Tag Archives: media

The Freemium business model

The Freemium business model works for Spotify
The Freemium business model works for Spotify

This post is the second of a multi-part article describing methods to monetise large digital audiences. The freemium model is one of the most modern monetisation methods in the series.

The concept of freemium is to offer a free service, and if users want more content or functionality, they must buy a subscription.

One of the most common freemium products is the music service, Spotify. Users can download Spotify and immediately listen to music. If users want to be able to listen to the music when an Internet connection is unavailable, or they want to listen to ad-free music, they need to pay a monthly subscription.

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The Content Subscription model

PaywallThis post is the first of a multi-part article on methods to monetise large digital audiences. The subscription model itself requires high quality content more than a large digital audience.

The digital subscription model is similar to a paper magazine subscription – users periodically pay to keep receiving content, whether it’s daily, monthly or annually. The digital version is often called a paywall.

In order to implement a paywall, the website owner requires a registration mechanism and a payment system. The registration system can range from Facebook Login to a proprietary implementation.

For the payment system, there are systems which can be tailored, to third-party providers such as Apple’s App Store. The issue with the latter, is the commission can be as much as 30% of the value of the subscription. The upside of course, is that the content owner doesn’t need to worry about the billing, the integration is often easier, and the third-party (such as Apple of Google) handles chargebacks and user support.

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An introduction to 4K television, and why it’s more than a better picture

In the next couple of years, TV will change significantly, both from a distribution, content and rights point of view.

From the rights point of view, UK customers have until now enjoyed a single provider for all their television. This has slowly moved to multiple providers, for instance Netflix and a Sky subscription. With BT winning the Champions League rights from Sky, this leads us further down the path of more subscriptions – similar to the US television model.

Netflix stock price since broadcasting House of Cards
Netflix stock price since broadcasting House of Cards

On the content side, we’ve’ve seen new companies commission (the TV word for “fund and then produce”) new shows. The leading example here is Netflix and their House of Cards production. See the stock price chart above – House of Cards was released on Netflix in February 2013. Netflix’s share price has doubled since then, and the second series is being released on Netflix next month.

While traditional broadcasters are churning out low-quality reality TV, Netflix are hiring A-list celebrities to produce high-quality drama. Which one is likely to attract the most viewers?

For the latest new television technology, 4K, it’s the distribution method more than the screen technology that I find interesting. I’m not playing down the advanced engineering and manufacturing to get 4,000 pixels working completely separately resulting [finally] in pure black.

4K will be the first television media technology distributed over the Internet before physical media.

In the past we’we’ve used DVDs to introduce HD technology (before satellite and then digital terrestrial broadcast).

With 3D TV (I never saw the point personally and I think we’ll see 3D services being quietly shut down this year), it was available on DVD and then satellite too.

The first 4K broadcaster will be Netflix. Think about that… a seven-year old company is beating the BBC and Sky to a new consumer broadcast technology.

And the reason for this is straightforward. The infrastructure required to support 4K is already in place. 4K “only” requires a (stable)  8 Mbit Internet connection. To distribute this over satellite television would mean removing some other channels – there isn’t the remaining bandwidth to broadcast all of Sky’s existing channels and a new 4K one. This is also why so many of Sky’s SD channels seem low quality – they have been compressed to squeeze the data into the broadcast.

Digital cinemas have been using the internet to download 4K movies for some time. A 4K movie is between 90 Gb and 300 Gb. Although, a cinema can afford to take a long time to download the film if it is only allowed going to be viewed in a few days’ time. With Netflix, which is currently streaming only, you’ll need that stable 8 Mbit connection.

What does this all mean for consumers?

Two things. The first is that we are moving ever toward non-physical content: think rental, or Spotify, not buying DVDs.

The second, is if you are planning to buy a 4K TV, make sure you’ve got a decent Internet connection.

The value of Amazon’s cloud for consumers

Madonna MusicThis morning I received an email from Amazon to say “Albums you have previously purchased on CD from Amazon are now available in Cloud Player for FREE”.

It’s always a nice surprise to receive something for free, and when I logged on to the Amazon Cloud Player, yes indeed the CDs I’d bought from Amazon in the last few years were all on there.

Half of all the CDs I’d bought from Amazon were gifts for other people. This reminded me of the nightmare I’ve had in the past with registering my children’s iPod Touch devices, and setting up iTunes for them. Or our ‘family’ Spotify account. Or just buying MP3s for my kids.

All of these purchases for other people are against the terms and conditions of use. I haven’t found a legitimate method of buying music for my kids like the old physical CD method. Perversely it’s easier to download music from BitTorrent for other people than legitimate methods. However, I’m completely against music piracy and feel that it’s morally correct to buy MP3s from iTunes, Spotify or Amazon and then give access to my kids.

Amazon has just brought this debate back to life where all the CD gifts for others I’ve bought in the past are now available for me to listen to via MP3s.

The next step will be for Amazon to offer the same service for videos and DVDs. If you bought a DVD film a while ago, you should be able to watch it over the Internet.

