Finding the optimal streaming content value proposition

Have you paid much attention to the various pricing options used in the streaming content space? A recent article on re/code talks about the challenges the music industry faces as it wrestles with free, ad-subsidized streaming services. In short, the article says free is bad and paid is good. I’d add that’s true for everyone but the consumer, of course.

The problem isn’t perhaps so much about making free go away but rather making the paid options much more compelling.

For example, I’m a big fan of Spotify. At first I just used the free, ad-based version and created a bunch of playlists. The ads didn’t seem too intrusive but when I saw the opportunity to try a three-month, 99-cent trial of the paid version I couldn’t resist. For less than a dollar I could eliminate the ads and download as much music as I want to each of my devices.

I use Spotify much more frequently now but the three-month trial is about to end. Am I so hooked on the Spotify Premium that I’m ready to fork over $9.99 per month going forward?

No way.

Even though $9.99 sounds like a bargain that’s still about $120 per year, much more than I’m willing to spend for the service. Spotify would have better luck converting a freeloader like me if they offered something in between. For example, I’d sign up for $2.99/month for an ad-free version with no download capability. And I’d consider signing up for $4.99/month for downloads and no ads. They’ll probably never see another nickel from me as long as the options are limited to free and $9.99 though.

Spotify’s problem is the free version is just too darned good, at least for me.

This challenge isn’t limited to the music world though. My wife and I share a Premium subscription to Next Issue, the all-you-can-read digital magazine service. We pay $14.99/month for unlimited access to more than 140 magazines. At first it seemed like a great deal but I’m opening the app less frequently every month and $180/year is starting to feel quite expensive. The other challenge here is that with the right combination of bookmarks, alerts, newsletter subscriptions and RSS feeds, it’s possible to gain free access to most of the content I’m paying for via Next Issue. As a result, our Next Issue subscription is likely to end soon.

Let’s compare that to Oyster, the all-you-can-read ebook service. Once again, my wife and I share a $9.95 subscription and we couldn’t be happier. I’d probably be willing to pay even more than that and I figure the price will go up before too long because Oyster’s business model isn’t sustainable at $9.95/month. But there’s no legal free alternative to this ebook content, so Oyster has much more leverage than Next Issue when it comes to the threat of “free” cannibalizing “paid.”

If you’re thinking of jumping into the streaming content marketplace, be sure to study the results of comparable existing products and make sure your free option isn’t so good that most consumers will never consider upgrading.


Why Johnny doesn’t like e-textbooks

A recent article in The Washington Post explained why most students prefer print textbooks over their digital equivalent. There’s no disputing the fact that print still dominates the textbook sector. That article correctly identified the “what” but I’m not convinced they thoroughly uncovered the “why” behind this phenomenon.

Here are a few key points I don’t think the article explored:

Students grow up with print – Today’s college kids might be the most digitally active ever but they grew up using print textbooks. Print books have been a critical component of a millennial’s study life, so what makes anyone think a student will magically shift from print to digital when they get to college? Today’s college students simply aren’t digital natives when it comes to textbooks.

E- is just like p-, but with fewer benefits – Why would they want to switch to e-textbooks anyway? I know there are some exceptions but when you get right down to it the e-textbook has fewer benefits than the print version. Here’s one great example: Sharing. Plenty of college students (my own kids included) have managed to save a few bucks for beer/pizza by sharing print textbooks with friends taking the same class during the same semester. Good luck trying that with an e-textbook.

Prices – Speaking of fewer benefits, is there really a financial incentive to go with the e-textbook over the p-version? I’m not talking about e- being marginally less expensive than p-. Think about the huge impact the $9.99 price point had on the broader ebook market when the Kindle first arrived several years ago. Here’s a (pardon the pun) textbook example: This Calculus book is available as a new product in print from Amazon for $264. The Kindle edition is $230, a whopping savings of just under 13%. Really? And we expect student so go with the Kindle edition that they can’t share but still costs more than $200?

