EU Gov't Study: People Won't Pay For Content; New Business Models Needed

from the wow dept

Just as more and more European countries are trying to ban or block sites like The Pirate Bay, it seems like a few more politicians should take the time to read the new EU study on digital competitiveness (found via P2P Blog). In it, the authors study the question of paid content and "pirated" content, and find that an awful lot of people have absolutely no interest in paying for content, no matter what -- and that the entertainment industry is exaggerating the impact of things like file sharing, since so few people would actually pay for the content in the first place (even if it weren't available for free). Rather than blaming "piracy," the report properly notes that it's a shift in technology (from atoms to bits) that has created the business model problems today:
De-materialisation of creative content distribution is shaking up the business models of the creative industries, with both potential opportunities and potential losses and bringing new players into the media industries' landscape.
It goes on to point out that the answers to these questions aren't going to come from lawsuits, but by recognizing how people (especially younger generations) view such things and putting in place business models that work. Still, the report does hedge in places, talking about the need for a "favorable regulatory environment," though it's not at all clear what's meant by that. But it's good to see a gov't report recognizing this is really a business model (and technology) issue, rather than a legal problem as many in the legacy entertainment industry would have you believe.


Reader Comments (rss)

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  •  
    identicon
    Anonymous Coward, Aug 12th, 2009 @ 6:49pm

    What is funny in the end is people will still pay for content. Rather than paying for content up front, they will pay for it at the back door, buying over priced t-shirts or whatever twisted business model comes up to cover the costs.

    The alternative is that the sources of this digital media die off. Without income, there will be little or no media interested in producing content that cannot be controlled and properly monetized.

    The suggestions given by Gurus like Chris Anderson are all pretty much dead ends. The combinations of adblocks and ad blindness mean that advertising is all but ignored. Most of the other models require a small number of people to significantly overpay for other products or services to support the freeloaders. It isn't supportable in the long run.

    So the discussion of "you need a new business model" is all well and nice, but when there are no models out there that function, what is left? Less content, or less good content and more amateur whatever content.

     

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      Content @ Zero, Aug 12th, 2009 @ 7:51pm

      Re: Backend Payment

      It is economic principle at work. It is basic supply and demand. Obviously people have the perception that content is not valuable and that something additional is needed to add value. Demand does not exist for the product and supply is infinite. Therefore the value approaches zero or less. Advertising if not invasive can produce some level of revenue from a drive by basis, but demand alone is not driving the market in music any more.

      Stop suing your fans and maybe (if you are lucky) they will respect the product again. When pirates are considered a more reliable and trusted source for content and added value, yes there is definitely a problem in image and how you are selling your products....

       

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        Anonymous Coward, Aug 12th, 2009 @ 9:03pm

        Re: Re: Backend Payment

        "Stop suing your fans"

        This is the ultimate joke. What you are really saying is "stop caring about your content, just give it away and be done with it". Total crock, can you not see past the end of your nose? When there is no income, who will provide the music and movies you love?

        Nobody. Or wait, you can listen to Amanda Facepalm Palmer all day.

         

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          Anonymous Coward, Aug 12th, 2009 @ 11:34pm

          Re: Re: Re: Backend Payment

          No, the real joke is that the level of illiteracy prevalent on text-based communication.

          When there is no income...

          Hmm, that's interesting. I could have sworn this Government funded study mentioned something about that. Something about consumers not wanting to pay even if the junk wasn't illegally free? Sounds a lot like "no income" to me.

           

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          JackSombra (profile), Aug 13th, 2009 @ 4:10am

          Re: Re: Re: Backend Payment

          I know you did not mean that, but actually you are 100% correct.

          The content is not and has never been what was "valuable", it was the method/medium of distribution. Otherwise we all would have been happy with radio (or even further back, going to taverns and just listening to singers/bards) and no one would have ever bought tapes/CD's.

          Now the world has moved on and we no longer need CD's as we can get digitally what we want when we want

          Now that distribution is virtually unlimited and free the Industry needs to take a page out of retailers play book and realise the "content" is the loss leader, it get's people though your door (in this case into your "brand"), your profit comes from the other things they buy once you get them "in the door"

           

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      Anonymous Coward, Aug 12th, 2009 @ 8:12pm

      Re:

      What a head-in-the-sand comment! It doesn't matter if you can't think of a better business model mate, what this study says is that people will not pay for content. No ifs ands or buts. Either adapt and give the people what they are willing to accept, or you will die off and people who can supply the goods will take over. Simple as that.

