What we need is a good-better-best approach to digital content

Paramount is out with a new online service that lets customers purchase clips from films. As this New York Times article notes, it’s initially aimed at advertisers and marketers who want to use the clips in campaigns. Consumers will be…

Paramount is out with a new online service that lets customers purchase clips from films. As this New York Times article notes, it’s initially aimed at advertisers and marketers who want to use the clips in campaigns. Consumers will be let in on the action later.

I have a couple thoughts on this:

1. Kudos to Paramount for giving this a shot. It certainly can’t hurt, and we need all the experimentation we can get.

2. I think this is a fantastic opportunity to test good-better-best quality levels. I’ve long thought there’s a way to service different segments of the audience through resolution, features and convenience.

For example, writers, bloggers and others who simply want to reference a clip could grab a lower-resolution version for free (as many already do through YouTube). This boosts awareness and creates branding opportunities for the content provider.

One sidenote: The Times piece suggests folks on the low end — consumers, mostly — may have to pay a low per-clip fee. That’s the wrong move. These aren’t ringtones. Ringtones are a public expression of personality linked to an always-on, always-available device. Embeddable movie clips require placement within media forms, be it a website or a DVD. The all-important personality element is muted. I’m not going to shell out cash if that so-bad-it’s-good movie clip only broadcasts my ironic sense of humor to a limited audience. I need exposure, dammit!

But I digress …

Moving up the scale, companies that want to aggregate clips or make them available as part of another content product could pay a reasonable amount (likely a flat rate for a certain number of clips) and gain access to DVD-quality content. I can see utility here for the education world. A one-stop shop for clips could take a lot of the pain out of the copyright quagmire law-abiding teachers currently face.

On the high end, marketers and advertisers who need full-resolution (1080p, if available) and the absence of co-branding would pay a premium.

What won’t work is an “everyone must pay” declaration. I’m assuming that since this got written up in the Times, and given that a consumer option is part of the longer-term gameplan, Paramount wants this to be more than a back-channel marketers’ tool. Otherwise, why publicize it? This is clearly a public-facing product. As such, it needs to properly service the unique needs of all audience segments.

Social media doesn’t make money directly, but it still has enormous value

Perhaps it’s a function of the intricate tracking the Web provides, but I’m still amazed at media’s inability to grasp the secondary (and often, tertiary) value of community efforts. So let’s make this as clear as clear can be: Twitter,…

Perhaps it’s a function of the intricate tracking the Web provides, but I’m still amazed at media’s inability to grasp the secondary (and often, tertiary) value of community efforts.

So let’s make this as clear as clear can be: Twitter, Facebook, forums and other social media functions rarely make money directly. Their value comes from the attention they gather and the opportunities that attention creates. If you have a mass of people who have willingly opted-in to your messaging, you damn well better put useful, for-pay products in front of them. Otherwise, all you’ve got is a social club.

This recent piece from Forbes does a nice job tearing down the direct-revenue mindset.

Judging Dell’s Twitter revenue against company revenue misses the point

If Dell turned heads last year when it claimed to have made $1 million through Twitter, its revised estimate for 2009 is going to cause nasty neck pulls: the company says Twitter revenue jumped to $6.5 million. (I’m assuming that…

Twitter and DellIf Dell turned heads last year when it claimed to have made $1 million through Twitter, its revised estimate for 2009 is going to cause nasty neck pulls: the company says Twitter revenue jumped to $6.5 million. (I’m assuming that spans multiple years.)

The Guardian has a nice bit of analysis on the announcement. It’s informative and interesting. It weaves in some contextual bits. But nestled amidst the numbers is the “drop in the bucket” paragraph that always pops up in these types of stories:

Although $6.5m sounds impressive, when you compare it with the net revenue of $12.3bn Dell reported in the first quarter of fiscal year 2010 it becomes clear that this is only a drop in the ocean …

Sorry. I guess that’s a ” drop in the ocean” paragraph. You get the idea.

I understand the need to insert this text. Its absence would surely raise a red flag for editors and consumers alike. But there’s an underlying perspective here that I believe is damaging, and I wish more analysts would call this out.

Social media exists in a space totally different from traditional business. Activity takes place at the edges, not the center. It’s ambiguous. It’s fleeting. Because of all this, judging social media efforts against traditional channels obscures the real analysis and the real opportunity.

