Tuesday, September 29, 2009

Mammals Shouldn't Take Advice from Dinosaurs

On ZDNet, Larry Dignan asks, Is Barry Diller Delusional? Barry Diller is the exec formerly behind Fox Broadcasting and USA Broadcasting, and is currently in charge of the lukewarm IAC/InterActiveCorp. Larry's post contains video of Barry (once again) declaring that people should pay for Internet content.

There are gobs of media moguls out there who feel that they should be paid for access to their content and that people will pay whatever said mogul thinks is fair. These people have heard of the Internet, but they've never actually used it. They might "have people" who surf, but they don't. In the context of the Internet they don't even know what's fair, and their entire argument is based on their abject ignorance. AIC's stock price pinpoints the moment when investors realized that fact.

I won't argue that they shouldn't get paid, but the mechanics of it are vastly different from what their wishful thinking would prefer to see. And it is the consumer, not the mogul, who sets the price. The principle of supply and demand is not negated simply because the content is on the web. On the contrary, it's magnified due to increased competition.

Web surfing is a lot like shopping. Not "guy shopping" like I do (I need something, I buy it, I leave), but the way my wife does it... taking a day, going to the mall (the modern incarnation of a bazaar), browsing, being pulled along by one interesting thing after another in imitation of Brownian motion. Along the way she might just buy something and take it home, but the bulk of the experience is the browsing. And, shopping this way, she's likely to bring home only those things that are bargains. Stores don't generally charge admission or require a subscription for that. Internet browsing isn't called "browsing" for nothing.

Now imagine if the stores required you to pay to see what they had. They wouldn't stay in business.

Now, what Hollywood execs are trying to do is treat a bazaar as if it were a theater. And certainly, they can do that. They can lock the doors of their establishment and only allow in those customers that have purchased a ticket or pass. But they've forgotten a few things:

First, people are pulled along by their interest, and locked doors aren't very interesting. That's why carnivals have barkers, and why movies have trailers. Experience shows that both barkers and trailers exaggerate the desirability of their product.

Second, people have finite funds. They can't pay for everything. They just can't. They have to choose. Given a choice between paying for access to a site and visiting a competing site for free, most of them will choose the competing free site. Don't think so? WIKIPEDIA. Ask a pundit and you'll be told that Britannica is more respectable, more reliable, yada, yada, yada. But for traffic and general use, they're getting their butts kicked every single day by Wikipedia.

The New York Times used to be a subscription site. Then they woke up and noticed that people were ignoring them. When it comes to news, the old rule applies: subscriptions pay the paperboy... ADVERTISERS pay the reporters, editors, printers. So what happens when your delivery costs drop to near zero? The answer is NOT to continue the subscription model and hope that your customers don't notice. They do. People will happily get the same news stories from web publishers who do understand that the subscription model is dying.

From a personal perspective:

I'm dropping the premium channels (particularly the movie channels) on cable, because over the last year I've found that I don't use them at all. I have used on-demand (PPV) and Hulu, which is supported by ads. Would I pay for Hulu? Maybe, if the cost were small and they pulled the ads. But even though Hulu is free to me, I still find I watch more YouTube and fanfilms (which are only getting better). If I had to purchase Hulu content per view I'd certainly watch far less of it. If I had to subscribe I'd almost certainly bypass it for other fare. Being supported by ads, Hulu certainly reaches a larger audience than it would otherwise do.

It's not a matter of being willing to pay. I donate to PBS, and nobody's twisting my arm. I buy the occasional PayPerView movie or event. But... in order to sink money into something regularly, it must not only be interesting, it must be interesting enough to justify the cost over something that's maybe not quite AS interesting, but free.

In Diller's case... sure, he can argue that people should pay for HIS content. He doesn't even have to argue it... he can just wall off his sites and do it, and needs no one's permission. But if he thinks he's arguing on anybody else's behalf, then he's just laying down a smoke screen for his own anti-competitive behavior. If he's hesitating, it's because he's got free competition. That he's complaining shows he doesn't like it. Tough. Other people have found ways of monetizing the web without fees. They don't need to be told how to run their businesses by the guy who hasn't figured it out yet.

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