       

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      Reed, Aug 12th, 2009 @ 10:00pm

      Re:

      "when there are no models out there that function"

      Your joking right? You suggested an excellent proposition to begin with and that is adding value to content such as merchandise.

      Think along the lines of Hannah Montana (Yes, I have little girls). What's really valuable her content such as a movie or the merchandising associated with it? There is always a way to make profit, even if you give your content away.

      The most farcical of all suggestions is somehow we will have "no good content left" in the future due to sharing. If your version of the apocalypse is a future with no more crappy Hollywood blockbusters then I'll take that any day.

      This EU report just highlights what every reasonable technological minded person already knows. It is time to hit the drawing board and re-think your business plans. It is the 21st century and you will fail if you think business as usual is going to keep working.

       

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      Falindraun (profile), Aug 12th, 2009 @ 11:26pm

      Re:

      Why am I not surprised that the first comment is from an exec of the music industry. I look back to Radiohead and the album that they sold for the price of "pay what you want" that seemed to work. I also look back to the 86 year old woman who lived in an assisted living facility whom also had Alzheimers, did not own a computer, did not know what a computer was let alone who she was. Yet the music industry felt it necessary to sue her for downloading music files. If it takes the downfall of the music industry for something better to replace it, then so be it.

       

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      identicon
      ..., Aug 13th, 2009 @ 5:21am

      Re:

      Cry me a river.
      Go out of business then, see if I care.

       

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      Designerfx (profile), Aug 13th, 2009 @ 9:51am

      Re:

      strawman. You are incorrect from the getgo. The answer is, people don't want to pay. Lots of people freload. Find ways to manage.

       

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      The Infamous Joe (profile), Aug 13th, 2009 @ 9:59am

      Re:

      What is funny in the end is people will still pay for content. Rather than paying for content up front, they will pay for it at the back door

      This, this, this!! Finally, one of you shills get it! This is what everyone has been saying! The content won't get paid for directly, it will be used to sell something else!

      I wish I knew your name, so I could go out and have a nice button or trophy made for you; I'm so proud!

       

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        seac, Aug 13th, 2009 @ 10:48am

        Re: Re:

        I remember going to the video store with my wife every week and we would rent first-run movies and be disappointed about 90% of the time; most of it not even mildly entertaining and just stupid.

        I realized one day that I was spending a lot of money for junk I would never pay for under normal circumstances, so started downloading.

        Now, I delete more than 70% of the movies I download before they are one-quarter the way through playing. I feel better about not being ripped-off.

        As others have pointed out, the expectation level these days from Hollywood or the music industry is just more trash. It's not worth buying.

        Once in awhile, we see something worth paying for, but usually it isn't distributed through the standard Hollywood distribution system anyway.

        And yes, it's clear that the entertainment industry has a simple supply vs demand problem. I agree that the demand is not near as strong as the espouse, and that their "P2P" losses are grossly exaggerated.

         

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      Anonymous Coward, Aug 13th, 2009 @ 12:07pm

      Re:

      This blog is content, there are many many people who would be willing to write a blog and provide content so if one source dies off a million more would be MORE than glad to replace them PROVIDED the government does nothing to introduce artificial scarcity (like they do with taxi cabs). There is no evidence to suggest that content is all that costly, it maybe artificially expensive due to government regulations, but it's not that costly and if you remove the government granted monopolies that cable companies get the price of cable would go down, commercials would go down, and content would go up.

       

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    Anonymous Coward, Aug 12th, 2009 @ 6:50pm

    Nice try

    Something something "free" something "paid" something. Additional strawmen here. "Artist" something "money." x=y. Nice try, but fail Mike.

    There. That's out of the way.

     

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    Anonymous Coward, Aug 12th, 2009 @ 7:06pm

    Most of the other models require a small number of people to significantly overpay for other products or services to support the freeloaders.

    Gee, sounds like our tax system here in the U.S.

     

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    Hephaestus (profile), Aug 12th, 2009 @ 8:21pm

    The duality of it all ...

    def - duality .... The quality or character of being twofold

    This is where the big discussion begins .... I now understand mikes views... scary that

    I will think about this and get back to you all...

    Mona Lisa Style GRIN....

     

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    Drew Farkas (profile), Aug 12th, 2009 @ 8:42pm

    same old whiners...