What’s notable about Dell’s Twitter revenue is that it went from $1 million in 2008, to $3 million in June ’09, to $6.5 million now. That’s an enviable trajectory in any business, but it’s doubly impressive here because Dell is making actual money through a nascent system. It found a way to put social media’s tricky architecture to work.

That’s key. Digital disruption is wiping out the fat revenues from traditional models. Many businesses will get smaller simply because consumers have more power and more choice. The companies that find ways to make money within this new landscape — even relatively small amounts of money — have a better shot at adaptation.

Images courtesy Dell, Inc. and Twitter, Inc.

My line between edit and sales blurred years ago. It’s not that big a deal

I was fortunate to have my ill-conceived notions about editorial/advertising segregation blown to bits early in my career. It hurt. No doubt about that. I came out of journalism school with all the requisite ethical boundaries and red flags intact….

I was fortunate to have my ill-conceived notions about editorial/advertising segregation blown to bits early in my career. It hurt. No doubt about that. I came out of journalism school with all the requisite ethical boundaries and red flags intact. So it was tough to let that go.

But it was so useful to let that go. It made me see that most journalism organizations are businesses. That’s it. All that stuff about objectivity and watchdog roles and the Fourth Estate sounds good, and it feels good, but news companies must ultimately adhere to the same criteria as every other business: does it make money or does it lose money?

That’s why it’s interesting for me to watch others go through the same gyrations now that the Dallas Morning News is moving editorial and sales closer together. I get it. This is hard to swallow. It goes against everything journalists know, everything we’re taught in the vacuum of j-school. It seems dangerous.

But having lived through my own transition, and having traversed some tricky edit/ad terrain along the way, I can tell you the danger is minimal. Perhaps even non-existent.

First off, consumers don’t care. If the content is informative and entertaining and useful, if readers can justify the time and money spent, they’re good. Second, a smart news business understands that it cannot undermine the trust it’s established with the community. This has nothing to do with public interest or greater good. It’s about money. Trustworthy content builds an audience, and audience attracts advertisers. Kill the trust and you kill the audience; advertisers will take their business elsewhere. That’s all there is to it.

Blurring the edit/ad line within a newsroom isn’t a big deal. It’s what happens after the blurring that matters. If the Dallas Morning News cranks out great stuff and serves/educates/helps people, this can work for everyone involved. If they do something stupid — like violating trust by kowtowing to clients — they’re screwed. That’s just business, and bad businesses die.

The psychology of paywalls [Quote]

“Paywalls are psychological as much as navigational, and it’s a lot easier to put them up than to take them down. Once web users get it in their head that your site is “closed” to them, if you ever change…

“Paywalls are psychological as much as navigational, and it’s a lot easier to put them up than to take them down. Once web users get it in their head that your site is “closed” to them, if you ever change your mind and want them to come back, it’s extremely difficult to get that word out.”Scott Rosenberg, former managing editor of Salon.com

The glory of a thought process, as illustrated by John A. Byrne

John A. Byrne is leaving BusinessWeek to start a new business (not exactly a newsflash, I know). I generally don’t care much if a bigwig leaves a position to venture out on his or her own. That happens all the…

John A. Byrne is leaving BusinessWeek to start a new business (not exactly a newsflash, I know). I generally don’t care much if a bigwig leaves a position to venture out on his or her own. That happens all the time. But Byrne is different. BusinessWeek, for all its financial trouble, has a phenomenal web presence, and much of that was built under Byrne’s watch. He’s also a guy who inherently understands the power of direct communication with the audience. Just take a look at his Twitter feed. How many editors engage like that?

And then there’s this …

In a blog post announcing his new venture, he articulates the beliefs that guide his thinking about digital content:

I have three fundamental beliefs that inform my thinking: 1) Print advertising will never come back. There are just too many options for advertisers today and too much pressure on rates. Sadly, success in print will be measured in single-digit declines, forever. 2) Online advertising will never offset those declines nor save print. There’s far too much competition online and far too much available inventory; and 3) Users will not pay for content, unless they’re convinced it has immediate and tangible value. Very little journalism meets that standard today. Do we really need 57 versions of a story on Bernie Madoff pleading guilty?

That’s a beautiful paragraph. Here’s why:

  1. He’s dead on.
  2. It illustrates the type of structural thinking that turns vague ideas into real businesses. We need more editors and publishers who work this way. Big ideas and grand plans cannot stand on their own. They have to be crammed into a structure — a mental furnace that burns away assumptions. Otherwise, all you’ve got is brain-based vaporware. That useless, fluffy business school nonsense that gets retweeted, and buzzed, and expanded into book form. We’ve got enough of that.

