The Internet for the Low Low Cost of . . .

Well  . . . since the Internet has swung into the collective consciousness, it has primarily been a cost free medium, except for the price to access it. (This is what happens when academics run the world. Not complaining. All of the online growth would not have been possible if businesses would have charged for content initially.) This is about to change. Several media magnates have recently said that they will start charging for the content they provide.

Berry Diller, Chairman and CEO of IAC/InterActiveCorp, was recently quoted as saying, “It is not free, and is not going to be” in regards to online content. Diller envisions three revenue streams: advertising, subscriptions and transactions. Rupert Murdoch, shareholder, Chairman and Managing Director of News Corporation, cites the failing ad revenue based business models as the catalyst for these changes and says “the current days of the internet will soon be over.” And last but not least, John Malone, Chairman of Libery Media, the man who got people to pay for TV (cable TV for you young’ns) believes that revenue shares between the providers of bandwidth and providers of content is the best bet. “When you were a cable subscriber, you weren’t sure whether you were paying for connectivity or whether you were paying for the content that was embodied in the connectivity.” This is to be expected from men with their experience and it would  be painfully naive to simply say you’re going to charge for content without listing conditionals. For instance: I’m not paying for a weather update or to hear about Michael Vick being signed by the Eagles.

Chris Anderson, Wired’s editor-in-chief and author of the new book Free, has some excellent recommendations with respect to charging for content.

1. The best model is a mix of free and paid – This is called Freemium and offers the user the option to view the ads or pay for the service. I like this model.)
2. You can’t charge for an exclusive that will be repeated elsewhere – The perception of exclusivity needs to be maintained if you’re going to charge for content. Why pay now when I can get it for free later. Unless of course the “later” is much much later?
3. Don’t charge for the most popular content on your site – The most popular is the closest to one size fits all. You’ll need to use this to get traffic to your site and plays into recommendation number 4.)
4. Content behind a pay wall should appeal to niches, the narrower the niche the better – This plays into one of the ways to monetize online content; advertising. As a general rule you can charge as much as 4x CPM based on targeted advertising/deeper knowledge (demographic/psychographic) of your user base.

I agree with all of these and wonder if Malcom Gladwell would agree. Mr. Gladwell recently poked numerous holes in Anderson’s claim that all things digital will eventually be free due to the laws of abundance defined in Long Tail. “In the digital realm you can try to keep Free at bay with laws and locks, but eventually the force of economic gravity will win.” (Gladwell’s article in the New Yorker is very well written is worth reading.)

As for me, I believe an academic spirited exercise (the Internet) is now succumbing the realities of business. People need to get paid. Not all content is worth paying for and the freemium model allows for maximum flexibility and could be extended to the broadband service as well. Also, I’m not convinced I’d be writing this post if ad revenue was not currently in the proverbial toilet (down to $.30, from $8.00). Very curious to see how this all shakes out especially as the online convergence continues.