September 2009Publishers of all types, from news to music, are unhappy thatconsumers won't pay for content anymore. At least, that's how theysee it.In fact consumers never really were paying for content, and publishersweren't really selling it either. If the content was what theywere selling, why has the price of books or music or movies alwaysdepended mostly on the format? Why didn't better content cost more?[1]A copy of Time costs $5 for 58 pages, or 8.6 cents a page. The Economist costs $7 for 86 pages, or 8.1 cents a page. Betterjournalism is actually slightly cheaper.Almost every form of publishing has been organized as if the mediumwas what they were selling, and the content was irrelevant. Bookpublishers, for example, set prices based on the cost of producingand distributing books. They treat the words printed in the bookthe same way a textile manufacturer treats the patterns printed onits fabrics.Economically, the print media are in the business of marking uppaper. We can all imagine an old-style editor getting a scoop andsaying "this will sell a lot of papers!" Cross out that final S andyou're describing their business model. The reason they make lessmoney now is that people don't need as much paper.A few months ago I ran into a friend in a cafe. I had a copy ofthe New York Times, which I still occasionally buy on weekends. AsI was leaving I offered it to him, as I've done countless timesbefore in the same situation. But this time something new happened.I felt that sheepish feeling you get when you offer someone somethingworthless. "Do you, er, want a printout of yesterday's news?" Iasked. (He didn't.)Now that the medium is evaporating, publishers have nothing leftto sell. Some seem to think they're going to sell content—thatthey were always in the content business, really. But they weren't,and it's unclear whether anyone could be.SellingThere have always been people in the business of selling information,but that has historically been a distinct business from publishing.And the business of selling information to consumers has alwaysbeen a marginal one. When I was a kid there were people who usedto sell newsletters containing stock tips, printed on colored paperthat made them hard for the copiers of the day to reproduce. Thatis a different world, both culturally and economically, from theone publishers currently inhabit.People will pay for information they think they can make money from.That's why they paid for those stock tip newsletters, and whycompanies pay now for Bloomberg terminals and Economist IntelligenceUnit reports. But will people pay for information otherwise?History offers little encouragement.If audiences were willing to pay more for better content, why wasn'tanyone already selling it to them? There was no reason you couldn'thave done that in the era of physical media. So were the printmedia and the music labels simply overlooking this opportunity? Oris it, rather, nonexistent?What about iTunes? Doesn't that show people will pay for content?Well, not really. iTunes is more of a tollbooth than a store. Applecontrols the default path onto the iPod. They offer a convenientlist of songs, and whenever you choose one they ding your creditcard for a small amount, just below the threshold of attention.Basically, iTunes makes money by taxing people, not selling themstuff. You can only do that if you own the channel, and even thenyou don't make much from it, because a toll has to be ignorable towork. Once a toll becomes painful, people start to find ways aroundit, and that's pretty easy with digital content.The situation is much the same with digital books. Whoever controlsthe device sets the terms. It's in their interest for content tobe as cheap as possible, and since they own the channel, there's alot they can do to drive prices down. Prices will fall even furtheronce writers realize they don't need publishers. Getting a bookprinted and distributed is a daunting prospect for a writer, butmost can upload a file.Is software a counterexample? People pay a lot for desktop software,and that's just information. True, but I don't think publisherscan learn much from software. Software companies can charge a lotbecause (a) many of the customers are businesses, who get in troubleif they use pirated versions, and (b) though in form merelyinformation, software is treated by both maker and purchaser as adifferent type of thing from a song or an article. A Photoshopuser needs Photoshop in a way that no one needs a particular songor article.That's why there's a separate word, "content," for informationthat's not software. Software is a different business. Softwareand content blur together in some of the most lightweight software,like casual games. But those are usually free. To make money theway software companies do, publishers would have to become softwarecompanies, and being publishers gives them no particular head startin that domain. [2]The most promising countertrend is the premium cable channel. Peoplestill pay for those. But broadcasting isn't