Debunking distractions – The Washington Post article notes that distractions are inevitable on the digital screen and how distractions are one of the reasons students prefer print editions. How many of those students reading print textbooks also have a smartphone right next to the book? They’re not distracted by the flashing and ringtones it puts out? Please. That said, if today’s college students are so easily distracted by Facebook and pop-ups I think it’s safe to say society is doomed.

User experience – Let’s also not overlook the device these e-textbooks are most likely to be read on. Pretty much every college student these days has a laptop and a phone; fewer have a tablet. So if they want to read their e-textbook most students are stuck reading it on their clunky laptop. The phone experience is awful for larger format, fixed-layout textbooks and probably not that effective for reflowable ones. I’d prefer print as well if my options were limited to the e-textbook on a laptop or a phone.

Dumb content on smart devices – This, I believe, is the most important point of all. Most of these e-textbooks are nothing more than a print-under-glass experience. They’re a digital replica of the print edition with no real digital features. The Kindle editions certainly don’t leverage the capabilities of the smart devices they’re read on, for example.

Until the market evolves from today’s mostly print replica model and offers compelling reasons for students to go digital, including a more attractive price point, we’re unlikely to see movement away from print textbooks. And let’s face it… The major players in this space love the fat margins they’ve always generated from print products. Those same players have enormous control over the ecosystem so what’s their incentive to offer a more compelling product and value proposition?


How the Internet of Things (IoT) affects content

You’ve undoubtedly heard all the hype by now. Sensors will be everywhere and we’re about to sink in the sea of data they’ll produce. Don’t just view the Internet of Things (IoT) as how your coffeemaker connects to the web though. This phenomenon means so much more, especially for content creators and distributors.

Fast forward with me to a time where your car and house are connected via the IoT. You’ll no longer need to keep track of oil changes, tire rotations, furnace filter replacement dates, etc. You’ll have immediate access to all the particulars via a dashboard app or receive text alerts when something needs attention.

All that data will also help identify trends and the likelihood of something going awry. For example, based on your driving tendencies and those of thousands of other drivers, this data will help determine when you’ll need to perform future maintenance and repairs. These predictive analytics will help you avoid even costlier repairs down the road.

What does any of this have to do with content?...

I’ve just outlined a terrific opportunity for creators of how-to and DIY information. If your organization offers content for weekend warriors or anyone comfortable turning a wrench, well, the IoT could be a game-changer for you.

Those sensor vendors and app developers will want to offer more than just the raw data. The value of their products increases significantly if they can also help their customers with their maintenance and repair projects.

Think of this as a whole new distribution channel with plenty of interesting revenue model options. Freemium, premium, subscription, micro-transaction…they’re all viable models here, but don’t forget the need to share some of that new revenue with the companies providing the sensors and apps.

The IoT opportunity goes well beyond the examples I’ve mentioned here. Think about the type of content you produce and how sensors and the IoT will eventually open new doors for discovery and distribution. The possibilities are endless and the data is just the beginning.


Why today’s ebooks are like the golden age of radio

The date was April 8, 1927 and the front page of The New York Times featured this headline: FAR-OFF SPEAKERS SEEN AS WELL AS HEARD HERE IN A TEST OF TELEVISION. Click here to read a PDF version.

As I read that 1927 article I recently I couldn’t help but wonder how confused the public was with this newfangled television thing. After all, radio had been popular for several years and few probably even imagined the need for a more powerful and engaging communication and entertainment vehicle. In fact, the article notes the following:

The Bell Laboratories have been directed to concentrate on developing television with all possible speed, although the American Telephone and Telegraph Company has no idea today whether it will ever be commercially valuable.

So a new technology was invented, the public was curious but everyone questioned its viability.

Sound familiar?

We’re in the print-under-glass stage of ebooks today. The ebooks we read are nothing more than digital replicas of the original print product. They almost never take advantage of the powerful digital capabilities of the devices they’re read on. I often refer to this as “reading dumb content on smart devices.” 