    It really gets me, the way people insist that everything under the sun has to have a specific, profitable dollar value. If you want to talk about business models, just look at HP inkjet printers. Huge business, worldwide market domination, yet they sell most of their printers for less than cost. I kid you not. Furthermore, the retailer turns around and resells it for even less than HP sold it to them for.* In effect, both the producer and the retailer are giving away the merchandise. Why? Because they have found a way to make an alternate business plan work. Would anyone question Office Depot's printer & accessory sales? How about the largest computer & printer manufacturer? Are they 'throwing money out the window'? Fact is, they've found a way to make it work -- and I earnestly believe that any business can.
    Take another example: Techdirt. Granted, I'm not personally familiar with Masnick's take home pay -- but this web site surely is not a nonprofit hobby. I personally read this blog on a daily basis. I don't pay a dime to do so. Yet, somehow, there's always enough for me to read, and the quality hasn't dropped. According to the doomsayers, either the blog will soon shut down, the quality of the posts will drop, or I'll start being forced to pay each time I read it. Let's see if they're right.
    (the last 11 years would tend to make me think they're not...)

    *I used to be a manager for Office Depot. I saw many printers sell for less than the wholesale price -- especially inkjet fax machines. They were typically $20-30 less than wholesale.
    These are just two examples of this; I could go on. (Gas Stations, Sony Playstation,....)

     

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      Anonymous Coward, Aug 12th, 2009 @ 9:35pm

      Re: same old whiners...

      Do you notice though: they don't give away the printers and double the price of ink to make it up, they just adjust it slightly. Office Depot takes a slight ding on the printer to get the first shot to sell you ink (and an overpriced USB cable to connect it).

      If they model was really "true", they would give the printers away, and ink instead of being $39.95 would be $99.99. Except nobody would pay it! Most importantly, HP is happily making their margin on the printers as well, you know they aren't producing them and shipping them out of the factory for free either.

      It isn't that everything has to have a "profitable" dollar value, but it has to have some sort of way to self support and self-sustain, or people will stop doing it alone.

      As for printer ink, the ink refill places (Island Inkjet in my area) has pretty much blown the office depots out of the water, refilling for about 1/2 the price. If they are using ink sales to support cheaper printers, they are going to find the need to either raise the cost of printers, or blow up the refiller companies.

       

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        Anonymous Coward, Aug 12th, 2009 @ 11:42pm

        Re: Re: same old whiners...

        Yes, fancy that, adjusting prices to what people are willing to pay...how much do CDs cost again?

         

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      CleverName, Aug 13th, 2009 @ 5:26am

      Re: same old whiners...

      I'm not sure that ink jet printers are a good business model example. This particular model requires all sorts of silly "IP" protection in order to keep it going.

       

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    RD, Aug 12th, 2009 @ 9:06pm

    Simple answer

    There is a simple answer for hollywood: Stop selling your product outside of movie theaters. Box office is still doing well, and even increasing somewhat. If the only copies available are in a theater, you have significantly greater control (since thats all they want besides money) over the distribution. Once you put that movie on a portable, easily copied media, dont come whining that people copy it. It's your content, dont sell it that way. Make your own, all-new format that is harder or impossible to copy (if you can) and lock it all up real tight. Dont want to do that? Consumer backlash? Sales will plummet? Too bad. Innovate. Adapt. Give the consumer what they want at a price they are willing to pay. Dont like that? Tough. Go out of business then, someone else will come along and make stuff when you are gone. Maybe it wont be as good, maybe it wont be as dazzling, but content WILL get made without you.

     

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      ClverName, Aug 13th, 2009 @ 5:27am

      Re: Simple answer

      And an added side benefit would be the popcorn growers would not have to starve and sell their children into slavery.

       

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    Spanky, Aug 13th, 2009 @ 12:19am

    re:

    I haven't bought much content from the entertainment industry in 20 years. It might surprise some of you to know that I can afford it. Its just that there hasn't been much worth buying, or stealing, in the last 20 years.

    What some posters here don't seem to grasp is this is not an either/or situation. This is Darwinian evolution. You wanted free-market capitalism? Then stand up like a man and act like a capitalist. Change your business model in the face of a changing marketplace, or get out of the business.

     

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      identicon
      ..., Aug 13th, 2009 @ 5:32am

      Re: re:

      What? You are not interested in the third remake of a tired old story? How about a movie based upon a sitcom - No ? Well can I interest you in a comic book movie? Damn - tough sell here. Do you like musical groups that can not play an instrument? Maybe a singer that lipsyncs. Well, I'm sorry but that's all we have.

       

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      Anonymous Coward, Aug 13th, 2009 @ 12:20pm

      Re: re:

      I haven't bought CD's since Napster shut down. I sued to buy some CD's when napster existed but after the RIAA shut down Napster I figure I didn't want to support them. To me it's not so much the money it's the principle, these people do not deserve a dime from me.

