publishers to take part, and you have the subscribers signed up, and you’ve developed a really compelling product and user proposition, and you have written an algorithm which divides the money up fairly, and you have managed to find a way to put high-priced, low volume products alongside low-priced, high volume products in the same service without any of them crying foul – none of which is easy – you still have to face the fact that you – and the publishers – have a terrible business.

Why?

Because you have set an upper limit on how big it can be. That limit is your subscription price. £10 per month, multiplied by the number of users you can sign up. You have to divide that £10 between all the publishers, and try to have some money left over for yourself.

That money will all be spoken for the day you go on sale. And there won’t be much left over to pay to new publishers who want to come and join in the fun. For them to get anything, you have to take it away from someone else, or try to increase price (and prevent the existing publishers from claiming the increase for themselves). Or the late joining publishers have to rely on advertising revenue – and we all know the issues with that.

It’s revenue, but it’s not a thriving market

So, this model produces some new revenue for the industry. Which is a good thing.

However, the revenue doesn’t increase in response to more content being consumed. It just gets shared more thinly between publishers, just as ad revenue does now. Not such a great thing if you want to see a bigger and more competitive market. More importantly, it reduces the rationale for investing more in content.

In a future “Spotified” world where total income is fixed, the incentive will still be to do exactly the same thing as now – minimise cost, maximise consumption, depend on advertising to drive revenue increases. It will just have an underlying, new, base layer of customer revenue which will only grow as long as new customers are acquired and retained.

It will not lead to a greater incentive to invest in product and content, because the market and opportunity will not grow any bigger in response to that investment. Not only is revenue limited by subscription rates in a “Spotified” world; so is market growth.

Super-subscriptions would be first aid for dying news brands, but not a cure

So, in my view, this model will solve little. It will give the existing players a temporary reprieve, but leaves an internet still far from the vibrant, thriving market it could be. The door is closed to new entrants, because the fixed revenue – the subscription price – means publishers who are involved will defend their share.

Be more ambitious, create a market which can thrive

There is a much more exciting, compelling and tantalising opportunity which publishers and regulators should focus on instead.

Imagine, if you dare, an internet in which every time a consumer reads something (or listens, or watches, or plays) the publisher makes some money. The more people consume their product, the more money they make.

What would happen?

Well… the best content, well produced, well marketed and wisely priced, would make the most money.

Which means the incentive to invest would change radically. We would see a lot more competition for users’ attention (and money). More products would be launched, and creative innovators incentivised to make their content compelling because they’re offered a direct reward.

Consumers would, in turn, increase their consumption because they’ve been given an ever more exciting choice of content to choose from. The market would grow every time someone decided to read more content. The job of the creators would be to get ever more creative about how to get them to engage more. And there are no limits set on the potential revenue for online content.

Publishers win big, consumers win bigger

But what about the poor old consumer, suddenly facing all this in place of what used to be free?

They’re actually the biggest winner of all. Being the source of the money places consumers in control – they become the masters of the algorithm. Nobody is going to part with their cash – or their data – unless what they get in return is worth it. Disappoint your customer and your business will suffer; please them and you win a huge prize.

This is happening right now

If you want to know how this can be achieved, I have spent the last year building the answer to that.

It’s called Agate, and you can try it now on publications like The New EuropeanPopbitch and Reaction.life – and many more to come.

Actually doing it

As some people will notice, my flurries of activity on this blog and elsewhere are somewhat random. I am deeply passionate about the issues around copyright, because they impinge so heavily on so many other things – economic, cultural, political, personal. One of the reasons I have written about it is to try to explain why these things matter.

The other reason is because I can see how things can be better.

Seeing how things could be better demands more than just sitting on a blog being a smart-arse. Instead of just writing about it, I need to DO something about it?

After all, one of the reasons the creative industries have found themselves in such dire straits is that while they have been adept at identifying their problems and pointing the finger of blame in various directions, they have been slow to come forward with – and actually implement – solutions.

The extended silence is because I have been doing just that.

Solving things for the creative industry is really about putting the creators and those who turn their work into products (the publishers, I guess) at the top of the economic pile. They’re the apex value-creators, after all, but on the internet they are far from the biggest earners.

Part of that is about copyright – the way permission is traded for value between, mainly, creators and publishers (and the main focus of this blog). Also the way those who don’t have permission are prevented from exploiting other peoples’ work. We all know how broken that is, and the many projcts (including some inspired and initiated by me) which seek to address it.

But at the other end of the issue there’s perhaps a more fundamental problem which needs to be solved.

How to get money into the value chain in the first place. The money that flows from advertising is largely inaccessible to publishers, controlled by huge platforms and leading to weird product decisions to try to maximise the paltry revenue flow.

The other revenue stream – from users – has been elusive for publishers. It’s a common belief that people don’t want to pay to access media content. That’s not particularly surprising that only a tiny proportion of people actually DO pay. Only 7% of people in the UK have paid for online news in the last year, according to the Reuters Institute – a number which seems, sadly, rather high to me.

That is the problem I have set out to solve. Free doesn’t work, but subscriptions are only taken up by a tiny proportion of the audience.

The 95% of activity which subscriptions fail to reach is a huge opportunity. Asking consumers to pay without asking them to make a formal commitment is a way to start making money in that huge space. Making it effortless is essential.

That’s what the product I have built does. It’s called Agate and you can try it now at Popbitch – go to www.popbitch.com/stories and start reading.