Today’s ebooks are more or less at the same stage radio was at back in the 1920’s. Like radio in the 20’s, ebooks are still a somewhat recent success, particularly since the first popular e-reading device, the Kindle, is less than 10 years old. Today’s ebooks are easy to get comfortable with. They operate like we expect them to. But other than the content itself, the presentation of today’s ebook rarely surprises or delights; it’s basically a digital page-flipper of the print edition.

The market has experimented with enriched or enhanced content and the results have been weak at best. As a result, most publishing experts feel the future promises nothing more than the print-to-e editions we see today.

I couldn’t disagree more.

In April of 1927 television was viewed as a gimmick, a solution in search of a problem, similar to how anything beyond today’s static ebook is perceived. It didn’t happen overnight but television obviously got beyond the gimmick stage and became an enormous industry. I believe the same thing will happen with the next generation of ebooks, or whatever we end up calling them. Anyone who believes today’s ebooks are as good as it gets probably would have scoffed at television in 1927.

By the way, although that NYT article is almost 90 years old it’s important to note that radio hasn’t gone away. Listeners don’t spend anywhere near the amount of time with radio that they used to and families certainly don’t gather around radios for evening entertainment. But radio found its niche and didn’t disappear.

The same will be true not only for print books but for today’s static ebooks as well. Sometimes you just want to curl up with a simple story, no fancy digital device or web connectivity required. But there are plenty of other types of content and reading experiences that will dramatically benefit from moving beyond today’s print-under-glass model. That’s where the real disruptive opportunities await an industry that’s never been known for embracing change.


Data-driven content recommendation

Which is better at assessing your content interests: a display ad on a random website or the app you spend hours reading magazines in each month? If my recent experience is any indication, the display ad is the winner, hands down.

I recently went on audible.com to explore audio books and picked one I thought I might be interested in. I was curious to experience the purchase process but I stopped before clicking “buy.” Later that same day three different websites featured banner ads from Audible with the cover of the book I almost purchased. The digital breadcrumbs I left behind on my audio book experiment probably still exist somewhere deep inside my browser’s cache.

Compare that to the fact that I regularly read sports magazines in my Next Issue subscription. So why doesn’t the Next Issue app use that information to recommend other sports content to me, right inside the app?

The answer is pretty simple: Online advertising services leverage data but content apps don’t. It’s amazing that in 2015 so few publishers and content distributors are utilizing the valuable data they gather every day.

The opportunity here isn’t just to get me to read more related content in the app I’m already in. Yes, that will increase engagement and serve as a win-win for publishers and readers. The real upside is around discovery and affiliate income.

Once Next Issue wakes up and starts recommending more sports content from its other magazines they should also recommend books in the same category. I’m not keeping a close eye on the newest ebooks about baseball and hockey, but Next Issue knows I read a lot of articles about both, so why not use that information to give me a heads-up about books I’m likely to be interested in?

This would be a terrific opportunity for book publishers to create an affiliate program within the e-zine app. Book and magazine publishers aren’t direct competitors, so why not work together to provide reading recommendations?

This is a two-way concept, btw; ebook publishers should be willing to serve up recommendations to relevant magazine content as well. An affiliate cut of any new revenue generated from these recommendations would be passed along to the recommending app/publisher.

First we need the app vendors to recognize and tap into the valuable data that’s right under their noses. Then we need to tear down the walls that exist between publishers so that data can be used to improve discovery and generate additional revenue streams. It will be interesting to see who figures this out and builds a truly data-driven content recommendation service.


Customers as curators: Going beyond simple reviews

My magazine reading is almost exclusively limited to what’s offered in my Next Issue subscription. If you’re not familiar with Next Issue, it’s an all-you-can-read e-zine service featuring more than 140 titles. Sports Illustrated, BusinessWeek and Wired are just a few of the magazines I read in my $14.99/month subscription.

I recently received an interesting email from Next Issue and it got me thinking about how customers are evolving into content curators. Every customer won’t do this, but a significant enough number will and it will lead to new forms of content discovery and consumption.

