What will the content business models of the future look like, and who will pay for them?
How will publishers make money in the future? Consumers will pay for content. And sponsors will pay for us to create it. At least, that’s what Grzegorz Piechota pitched in a recent session of FIPP’s recent Digital Innovator’s Summit. And if you’ve been reading here for a while, you know I agree.
But consumers won’t pay for it like they do now, where so many publish everything for free, hoping to make a buck on ads. It can’t continue to work that way exclusively because adblockers exist now, and our hopes for the growth of display advertising is dwindling.
We have plenty to learn from other industries, who have gotten the pay-to-play strategy down: ask users to pay for what they consume. Airlines have no problem asking consumers to pay for their seat, for their extra bag, for extra leg room, for disposable headphones, and for drinks on a flights.
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Piechota doesn’t suggest keeping all content locked up. Like us, he agrees that free content is completely necessary to build an audience. But giving it all away in exchange for ad revenue, simply won’t be the future.
So why do publishers give so much away for so little?
In his presentation, Piechota notes that publishers are only seeing 1/3 of all the advertising revenue out there. The rest is going to Google and Facebook. Based on benchmark data of the top 17 publishers in the US, they’re only seeing, on average, about $1.3 million per month in ad revenue. 60% of that, is coming from YouTube. He notes this revenue doesn’t pay for the cost of content, which he estimates is likely around a billion dollars for The New York Times. So how will publishers be paying for content in the future, if it’s not through traditional display advertising?
Piechota notes that there have been a few waves of disruption leading to what we’re seeing now in publishing. The first was the unbundling of content. Just speaking on social media, he refers to articles being unbundled with headlines being read on feeds like Twitter, and images being clicked on networks like Facebook. And newspapers have been unbundled by separating content from its marketplace and removing advertising on content.
He says, “Look at the business model of a publisher. Publishers were making money because people were coming to their site or an app and they were consuming content, and they could capture value by delivering ads to the people. What the platforms started doing, was they started decoupling the activity of consuming content, so value is eroding.” Piechota notes that it’s not just the platforms hurting value and the ad market, adblockers are also to blame. Consumers with adblockers can get ad-free content with no problem. Even on TV, people with a DVR can fast-forward because, as Piechota puts it, people just don’t like to watch ads.
We agree with this notion, that separating content from commerce isn’t the path of the future. We believe all content will eventually be either sponsored content or a form of listings which are supplied by the sponsor that would include directory content, classified content and calendar content.
To succeed, premium content should also be segmented into its own brand or sub-brand so that the user can understand the difference between premium content and sponsored content which will ultimately be the two major surviving categories of content published on all niche media websites.
Piechota notes that sponsored content of the future would include content underwritten by third parties with the goal of selling their products and services, and content underwritten by the publisher would have the goal of selling their branded subscriptions, products and services.
I believe this model is already in progress. And it’s a big part of what we’ve always taught through the Mequoda Method. In this model, all of the content we put into an audience development portal would either be audience development content or sponsored content. Both audience development content and sponsored content contribute to the overall economic health of the business model.
You can watch Piechota’s full session here:
Do you agree? How do you see content generating revenue in the future? Leave a comment below, or reach out to talk to me more about the future of your own content and revenue goals.