I speak from experience with this structure stuff. I used to wander aimlessly through the “future of content” world, distracted by shiny new things and influenced by flavor-of-the-week thinking (I once thought micropayments were totally going to happen … ugh.) But six months ago I decided to map out my own structure for all this digital disruption business. The result is this. I have no idea if it has any value as an actual business model, but the writing process forced me to hone and articulate the thousands of rants and opinions brewing in my head. Now, when I’m confronted with a new idea or perspective, I can feed it into this structure and quickly examine the various angles. It’s helped me tremendously. I’ve got my footing now.

The Kindle is a big, shiny, distracting object

Hey book people: don’t be fooled by the Kindle. Amazon has no interest in hardware. That’s the conclusion Joe Wikert reaches in an excellent bit of analysis. I couldn’t agree more. The Kindle is a big, shiny object that’s distracting…

Hey book people: don’t be fooled by the Kindle. Amazon has no interest in hardware.

That’s the conclusion Joe Wikert reaches in an excellent bit of analysis. I couldn’t agree more. The Kindle is a big, shiny object that’s distracting everyone from Amazon’s more subversive (and smart) move: It’s trying to become the source of ebooks. It doesn’t want to own that market. It wants to rule it.

It’s entirely possible that Jeff Bezos and Co. originally sought to duplicate Apple’s iPod-iTunes model. But take a look at the evidence Joe presents: At some point in the last two years, Amazon realized it’s not Apple. The hardware gambit only works if you create something miraculous. The iPod and iPhone certainly qualify as technical marvels. Spend 30 seconds with an Apple product and you’ll come away deeply impressed. Spend 30 seconds with a Kindle and you’ll want your 30 seconds back.

Amazon just can’t cut it in the hardware game. I bet the higher-ups don’t particular care, either. This is a company that redefined retail efficiency. It’s masterful at satisfying consumer demand, more so than Apple or even the big daddy of the retail chain, Wal-Mart. Publishers need to realize — and the smart ones already do — that the Amazon threat doesn’t lie in a device. It’s in the distribution.

Honing my thoughts on book publishing’s big issues

I recently had the privilege of being interviewed by Victoria Sandbrook. In a serendipitous twist, I found that by answering her questions I clarified some of my thoughts around book publishing’s big issues. What follows is largely for my own…

I recently had the privilege of being interviewed by Victoria Sandbrook. In a serendipitous twist, I found that by answering her questions I clarified some of my thoughts around book publishing’s big issues. What follows is largely for my own archival purposes.

1. What is the best thing publishers can do to get ahead in the digital marketplace?

The thing they can do right now is centralize their editorial and production processes around “content creation.” Not “print books.” Not even “ebooks.” They’ve got to create content.

XML is a big key here. It creates flexibility to take advantage of all forms: print, EPUB, PDF, HTML, a hologram imprinted on your brainstem, etc. A digital-centric workflow also lets publishers quickly adapt to new ideas.

2. What parts of the established publishing model are most hurting expansion into digital publishing?

There are a couple that occur to me. The first, and biggest, is a print-first mindset. That’s a massive detriment because print is locked down and inflexible. Building digital products out of print products is unbelievably inefficient. And really, it’s just dumb. Everyone creates content in a digital form these days — know anyone who still uses ink and parchment? Why would you take something that’s already digital, lock it down in print, and then retroactively attempt to create digital formats from that inflexible product? It doesn’t make any sense.

The second issue is disregard for consumers’ growing power. The old model worked to the advantage of publishers and retailers. High distribution and production costs meant only the most committed businesses had the clout needed to get books into the marketplace. These firms could set their own terms because consumers didn’t have an Amazon-like option as an alternative. But now they do. Any publisher who does anything that works against the consumer is shooting itself in the foot. DRM is a perfect example. You’re not protecting content with that. You’re pissing off your best customers by preventing them from doing what they want with the content they purchased. And you’re doing that within an environment where the consumer has the power! I understand the DRM impulse. I really do. It’s a reaction to an irrational fear. But cooler heads need to prevail here, and that requires a deep understanding of market reality.