The email I got from Next Issue can be seen here. You’ll notice that a Next Issue employee shares a link to her favorite stories on the outdoors in that email. I’m not exactly the outdoorsy type but even I was intrigued enough to click and read the recommendations. Why?

I’ve gotten so numb to all the automated, algorithmic recommendations in emails and on websites (e.g., “those who bought x also bought y”) that I was curious to learn more. It just goes to show that human curation can still trump computerized curation.

Then there’s the passion factor. Recommendations from an actual person have a more genuine feel than the sanitized, generic messages we’re so used to seeing. Whatever your hobbies and interests are, you can probably create a more credible, click-worthy reading list than even the most sophisticated computer algorithm.

And let’s face it: We are a lazy society, so we want others to vet articles, books, blogs, etc., before we waste our precious time on them. If Next Issue sends me a recommended reading list, even if it’s based on my reading habits, it feels empty, void of any soul. But if that same list comes from an actual person, even an employee of the company, it has more credibility.

This all means that a publisher’s most enthusiastic readers can potentially become on of its most influential sales and marketing resources. It’s an opportunity for those readers to share their passion with others while also helping the publisher increase engagement.

This is the next evolutionary step for product reviews written by customers like you and me. Rather than having reviews sit passively on a website, waiting for prospective customers to arrive, they can be spun into active narratives, encouraging deeper engagement from existing readers/subscribers.

It’s all about the personal curation though, and having a name and face accompany the message. It’s also an opportunity for a publisher’s biggest fans to take on a new role, but only for those publishers who are willing to give up some of their precious content curation control.


What’s the biggest obstacle facing Oyster, Next Issue, Spotify, et al?

I used to buy ebooks from Amazon but now I read almost exclusively on Oyster Books. Years ago I subscribed to a bunch of magazines and now I read all but one of them through Next Issue (The Week is the only exception). It wasn’t that long ago that I bought CDs and music tracks but now I’m mostly streaming through Spotify.

Since I’ve wholeheartedly embraced the content rental model, what’s preventing me from dumping Oyster for Scribd, Next Issue for Zinio or Spotify for Rdio?

The answer is “almost nothing.” All of these rental services face the enormous challenge of building customer loyalty. Since I don’t own the content and I’m on a month-to-month agreement with them, I can easily leave at any time. And when I switch, I leave almost nothing behind.

Contrast that with the likes of Amazon, where they focus on walled gardens and making it hard to leave. If you’ve built a large Kindle ebook library you probably don’t want to abandon it for another retailer and another reading app, particularly since you can’t bring your old books with you.

You might figure this is no big deal as customers who leave for a similar service will be offset by ones who go the other direction and switch from the competition. As with pretty much any business today though, it’s generally far more profitable to maintain an existing customer than it is to acquire a new one.

So how will these rental services deal with this? The most obvious answer is to expand their catalogs. But they’re all doing that and we’ll eventually reach a point of equilibrium where catalogs are almost identical between the services. Publisher exclusives could impact this, of course, but I’d like to think publishers learned their lessons from walled gardens and won’t make a similar mistake with exclusive distribution deals.

Another way rental services can distinguish themselves is to create more unique features in their apps. The competition will likely copy those features though, so any gains here will be short-lived.

Lower pricing isn’t an option either as that can be quickly copied and is nothing more than a dangerous race to the bottom.

How will this all play out? As much as I hate to admit it, I think all of this only further strengthens Amazon’s position. Amazon specializes in customer loyalty. That’s why so many of us first look to Amazon when buying almost everything these days. They’re also terrific at linking services together. Look at how Amazon Prime has evolved from free two-day shipping to now include Prime Photos, Prime Music and the Kindle Owners’ Lending Library. Critics will argue that none of these add-ons are as good as what consumers can find through other competitors; the difference is Amazon offers them for free, as part of Prime, and you can bet these add-ons will continue to improve over time. Lastly, when it comes to low prices and losing money, well, Amazon is the king.