       

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        Anonymous Coward, Aug 13th, 2009 @ 12:20pm

        Re: Re: re:

        sp/I sued to buy some CD's when napster existed/I used to buy some CD's when napster existed

         

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        Anonymous Coward, Aug 13th, 2009 @ 12:21pm

        Re: Re: re:

        (btw, I know napster exists but the point is that they were forced into changing their business model and distribution of music because the RIAA forced them to).

         

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    Trevor Doerksen, Aug 13th, 2009 @ 8:11am

    Streaming Victims

    The report accurately captures the problem of streaming content as being too expensive to stream and that the majority of services are tied to specific uses and territories. For example Video on Demand over IPTV in France delivered as a rental. It then goes on to say that this is not replacing DVD revenue. No doubt.

    Europeans are streaming victims.

    Lack of portability and download-to-own mixed with high costs of bandwidth for delivering IPTV is a losing proposition. However, that does not mean paid content is a losing proposition.

    The study goes on to state that about 30% of people say they are willing to pay and as many as 10% did in the last 3 months. This is basically consistent with other data coming out the US during the same time period.

    Online video usage rates quoted by the blog author and the study are also inline with similar data in the US. About 20% of people are viewing video online. About 20% of people are viewing TV shows online.

     

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    Anonymous Coward, Aug 13th, 2009 @ 12:06pm

    "and bringing new players into the media industries' landscape. "

    See, this is evidence that given a free market (ie: fewer intellectual property restrictions) people will produce content that others will consume. However, of course they see this as a problem because the status quo wants to find ways to take every penny that we earn just like they manage to regulate taxi cab driving by adding artificial scarcity like medallions to higher the price. Otherwise taxi's would be far cheaper because other players would be willing to join the landscape.

     

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    karmatiger, Aug 17th, 2009 @ 1:39pm

    there is a way

    Let's set aside music for a moment, as in Canada music downloading is legal for a reason - artists can make money from touring. Giving away the music builds a fanbase, and more people come out to see the concerts.

    movies, however, have no such ancilliary income sources for the artists. A production company (be it studio or independent) may use merchandising agreements to offset some of the production costs, or a master distributor may buy the merchandising rights along with the rights to distribute a film in a certain territory (which is why you see indie films distributed by Sony Tristar or Fox - they didn't make the film, they just buy it to distribute).

    When an artist gets involved with a film, whether as screenwriter, director, actor, etc. they are often promised a piece of the film sales. While many piracy advocates focus on the film where the stars get paid millions, they overlook that a) on those same productions the multi-million dollar talent is usually one or two actors; many of the others are just getting union scale, plus a promised percentage of the gross and b) most films are made for $20-$30 million with no one getting a huge paycheque.

    When you take away the residuals (percentage of gross from box office, DVD sales, etc) screenwriters and actors are lucky to earn a base living at all - there can be months between work, and it's residuals that keep them fed and housed. If you download a film you clearly thought it was interesting enough that you wanted to watch it - but in doing so you're denying the artists that made the film income they're entitled to by their efforts to entertain you. They performed a service (acting, directing, writing, etc.) that you benefit from by watching, but you're taking their service illegally rather than paying for it. If you did the same to anyone in the real world it's theft and/or fraud.

    But with downloading so easy, people will do it. Even if a film cost $0.99 v. free, people will go for free.

    Happily there is a solution. Television has been giving away content for decades, using interstitial commercials to pay for it. The same can be applied to film; you get the movie for nothing, but there's some advertising on the site that covers the license cost of the download.

    I've created a service to do this at http://www.cinestream.ca It's not actively allowing downloads yet because we need at least 50,000 members to show advertisers and content providers there's a demand for this model. But if my relatively small company has come up with a viable model and the technology to carry it out, what's stopping the big boys?

     

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    Hephaestus (profile), Oct 1st, 2009 @ 7:18am

    The link to the study ...

    Report Link

    Page 57

    "5.1. Willingness to pay for content
    Results from the 2008 survey reveal that less than 5% of Europeans had paid for online
    content in the last 3 months. For the youngest age group (16-24), this figures is twice as high.
    When looking at the individuals that did not pay for online audiovisual content, half of them
    state that nothing would make them change their minds. For approximately 30% of them,
    lower prices would be an incentive to pay, while other improvements (wider choice or availability, enhanced quality, better payment methods, the right to share material) or the lack
    of freely available content would convince between 15 and 20%. Interestingly, the willingness
    to pay of youngsters and the general population is very similar (Figure 1)."

     

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