Pretty soon you’ll be able to take it to other sites too, without any further setup or login or any such nonsense.

I hope you like it, and if you do I hope you spread the word (and add @agatehq to your tweets and follow list).

So, I’m making it easier to make money, at prices and on terms that publishers control.

After that the challenge is for the creators and publishers. Can they make something you like enough to want to spend a few pence on? If they can, the prize is pretty big.

That makes pleasing you becomes their most important objective. Not so much pleasing the advertisers.

What a relief and a pleasure that will be!

So, saving the media. How?

Finally the emperor has no clothes. The creative media will never be able to adapt to the internet the way it is now. More and more people are saying it. Media is dying.

Why? Because it’s starving. There simply isn’t enough money to pay for everything. However good the media has been at garnering audiences and data, the impossibility of trading those things for meaningful amounts of money has become apparent to even the most optimistic enthusiasts.

Without money, media withers and dies. Newspapers, with a few stand-out exceptions, are withering away at an alarming rate. Magazines, long dependent on their print editions to keep going, have hit a wall.

The simple and seductive idea that advertising could translate internet popularity into money has proved itself wrong. We need not dwell on the reasons other than to observe that that advertising isn’t working, and has never really worked, as a sustainable revenue source for online media. After roughly twenty years waiting and hoping that things might change, the patience and financial reserves of the media have begun to run out.

Which leaves a gloriously simple problem. The media needs to make more money. It needs to translate audience into revenue.

If advertising can’t do it, what can?

There’s only one other source of money and that is the audience themselves. The stand-out exceptions I mentioned above are thriving because they’re charging for access. The London Times, the Washington Post, the Economist and so on.

For them, subscriptions are the central focus. The Times of London is profitable for the first time in living memory as a result of its obsessive, long term, subscription focus.

The only way customers can be persuaded to pay, and keep paying, is if The Times focuses on nothing more than producing a product which entertains, informs, delights and surprises them. That is great news for customers. The Times has to be trustworthy. It has to be consistent. It has to be, and to stay, excellent or people will simply decide not to pay for it.

The same is not true of free products, which need to capture enough readers to generate data to sell to advertisers.  They often do this by generating “click-bait” stories, which, as the name indicates, are a form of con and hostile to readers.  Free products need to display as many ads as they possibly can to maximise the (still pitiful) revenue that data can generate. They need to cut their investment in content and the creators who make it, to try to make ends meet, thereby short-serving their readers.

So even if being asked to pay seems, initially, like a bad option, it turns out that for a significant numbers of users it is not. But only if the product is good enough to justify the cost.

That’s an important factor for publishing people to consider when they find themselves thinking “but nobody will be willing to pay”. It is surely true that persuading people to pay for a product which has been optimised for being free, and in the process become unsatisfying and hostile, is tough. But it’s not a generic truth that people won’t pay.

People will pay. They’ll pay for anything for which their desire exceeds the cost being demanded – whether it’s media, groceries, cars or jewellery. The amount of desire, the acceptable cost and the product might vary from person to person, but it is that basic equation which drives all consumer markets.

The task of the media is to bring cost and desire for their products into line.

If the cost has to be more than zero in order to remain in business, what has to happen to the product to make it viable? Self-evidently it has to be attractive to enough customers. That probably involves more change than simply putting a price sticker on it. But where there’s a return there’s a business plan. Investment to make the product better is justified by the improved bottom line that stands to be gained.

Lastly, what about the cost? The Times and others have shown the way by creating a high value product that sells, to hundreds of thousands of people. They have found a lot of people willing to part with a fair amount of money every month because their desire for the The Times exceeds the cost being asked.

It isn’t cheap, though. The Times is most certainly a high-end product aimed at affluent individuals. That’s why the subscription base is somewhere below 10% of the people who want might otherwise choose to read their product. The other 90+% just have to be ignored, or, in some cases given a certain amount of free content in order to tempt them in.

For other publishers, with larger and less affluent or less committed audiences, the investment in making the product more desirable has to be justified by a price much, much lower than the subscriptions currently doing so well at the very top of the market which appeals to a much broader demographic.

Lowering that cost and creating really huge new sources of revenue and profit is the next challenge.

Which will be the subject of the next blog…

 

Rebooting copyright (blog)

Ah hello hello hello. Long time no, um, blog.

I’ve been busy going back to first principles and working out how we can adapt to a world in which the failure of copyright seems to be collapsing the media ever more quickly.

I’m still obsessive about copyright, of course, but I have begun to wonder if we need to focus our attention in a different direction.

Getting right to the nub of it, the central purpose of copyright is to enable creators to benefit from their work. It has lots of surrounding detail but that core function is critical.

Critical and no longer reliable.

So I have paused, for a while, my focus on the legal and regulatory cause of the malaise. Coming up with solutions which work, which I have helped with, can’t solve anything as long as progress is a political rather than practical process.

So I have been focusing on the practical. What can be done, right now, without the need for any political involvement at all?

Not just conceptualising it, but designing it. Not just designing it but building it.

It’s built. It’s about to launch. It makes, I hope you will think, perfect sense. And it changes everything, without depending on the politicians changing anything.

So I’m going to start writing here and elsewhere again, to explain some of the thinking which has led to Agate. Keep an eye on www.Agate.one where a new site will be launched soon, and a product soon afterwards.

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