The lesson here is that while consumers will continue flocking to the rental model, the lack of customer loyalty means the leaders today may not even be relevant tomorrow.


How crowdsourcing will ultimately add value

Most publishers cringe at the thought of crowdsourcing. Publishers often believe they exclusively own the art of content curation and they feel threatened when they sense others encroaching on their turf.

It’s hard to argue with that logic, especially in our disrupted world where the publisher’s role is under attack from self-publishing, free content and authors with their own platforms. That’s why every publisher should rethink the role they play and determine how to remain relevant in the years to come.

I believe crowdsourcing will eventually be a very powerful tool for all publishers. One of the key problems with crowdsourcing today is that it’s little more than a buzzword and most crowdsourcing efforts are poorly coordinated and leveraged.

Imagine this scenario in the future: A newspaper publisher allows members of their community to create remixes of the paper’s original content. Additionally, they not only allow, but they actually encourage the community to integrate it with content from other sources, including the “competition”. These derivative works will benefit from the interests and curation skills of highly passionate community members. It’s a blend of bloggers and “professional” content, for example. 

What’s in it for the community curators? If the publishers are smart, they’ll create affiliate programs where the publisher sells access to these crowdsource remixes and the curators earn a share of the resulting revenue. This also helps those curators build brand names of their own, potentially ones the newspaper might want to hire full time. Think of it as a feeder system for new content talent.

Now let’s look at the opportunity for book publishers. What if the publisher allowed the community to create their own editions of books? Let’s say you want to read that new blockbuster book about marketing strategies. What if a marketing guru read it before you, highlighted all the critical elements and inserted additional, relevant notes from their years of experience? Now you have a book that has significantly more value than the original edition. The publisher can probably charge more for this edition and pay the marketing guru a portion of the incremental revenue. Over time you’d see multiple digital editions of books. Would you pay more for the “Seth Godin Edition” of that marketing strategy book, where Godin didn’t write it but he highlighted the important stuff and inserted a bunch of related insights?

Most existing publishers will balk at all of this, worrying about the additional layers of complexity, a modified review process, etc. As the incumbents reject it we’ll see yet another new chapter of The Innovator’s Dilemma unfolding right in front of us as startups will fill the void; after all, startups don’t worry about new processes and whether it’s OK to break the old rules.


Revisiting Pew’s view of digital life in 2025

The Pew Research Center released a report last year called Digital Life in 2025. You’ll find a summary of it here and the downloadable PDF is here. I should point out that the report is now almost a year old, but since the vision is for ten years out, it’s still quite relevant and an interesting read.

If you don’t have time to read the entire 60-page document I’ll summarize it for you with two bullets:

  • The Internet becomes more like electricity and,
  • It’s all about access, not ownership

You could argue we’re already living out the first point today. The web is ubiquitous and thanks to inexpensive, powerful sensors and embeddable devices, the Internet of things that we’re rapidly heading towards means everything will soon be connected and burying us in even more data.

I think it’s terrific that my home’s thermostat can now be accessible from my phone. I’d love this concept even more if it meant that digital content operated more like electricity.

Today, however, I need a variety of apps to consume and manage all my content. Here’s a short list of some of the content apps I use on a daily basis: web browser, Oyster ebook app, Kindle ebook app, Next Issue magazine app and Evernote. If electricity operated this way you’d need a set of international travel adapters and converters to work with all the different plugs in your house, at the office and on the road.

I’d like to think that one day we’ll have a universal digital content app that lets you do it all. I’m not sure that will happen by 2025 though, not when all the major players insist on building and reinforcing their walled gardens.

The second point, about access, not ownership, is already playing out in the music world. iTunes helped break the chokehold record labels had when they used to force us to buy entire CDs. In the next stage of disruption, services like Spotify are helping tear down the dominance Apple built with iTunes.