There are systems in place such as Ultraviolet which enable users to watch a film irrespective of the original purchase media. So if you bought a DVD or Blu-ray or Internet file for a specific film, you can watch it on the other media for no additional charge.

This is exactly the type of advantages that consumers want to see from cloud services. In fact, consumers don’t want to know about cloud any more than RAID storage, they just want life made easier, and with additional value thrown in as part of the package.

Google Chromecast: This Puppy Changes Everything

This puppy changes everything
This puppy changes everything

In a technology trends report that I produced earlier this week I included a slide called “This Puppy Changes Everything” next to a picture of Chromecast, the USB dongle designed by Google which plugs into TVs and makes it really simple to watch web TV on a TV. Hours later, Iolo Jones also released a blog post called “This Changes Everything”.

My nephew has just competed in the Maccabia games. The opening ceremony was streamed live using a proprietary Flash player, so our family and extended family sat around a computer monitor in our house. 10 metres from the computer is our 40-something inch TV (with a comfortable sofa instead of chairs!), but hooking the computer up to the TV is a nightmare.

Chromecast changes all this. It will stream content from any iOS, Android or computer on your home network. There are apps for Netflix and YouTube, but the most powerful function is to duplicate your web browser (well, as long as it’s Chrome) on any device, on to the TV.

And Chromecast is a one off cost of $35 (less than £25). One of the reasons it is so cheap is that no remote control is required – the unit is controlled using your smartphone or computer.

Chromecast is a game changer because using a web browser is by far the most flexible and easiest interface available. Why would you subscribe to a premium TV channel if content is available on the web for a cheaper price?

Concentrating on legal content for a moment, monthly web subscriptions to say, sports content, is cheaper than equivalent TV subscriptions. When you include illegal content as well (I’m including YouTube here) makes it the game changer.

This is the most disruptive piece of hardware I’ve seen in the media industry since Sky+.

Five Key Internet Megatrends: 1. Nanopayments

When I started this blog, it was with the main aim that when I repeated something at work to multiple customers or colleagues, my aim was to document it here. This could be a news article, or a new technology or process.

During a recent conversation with a client, I realised that one of the key discussions that I have never documented are five key Internet trends, or what they would now be termed ‘megatrends’.

These megatrends are based on several years’ experience working across multiple sectors – including sport, insurance, retail, banking and recruitment.

This is the first of five posts, each dealing with a specific trend. Once I’ve covered all the trends in detail, I’ll put the full presentation on Slideshare.

I’m happy to discuss each of the trends, either here on the website, or to discuss on Twitter, or just give me a call.

1. Nanopayments

Credit: http://www.flickr.com/photos/labyrinthx/1955692114/in/photostream/
Coins for micropayments – what about the electronic equivalent?
Credit: http://www.flickr.com/photos/labyrinthx/1955692114/in/photostream/

Key points:

  • High quality content and services can’t be free for much longer
  • It costs too much money to send someone a very small amount of money
  • When we can solve the small payments problem, piracy will significantly reduce

Our children will look back on this period of the Internet and be shocked at how many services we receive for free. Google searches, music from Spotify, news from Sky, an encyclopaedia from Wikipedia, photos from Flickr, email from Microsoft, word processing and spreadsheets from Google, the list goes on and on. It’s quite easy to use the Internet at the moment without paying a penny.

It’s unsustainable. It can’t be ad-funded for much longer – and I’ll discuss this later on in another trend “Real money”.

Content web sites such as those from newspapers and films are moving to a subscription model, but this is an inflexible model. I want to read The Sunday Times on the weekend, the Metro during the week when I use the Tube, and once a fortnight I’ll read The Financial Times.

On the Internet, this model isn’t possible. At the moment, users need to subscribe to The Sunday Times or The FT on a weekly basis. I only want to read for one day, and next week I want to be able to go back to the content without paying again. It’s not possible.

The newspaper model is the opposite to the music industry’s. You can’t just buy a single track on a CD, you need to buy the entire album. On the Internet however, you can buy just a single track.

There are authors who earn a reasonable living from successful blogs. When I say successful, it’s in terms of traffic levels. The blogs have advertising, and the authors rely on readers to click on the adverts. Neither authors nor readers want advertising. Authors would much rather a model where each reader pays a small amount for the content.

At the moment, if a content producer or service provider wanted to implement a paywall, they could use PayPal and charge users a few pence per article. A major problem is PayPal charges 3.4% of total amount plus 20p per transaction. Actually, PayPal has a micropayment model, however it is only available within a country, which on the Internet isn’t useful.

In the future, we’ll have a central company which will have a pot of our money. As we visit websites, the central company will provide the websites we visit with nanopayments, which are tiny amounts of money – perhaps less than a penny, on a per-page or per feature (e.g. sending an email, or searching the Internet) basis. This will be an automatic process, and we’ll have some sort of browser plug-in which shows how much money we’ve given to this website, and the remaining balance in our centralised wallet.

