If You Create Value, They Will Pay

By Michael Tanenbaum Online content providers are in a doldrums. Consumers simply do not want to subscribe to pay for content. A just-released Nielsen study reports that 79% of web users avoid websites that charge for content, particularly when they can find the same content elsewhere for free with only a modicum of effort. (See story: Nielsen reports online user trends) Some providers have explored alternative business models, such as easier payment methods and micropayments, but so far few solutions have opened up consumers’ wallets.

So much online content is already available for free that it has become valued as a commodity. How can you create preference, inspire loyalty and command leadership in a digital world where so much is given away for free?

This is a problem.

The answer is to provide customers what they can’t get elsewhere, within a credible price range, at a level of service unparalleled in the particular industry. If you build a strong brand, people will pay.

Witness the success of Apple’s iTunes Music Store (iTMS), with a deceptively simple business model of 99¢ for most music downloads. While it did not put illegal filesharing out of business, its ease of use and massive selection of quality artists, among other branded features, simply made it a more engaging and reliable experience than most other methods of acquiring music. iTMS is now the largest music retailer in the world.

In the newspaper publishing industry, The Wall Street Journal has blazed its way to profitability, both online and offline, with its pay-to-play model. (See story: "What the Wall Street Journal Has, Few Will Match")) The Journal provides insightful analysis of largely exclusive, narrowly focused content at a level of scholarship few other publications can match. In 2009 they landed the #8 spot on Mediaweek’s Digital Hot List of significantly relevant Web properties.

Why do consumers value the iTunes Music Store and The Wall Street Journal while they complain about paying for other content? Why is HBO so popular while network TV is falling to pieces? They each offer differentiated products that the competition cannot. And consumers are willing to pay — sometimes even top dollar — for unique, original and compelling content.