More recently we’ve seen the same phenomenon in other digital content areas. Next Issue gives me access to dozens of magazines, including their archives, as long as I keep paying them every month. Then there’s Oyster and Kindle Unlimited, which offer similar broad, unlimited reading options for ebooks. As I mentioned last week, these ebook services will undoubtedly expand in the next 12-18 months, becoming your all-access pass for the topics and genres you love most.

If you have the time, I recommend reading the entire Pew report. The two items I covered here are the ones that resonated most for me but the report is loaded with plenty of other insight and perspective from quite a few industry experts.


What to expect in 2015 (and beyond)

Publishing is a pretty slow-moving business. That statement is solidly supported by the fact that the Kindle is now more than 7 years old and the majority of digital content revenue still comes from “print under glass” format. We’re still basically consuming dumb content on smart devices, regardless of whether it’s a book, a newspaper or a magazine.

Because the industry moves at a glacial pace I don’t think we’re likely to see any earth-shattering breakthroughs in 2015. What I do think we’ll see are some seeds of change being planted and a few of the next steps in the industry’s evolution. 

With that in mind, here are five important developments I expect to see in 2015 and beyond: 

Content expansion in all-you-can-read subscription models – No, I’m not just talking about more book publishers participating in services like Oyster and Kindle Unlimited. That’s a no-brainer. What I’m referring to here is that these book reading services will expand into other types of content, including newspapers, magazines and born-digital content that currently sits behind a paywall. And as this happens, watch topic-based, vertical subscription options sprout up within the platforms (e.g., all-you-can-read subscriptions for sports enthusiasts, fiction fans, hobbyists, etc.) In short, these services become your all-access pass to all paid content forms for your particular area of interest.

Content becomes smarter – Publishers have allergic reactions to phrases like “enriched content” or “content enhancement”. That’s largely because of failed experiments with native apps and tools that force a publisher to abandon their existing editorial and production workflows. Just as TV didn’t stop with radio shows in front of a camera, the way content is produced, distributed and consumed will evolve and begin to leverage the smart devices consumers already own. Soon the e-editions will be more than just a cheap alternative to the print edition.

Bundles and sponsorships drive more revenue – Consumers have been trained to expect lower prices for digital editions. Publishers like to blame Jeff Bezos for this but I believe there’s plenty of blame to go around. After all, how many e-editions actually have less functionality than the print version? For example, have you ever tried sharing an ebook, digital newspaper or digital magazine with a friend after you’re finished with it? Prices aren’t going up anytime soon and publishers are anxiously searching for new income streams. Look for bundles and sponsorships to fill the void. That next money management ebook you buy might include an offer for a discounted (or free) subscription to Fortune magazine, for example. Or perhaps that same ebook is offered at a lower price for the month of April thanks to a sponsorship from Charles Schwab. The possibilities are endless.

Successful brands will no longer defined by containers – What are the first things that come to mind when you think of the ESPN and Sports Illustrated brands? I’ll bet it’s “television or cable channel” for the former and “magazine” for the latter. This, despite the fact that both have thriving websites, apps and other digital properties. But that’s precisely why a brand like Bleacher Report can come out of nowhere and draw so much interest and traffic. Yesterday’s brands are often tightly coupled with containers like books, newspapers, magazines and TV while the most popular, highly valued brands of tomorrow will have no particular container affiliation. In fact, being tied to a specific container will be a major drawback in the future.

Content reuse surges – Today it’s almost considered a gimmick when content can be redeployed in new manner. Book content is sold in pieces and collections of short-form articles get remixed, becoming long-form content products. This is a tiny revenue source today, but that’s largely because content isn’t being acquired and developed with reuse in mind. Eventually every piece of content will be looked at through the lens of reuse. This means that every piece of content will be part of multiple products from the start. Compare that to today’s model where reuse is typically an afterthought and redeployment doesn’t happen for months or years after the content was first published.

What do you think of these five items? Agree? Disagree? Are there other areas I’m overlooking that you believe will strongly influence the publishing industry in 2015 and beyond?