As a result, nanopayments will significantly reduce piracy. If the price point for content can be reduced to nanopayments, perhaps on a per-play model, users will find this model as easy to use as the illegal models. (This is one of the was the music business combat piracy – buy allowing legal downloads at less than a dollar per track, the price point is acceptable, and piracy is less desirable).

Currently, content owners need to charge a higher price partly to cover the transaction processing costs. If the transactions costs are significantly reduced, we could move to a per-play model. So instead of paying 89p for an mp3 track, users could pay under 5p for the track each time they listen to it.

The ticking time bomb of digital footprints

Mail on Sunday front page 7 April 2013
Mail on Sunday front page 7 April 2013

This week’s news about Paris Brown brought home the reality of growing from a child to an adult with a digital footprint.

Paris wrote some tweets aged between 14 and 16 years old that contained poor language that most adults would be ashamed of.

What Paris tweeted (I’ve seen the tweets and they are not worthy of being repeated here) is completely wrong. However, the point to this case is that Paris is the first high profile case of a child who had made some pretty bad statements which have come back to haunt her later on in life. She won’t be the last.

There are a number of important points to the Paris Brown case. Firstly, I find it appalling the way the news was broken. The Mail on Sunday covered the story on the front page. Really? Was this really the most important story for a Sunday paper? Paris is 17 years old and this week’s ordeal has been out of proportion. She was 14 when she wrote some of the tweets.

The question is whether employers should check all social media channels for indecent content?

That’s an interesting question. Should employers check newspaper articles and letters to the editor too? How can employers check Facebook pages which are, or at least should be, private? Where’s the line drawn?

In 2008 there was a court case in the UK where a company took an employee to court to instruct them to remove all LinkedIn connections from their account. The employer claims to own those connections, not the employee. The case was settled out of court.

In the US, a similar case, also concerning LinkedIn, did go through to judgement, and the court was in favour of the employee, mainly because the contacts could be found in the public domain and replicated by anyone.

We are at the tip of the iceberg with these legal issues. These are new challenges that need to be resolved.

When recruiting, should it be standard practice to research the candidate online? What happens if an employer sees a photo of the candidate in a fund raising capacity for cause seemed inappropriate? “Inappropriate content” is a very wide grey area.

I feel sorry for Paris Brown. She posted something at 14 years old, has apologised for her comments, resigned from her job, and now has a permanent digital footprint across all the national newspapers which is beyond her control. Paris’ digital footprint, which started as a handful of tweets, now has over 38,000,000 results according to Google. She won’t be able to delete those so easily.

The best Times today was on paper

The Times special edition today
The Times special edition today

Despite waking up at 4am this morning for a 6.50 flight to Dublin, then a 4.50pm flight home, I consider myself pretty lucky today*.

When I passed through security controls at Heathrow today, I headed straight for WH Smith to buy today’s Times. It was a ‘special edition’ with several pages and a separate supplement on Margaret Thatcher. The paper was totally engrossing. I had a couple of other publications and white papers to read on the fifty minute plane journey, but I couldn’t put The Times down.

The articles on Thatcher were superb, balanced, and detailed. So many different journalists, politicians and colourful characters contributed that it was superior than any biography of Thatcher could be.

I was just a little too young to remember Thatcher in any great detail, and I was as completely uninterested in politics in my teenage years. By the time I graduated from University, John Major was in power, and through scandal after scandal, politics was doing its utmost to deter anyone except William Hague from becoming interested in the field.

The Times correctly pointed out that it’s difficult for anyone in today’s world to imagine the City in the pre-Thatcher era, or how the World thought of the UK defences as so inferior as to try to reclaim the Falklands.

In Digital Media terms (because you probably didn’t want to read about my political opinions), I can’t imagine The Times electronic edition today being as effective as the paper edition. From the wrap around cover (single photograph) to the layout of the insides of the paper and the almanac. I almost feel that the paper version should be stored somewhere safe for a later date – how can a digital edition compete with this?

* Actually I consider myself lucky every day, but that’s for another post

Spotify Freemium rebalance

Spotify

I see that Spotify is trying harder and harder to convince more subscribers to pay for the service, rather than rely on advertising income.

Tonight the new Brandon Flowers album is only available to Premium users. Spotify are [perhaps rightly so] preserving many of the advanced features and new content solely for their tenner a month subscribers.

If I worked at Spotify, I would try and poach experienced ad sales people from traditional radio stations such as Absolute or Global Radio (owners of Capital FM, Classic, XFM and others).

Clearly those stations have a ad sales business model which keeps them afloat. Those radio stations would love to have the CRM information that Spotify has at their disposal, which would further help traditional sales people.

As many people in media have been suggesting for a while, New Media companies have a lot to learn from traditional media companies – many of the business models are the same.

What keeps the Google CEO awake at night

During this interview on the Guardian website with Google CEO, Eric Schmidt, he is asked about advertising vs paywalls, his relationship with the Murdochs, and what keeps him awake at night.

The answer – mainly around lack of innovation and pushing forward, he says, is the main reason that all IT companies fail – and the fact that it’s self inflicted. The fact that it’s self inflicted is what keeps him awake at night.