One fascinating thing to watch is how people in certain content professions continue to hold out hope that there’s some way that maybe, possibly, really people will suddenly see the light and magically start “paying for content online.” Now, obviously, many people do pay for content online, but it’s a very difficult market position to sustain due to basic economic forces, unless you’re doing something special, and have figured out a way to effectively bundle that content with some sort of real and valuable scarcity — i.e., a true reason to buy.
But, figuring out those business models aren’t easy, and for those who grew up in a world of artificial scarcity, there’s always this vague hope that, magically, people will start paying again. Believers in this fantasy were pretty happy to gloat and point us to a recent report from Nielsen, concerning some survey data on whether or not people would pay for content. The suggestion passed along was that this shows that we’re crazy for questioning whether or not people will actually pay for content online, as seen in the following chart, released by Nielsen plotting the data:
Of course, you can read this chart in a variety of different ways — and I found it interesting that the data is not actually to scale, since it cut off at the 60% mark. To put this into a bit more perspective, it’s a bit more helpful to show what the data actually say on a full 100% scale, so I did a quick & dirty version of that myself to help out:
Ah, amazing what a different scale will do, as the latter image makes the numbers (accurately) look a little less impressive than the image released by Nielsen.
But, even beyond that, these numbers don’t actually look all that good for the folks who claim that there’s some way to suddenly get people to start paying for this stuff, for a whole variety of reasons. First, this is survey data, which is notoriously bad at getting people to accurately predict if they would pay for something. You can lop off a big percentage of people who say they would pay, because when asked, lots of people who would never actually pay for something will say they will pay. I won’t even bother to estimate that amount, but I would argue it’s a significant chunk of those orange bars.
However, even if we grant the premise that these people potentially would pay, it still doesn’t support the “if we just did x, they’ll pay” camp (where x is anything from “shut down The Pirate Bay” to “kicked file sharers off the internet” to “passed three strikes legislation” to “increased enforcement” to “beefed up copyright laws” etc.). And the reason for that is when you look at how many people are actually paying. That is, it’s really those tiny blue percentages that matter here. And those are tiny across the board — and the reason isn’t copyright infringement or unauthorized file access, but the fact that the producers of the content haven’t figured out how to give most people a true reason to buy. They’re used to a world where you didn’t need to figure out a business model, but artificial scarcities and a small number of gatekeepers were able to make it so people had little choice.
But these days, with widespread abundance in content — which is growing every day — the era of artificial scarcities is rapidly ending, and anyone who wants to build a 21st century business model needs to start looking for real scarcities that offer real value, not artificial scarcities that seek to limit value while boosting price. So, yes, there’s some interesting data here, but it’s not the savior of those who think there’s a business model in selling content directly. It really says the exact opposite.
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Hedge funds reported their fourth quarter 2009 long holdings this month.
