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Un-bundling is good for consumers, but bad for marketers and content creators

July 12, 2011

In his article called “Why We Need the New News Environment to be Chaotic“, Clay Shirky offers some suggestions on what the newspaper business should be when it grows up. It’s a really great article, and it breaks down the dilemma faced by newspapers. The newspaper model, he explains, is basically this:

“We will print enough content to fill the hole left after we’ve sold the advertising space. We will include content proportional to the amount and intensity of reader interest, modified somewhat by editorial judgment. Overall, the value of the bundle will be more than the sum of its parts.”

His point is this: newspapers bundled Football scores with city council meetings and sell ads around it. On the arrangement, he wrote:

“Writing about the Dallas Cowboys in order to take money from Ford and give it to the guy on the City Desk never made much sense, but at least it worked.”

What is important to note is this arrangement worked for newspapers and marketers. It didn’t work for the consumer.

There was a guy named Wannamker who famously said this:

“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

Most of the money I spend consuming content is wasted. If I buy a newspaper for the Football scores, then about 90% of my money is wasted.

On the Internet, content wants to be free and unbundled. I would pay $100 per year to watch Arsenal games on my TV, but I can’t. Instead, I have to pay over $100 per month to get a cable package with networks I’ll never watch to get FSN that occasionally shows games that I have no interest in to get the occasional Arsenal game. I can tell you exactly where my money is being wasted.

For most of my life, content has been bundled. It’s a bundle subsidy. Record stores used to be the place to buy bundled music, but iTunes un-bundled it. Cable companies used to be the place to buy bundled subscriptions, but iTunes, Netflix and YouTube (to name a few) have unbundled TV.

Bundling is a wet dream for advertisers and content creators because people have to buy a lot of ads to get the Football scores, and they have to watch a lot of TV to get the sports game.

In an era of unbundling, consumers might win, but at a cost.

Like the newspaper business, content is subsidized by the bundle. As it unbundles, the money lost will never be returned. Think about the above math: if I pay a couple of content creators $100 per year, that is way less than the cable companies will get from me. Since they are getting less, they can’t pay the EPL (or any sports league) to get the rights.

for more simplistic math, think of the record business: One song from a new album is 99 cents. When bundled, the album is $15. If I pay 10 cents (or whatever) to read one article from RollingStone.com, that is less for RollingStone in subscription and advertising revenue.

The loss of revenue from analog to digital is big because the internet doesn’t allow the bundle subsidy.

Advertisers love the bundle because they can get impressions. If there are many things bundled together, like in a newspaper, or a cable package, advertisers know they will an impression number. Remember, every newspaper bought is an impression, even if we suspect most people just read the sports section, we continue with the fiction that all impressions are equal.

In the online world, we can’t pretend a reader who logs onto RollingStone.com sees every ad — we know which one they read. With the actual magazine, impressions are assumed. Remember the Wannamaker quote. There’s an assumed loss in advertising that goes away when it goes digital.

A real life Newspaper of Magazine is a bundle of joy for both advertiser and content creator.

But the ride is over. Unbundling is here, and it will impact marketing and content creators. It is already impacting consumers like me. I hardly buy bundled content.

What do you think? What bundled content do you still get?

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6 Comments leave one →
  1. July 17, 2011 1:21 am

    The idea of paying for content is reasonable and will become more prevalent over the next period of Internet evolution. Moreover Cable and Telco companies currently charge you 60 for cable television and redistribute 35 of that to the cable channels that create the content. They charge you a similar amount for high speed web access and dont share a dime with the content creators.

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