3. Why should small publishers stay small?

I’m totally biased toward this “small” thing, so take all this with a grain of salt 😉 It’s the ravings of a small evangelist …

Anyway … after 5 or 6 years of studying digital disruption in the content industries, I’ve reached one conclusion: there’s a successful model here, but it’s much smaller than what we’re used to. Someone may very well figure out how to create a giant business within digital’s dispersed environment (Google certainly cracked that code), but this mythical company will not accomplish this feat by transitioning a giant business built in a different age wholesale to the digital world. It just doesn’t work. Pricing is lower. Audiences are large, but dispersed. Consumers have unbelievable choice. So a business can’t count on 20 or 30 percent margins in this environment. It might achieve those margins in time, but you can’t walk into a digital business expecting those.

That’s why I believe small publishers are uniquely positioned to take advantage of digital. The Web creates stunning efficiencies. You can reach huge numbers of people through low-cost marketing (blogs, social media, etc.). You can manage inventory through low cost back-office software. You can even set up your organization to only produce physical products when they’re ordered (print on demand). There’s a lot of upside here. And small publishers have the agility to do these things. They aren’t trying to figure out how to support thousands of employees. They’re generally unencumbered by the old model. That’s liberating.

Problems arise when small publishers grow too fast for their own good. No one has figured out the end-all, be-all model of digital publishing. There are no assumptions, yet. There may never be. As such, a small publisher needs to be able to justify expansion because there’s no guarantee — or even a hint of a guarantee — that their larger size can be supported by fickle and fluid digital audiences. Think of it this way: Would you take on a $1 million mortgage if your annual earnings fluctuate wildly? Probably not (although that may be a bad analogy given events of the last two years …). I’m not saying don’t take risks. You have to do that. Just take smart ones. Understand how the digital environment is different from the traditional marketplace. Once you get that, you can correctly assess your options and make the best possible decisions.

I’m much more interested in building businesses, not saving them. “Small” is the foundation upon which all businesses are built. They get big. They don’t start big. We’re in an odd moment in history where the sea change of disruption is forcing big businesses to transition (“save themselves”). That’s unusual. In normal times — or less disruptive times — entrepreneurs build new businesses and grow them. Currently, we’ve got entrepreneurs doing their small-business thing, but we’ve also got these massive organizations attempting to shift to something new. I think those big businesses need to take a note from the small guys. They need to build businesses in this new environment. Not save them. Not ask for government handouts. Not hope for deus ex machina in the final act.

I’m reminded here of newspapers that closed earlier in 2009. The staffs thought they’d gather their resources and launch their own online-only publications. That’s not a bad idea, but they approached it the wrong way. They were trying to create something that could support 150-200 people out of the gate. Unless you’ve got massive venture capital funding, that’s not going to happen (even then … it’s just such a bad idea). Had they opted to create an online-only product and then grow it appropriately, they would have had a much better shot at success.

4. What do you think will “flip the switch” on digital text? What will make it become the dominant product we publish?

I think it’ll be a gradual evolution that builds toward a tipping point. We’re in the evolutionary stages now … the upside of digital is becoming apparent to envelope-pushing publishers. Devices are being created to deliver digital content. Younger generations are more and more acclimated toward finding and absorbing material in a digital format.

The thing that tips it could be a device. That’s always exciting and fun. But it might also just be the inevitable moment when more money can be made from digital content than print content. It’s really hard to say.

I know publishers of all types like to point to the iPod as a tipping point moment. And it was to an extent. But the debut of that device was made possible by a massive number of decisions made prior to the iPod’s arrival. The move from cassette to CD, for example. There’s no way the iPod would have arrived when it did if people weren’t already accustomed to digital music. The leap from cassette to “digital file” was too great. But the shift from cassette to CD to digital file was easier. See what I mean? There’s all these little steps that add up, and you really can’t see the lines connecting the dots until you look back over the history of a format or device. To me, that’s one of the most intriguing parts of this. There are forces at play and things happening that we won’t fully understand until much later. Again, acknowledgement of this is the first step. Creating the agility needed to take advantage of these opportunities is the second. It’s like catching a no-look pass. You need to read the situation to know that pass might be coming your way. You also need the dexterity to snare that ball when it suddenly appears.

