Friday, February 19, 2010

Is "Access" Where Most of the Revenue Is?

Fretting over whether people will pay for content is based on a mistaken assumption: that people have ever paid for content in the past, says Forrester Research VP. "They actually haven't," he says.

 Instead, people have paid for access to content.  You have to think about this some. People buy newspapers, so isn't that a content purchase? Well, he argues, not really. The cost of the newspaper purchase never covers the full cost of the content, which is mostly paid for by advertising.

One had to think about a "newspaper" as a distribution channel and a content aggregator, not an actual "content product" in that sense.

So what about cable TV? McQuivey argues even monthly video subscriptions are about "access" to content, not direct content purchasing. "Pay per view," where a show or movie is bought a la carte, on the other hand, is a content purchase.  Subscriptions to linear channels are a form of access, he argues.

If one looks at matters that way, "access" constitutes 77 percent of what the average household spends for "content" each month is spent on content access, not content itself.

Some will argue with the notion that a cable, telco video or satellite video connection is "access" rather than content. On the other hand, having linear video streaming in the background, even when one is not watching, is somewhat akin to voice "dial tone" or broadband Internet access. It's there, one can use it when one wants, but it is not a discrete "content"purchase.

I'm not sure I'd go so far as to classify cable TV as "access" rather than content. People pay for their voice services using a flat-fee subscription, as they pay for linear video. Some of us might not think a different payment method, or retail pricing plan, changes the nature of the product.

But it is an interesting way of looking at the relative value of various revenue streams. Back in the early days of the tramnsition from dial-up to broadband, I gave a speech to a group of ISPs very concerned about the difficulty of the business model.

At that time, most of the actual revenue was earned by providing access. There was some amount of value-added service and products.  For better or worse, I said then, "access" was where most of the money was, despite the difficulty of the business case.

The business ecosystem was simpler then. Google had not grown to its current state, for example.  Looked at broadly, it may no  longer be true that most of the money is in access.

1 comment:

Dave Michels said...

Gary, This is an excellent thought provoking post. I never thought of access vs. content as a gray area, but it clearly is. Particularly with CATV.

When my kids were young, the Disney channel was a premium channel like HBO, but they switched it to a free/commercial channel.

I've always been sensitive to commercials and as a result we stopped watching at home. I always thought that was happy to pay for it, but I won't take it free with constant toy and cereal commercials. So I was willing to pay for content in this example.

Nick figured it out, and offered small kid programming during the day with commercials only between shows. It became our primary kid channel.

But I am not sure I agree that paying for a newspaper is not paying for content. Paid newspapers have a blended revenue model. A newspaper with excellent content can command a higher price.

DaveM

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