Publishers Need Popcorn, Not Paywalls

Publishers across the world will be keenly scrutinizing the response to The Times’ freshly erected paywall. Tired of giving its expensively acquired content away for free online, News Corp. has decided that users must now pay for it. Are paywalls the answer? They may be an answer — but to the wrong question.

Instead of asking how much more money they can get for the content, companies should be focusing on how that content can help create new revenue streams. It’s a small but crucial difference. The value in a media business lies in its dialogue with consumers. And if a paywall removes 90% of your audience (as Sunday Times editor John Witherow has suggested — and even that may be an underestimate), the challenge becomes even harder. Focusing on the sale of content is missing a trick: Media companies are not actually in the content business; they are in the audience business.

We may speculate as to whether 2%, or 5%, or 10% of Times readers will pay for the paper’s content online in the face of competition from free rivals. We will have to see. But we have plenty of evidence that consumers do spend money online on products and services. Indeed, online news fans are even more likely than the average online user to buy books, tickets, travel, or clothing online. The key is not to monetize the content but to monetize the audience.

The challenge is to really understand that audience and identify the way that compelling content can build a strong relationship, creating new opportunities for monetization elsewhere. In this respect, passion-based products such as Times Plus (or Guardian Extra) that reward keen readers with additional content and offers represent a smarter long-term solution than a simple paywall that drives users into the welcoming arms of your (free) rivals.

Yes, many publishers offer bookshops, or holidays, or DVD rentals; increasingly, we expect these marginal offerings to move to the mainstream. We will see media brands learn from non-media brands about how to use great content to drive core revenues, whether it’s Apple using music to drive iPod and iPhone sales or a telco like TDC using free music downloads as part of a successful retention play. Smart non-media companies see content not as a revenue centre but as an engagement and audience-building play. Follow the consumers, and the money will follow.

Think of cinema, the great survivor of 20th century media. What did cinema owners do when the US economy tanked in the 1920s and 30s? As well as innovating the product (introducing sound, then colour), the packaging (offering double bills), and the user experience (introducing air-conditioning), they also found a new revenue stream that ultimately saved their business — popcorn.

We think of the movies as a content-based business but cinemas then as now make their profit from popcorn (which has an operating margin in excess of 90%). It also drives additional revenue streams by making you thirsty. And somehow it’s become an integral part of the content experience. What 21st century media businesses must do now, as they rebuild themselves, is find their popcorn.

For more on this topic, clients can read my new report, Creating New Revenue Around Content: Find Your Popcorn