publishing: you're notselling a copy of something. That's one reason the movie businesshasn't seen their revenues decline the way the news and musicbusinesses have. They only have one foot in publishing.To the extent the movie business can avoid becoming publishers,they may avoid publishing's problems. But there are limits to howwell they'll be able to do that. Once publishing—giving peoplecopies—becomes the most natural way of distributing your content,it probably doesn't work to stick to old forms of distribution justbecause you make more that way. If free copies of your content areavailable online, then you're competing with publishing's form ofdistribution, and that's just as bad as being a publisher.Apparently some people in the music business hope to retroactivelyconvert it away from publishing, by getting listeners to pay forsubscriptions. It seems unlikely that will work if they're juststreaming the same files you can get as mp3s.NextWhat happens to publishing if you can't sell content? You have twochoices: give it away and make money from it indirectly, or findways to embody it in things people will pay for.The first is probably the future of most current media. Give musicaway and make money from concerts and t-shirts. Publish articlesfor free and make money from one of a dozen permutations ofadvertising. Both publishers and investors are down on advertisingat the moment, but it has more potential than they realize.I'm not claiming that potential will be realized by the existingplayers. The optimalways to make money from the written wordprobably require different words written by different people.It's harder to say what will happen to movies. They could evolveinto ads. Or they could return to their roots and make going tothe theater a treat. If they made the experience good enough,audiences might start to prefer it to watching pirated movies athome. [3]Or maybe the movie business will dry up, and the peopleworking in it will go to work for game developers.I don't know how big embodying information in physical form willbe. It may be surprisingly large; people overvalue physical stuff.There should remain some market for printed books, at least.I can see the evolution of book publishing in the books on myshelves. Clearly at some point in the 1960s the big publishinghouses started to ask: how cheaply can we make books before peoplerefuse to buy them? The answer turned out to be one step short ofphonebooks. As long as it isn't floppy, consumers still perceiveit as a book.That worked as long as buying printed books was the only way toread them. If printed books are optional, publishers will have towork harder to entice people to buy them. There should be somemarket, but it's hard to foresee how big, because its size willdepend not on macro trends like the amount people read, but on theingenuity of individual publishers. [4]Some magazines may thrive by focusing on the magazine as a physicalobject. Fashion magazines could be made lush in a way that wouldbe hard to match digitally, at least for a while. But this isprobably not an option for most magazines.I don't know exactly what the future will look like, but I'm nottoo worried about it. This sort of change tends to create as manygood things as it kills. Indeed, the really interesting question is notwhat will happen to existing forms, but what new forms will appear.The reason I've been writing about existing forms is that I don'tknow what new forms will appear. But though I can't predictspecific winners, I can offer a recipe for recognizing them. Whenyou see something that's taking advantage of new technology to givepeople something they want that they couldn't have before, you'reprobably looking at a winner. And when you see something that'smerely reacting to new technology in an attempt to preserve someexisting source of revenue, you're probably looking at a loser.Notes[1]I don't like the word "content" and tried for a while to avoidusing it, but I have to admit there's no other word that means theright thing. "Information" is too general.Ironically, the main reason I don't like "content" is the thesisof this essay. The word suggests an undifferentiated slurry, buteconomically that's how both publishers and audiences treat it.Content is information you don't need.[2]Some types of publishers would be at a disadvantage tryingto enter the software business. Record labels, for example, wouldprobably find it more natural to expand into casinos than software,because the kind of people who run them would be more at home atthe mafia end of the business spectrum than the don't-be-evil end.[3]I never watch movies in theaters anymore. The tipping pointfor me was the ads they show first.[4]Unfortunately, making physically nice books will only be aniche within a niche. Publishers are more likely to resort toexpedients like selling autographed copies, or editions with thebuyer's picture on the cover.Thanks to Michael Arrington, Trevor Blackwell, Steven Levy, RobertMorris, and Geoff Ralston for reading drafts of this.