5. Why is Amazon’s e-book pricing problematic?

Amazon’s pricing is only problematic for publishers. It’s great for consumers. It’s great for Amazon, too, even though they’re currently subsidizing a whole lot of the cost. But Amazon is a long-view company. I’ve always respected Jeff Bezos’ ability to shrug off short-term naysayers and keep his focus on the horizon. And that’s why Amazon’s $9.99 price point is a big problem for publishers. In Amazon, they’re up against a company that’s in it for the long haul. Amazon is willing to pay a lot of money short-term to redefine the marketplace for digital books. If that redefinition happens — and I can’t see why $9.99 wouldn’t be more successful than $19.99 or $29.99; lower is almost always better — Amazon will be able to go back to publishers and say: “We’re your biggest retail channel. We set our prices at $9.99. We’re ending our subsidy and taking 20% for ourselves. You’ll need to adjust your pricing (and your business … and your entire model) accordingly. Take it or leave it.”

That’s the power of popularity. That’s what Amazon is doing here (I think … Bezos and Co. are a lot smarter than me).

Now, some in the book publishing world believe they need to create a competitor to Amazon. Collusion concerns aside, that’s not a bad idea. Competition is a good thing. But there has to be a Plan B, and it must come from within publishing organizations. Publishers need to figure out how to make money on $9.99 books (or $4.99 if they’re iPhone apps …). You do NOT want to challenge consumer expectation. Truly, the price point isn’t about Amazon. It’s about Amazon’s ability to harness consumer expectation as leverage. And they’re doing that masterfully. So publishers need to get out in front of this and figure out how to make money on those lower price points. Centralization of content through an XML workflow is one way. That increases efficiency. But publishers also need to experiment with different platforms (iPhone, Android, their own sites, etc.) They also need to consider ways to serve consumers through non-book products. I don’t have the answers here. I just know that when you’re confronting an adversary head on, it behooves you to consider flanking maneuvers.

Would freelancers build businesses if it was easier?

I’m as pro-freelance as they come, but Scott Shane makes an excellent point in his BusinessWeek piece “Beware the Freelance Economy”: What if the shift toward non-employer businesses reflects a belief that building a business with employees has become too…

I’m as pro-freelance as they come, but Scott Shane makes an excellent point in his BusinessWeek piece “Beware the Freelance Economy“:

What if the shift toward non-employer businesses reflects a belief that building a business with employees has become too much of a hassle? Entrepreneurs don’t want to deal with issues of health insurance and managing people and all of the things that come with building an organization. So instead they are tending to start more non-employer businesses, with the result that the firms they establish are less substantial and contribute less to employment than the startups created in decades past.

I’m intrigued by his point about the hassle of health insurance. That’s key. If that obstacle was reduced, would some of those non-employers consider hiring workers? And wouldn’t that create opportunities for those small businesses to grow? And, extending that idea further, wouldn’t a percentage of those small firms inevitably transform into large, important businesses? Luck alone would allow for that.

My parents own a small business and I’ve watched them engage in an annual struggle with overhead. Health insurance being the most notable expense. Bearing witness to that shaped my own entrepreneurial instincts. I have no interest in taking on what I perceive to be the “extraneous” expense of employees. But if the system was different, if it was easier to hire employees and provide them with appropriate benefits, I would absolutely reevaluate my perspective.

Sidenote: What Shane addresses in this column is the hint of an issue, and I appreciate that. There might be nothing to the rise of non-employer businesses. But there might be something to it, too. I like his approach here. It’s not run-of-the-mill, hey-look-at-me punditry. He’s workshopping an idea in a public forum.

An exclusive search engine deal for newspapers can’t be far off

Reports suggest Microsoft is courting European publishers for some sort of Bing-based news thing. Meanwhile, Rupert Murdoch continues to shake his fist at Google. Cory Doctorow connects the potential dots at Boing Boing: So here’s what I think it going…

Reports suggest Microsoft is courting European publishers for some sort of Bing-based news thing. Meanwhile, Rupert Murdoch continues to shake his fist at Google. Cory Doctorow connects the potential dots at Boing Boing:

So here’s what I think it going on. Murdoch has no intention of shutting down search-engine traffic to his sites, but he’s still having lurid fantasies inspired by the momentary insanity that caused Google to pay him for the exclusive right to index MySpace (thus momentarily rendering MySpace a visionary business-move instead of a ten-minutes-behind-the-curve cash-dump).

So what he’s hoping is that a second-tier search engine like Bing or Ask (or, better yet, some search tool you’ve never heard of that just got $50MM in venture capital) will give him half a year’s operating budget in exchange for a competitive advantage over Google.

Toss in the growing idea that Twitter, Facebook and other recommendation-based results are now more important than Google traffic and we’ve got a very interesting set of signals.