In Going Free, London Evening Standard Doubles Circulation While Slashing Costs

from the but-free-doesn't-work!! dept

In October, we wrote about how, just as Rupert Murdoch and crew look to put up paywalls for online content, the operators of the London Evening Standard were going in the other direction and making their physical paper free. So, how's that been working out? mowgs alerts us to the news that the paper has doubled its circulation in just a month. Not bad. But what's more interesting is that it's also slashed its distribution costs massively. It used to cost about 30p, and now it's just 4p per paper.

This actually brings up a point that's rarely talked about in the free vs. paid debate. Charging can be expensive. It takes quite a bit of effort to charge, to take money, to manage the money, to set up the accounting and bureaucracy for managing each transaction. And, even worse, if you're working with third party distributors, like news agents, then you have to handle financial relationships with them as well. Getting rid of the per paper price changes the economics not just on the revenue side, but on the cost side as well -- something that's rarely discussed at all. And, yes, this impacts online news orgs too. Putting up a paywall is going to prove a lot more expensive than most people think on the cost side.

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Having ISPs Fight Piracy Could Cost More Than Claimed 'Losses' From Piracy

from the inefficiency-at-work... dept

While I'm sure defenders of kicking people off the internet will quibble with the numbers, ISPs are pointing out that the cost of implementing Lord Mandelson's plan to have ISPs police the internet for file sharing, will cost the industry significantly more than the music industry claims it's losing to "piracy." Even if you accept that the ISPs may be exaggerating the cost, we already know for a fact that BPI massively exaggerates its loss numbers. So if you cut back the ISP estimates significantly, the overall cost is still likely to be much higher. Meanwhile, we're still waiting for anyone to explain how kicking people off the internet gets more people to buy stuff. It's difficult to see how anyone could support this plan if they've actually put more than two seconds into thinking about it.

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Music Industry Squanders $69 Billion Worth Of Free Promotions In 2007

from the got-your-attention? dept

Over the years, we've seen so many bogus reports on the supposed "losses" to various industries due to unauthorized file sharing, that it's about time the story was flipped. Reader SteveD writes in to point out the latest research, claiming that in 2007, the dollar value of all unauthorized music file sharing was $69 billion. The research company that put out the number does clearly state that those numbers are not lost revenue (good), but then goes on to still claim that this shows how damaging unauthorized file sharing is for the industry:

"A $69 billion figure is staggering to contemplate, but it effectively illustrates the impact of piracy on the music industry."

Actually, I disagree. I don't think it shows the "impact" at all. If anything, you could flip this around (as I did in the title) and use it to show how much goodwill and free publicity provided by fans the industry squandered by trying to turn those fans into criminals, rather than learning to embrace that free labor in a business model that took advantage of all of that free promotion. Sure, the headline is an exaggeration, but it's no more of an exaggeration than claiming that the $69 billion represents the extent of any problem. If there's a problem, it's in the fact that so many folks in and around the industry view this as a problem rather than a huge opportunity and resource.

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Understanding The Backlash Cost In Copying Someone Else's Work

from the thinking-things-through dept

Earlier this month, we wrote about a neat marketing campaign put on by the Eepy Bird guys using tons of Post-It Notes. It wasn't clear if 3M, the makers of Post-It Notes was actually involved or not -- but it appears the company is busy at work on its own viral marketing campaign, though it's off to a poor start. As a bunch of folks have sent in, 3M apparently decided to make make its own car covered in Post-It Notes photo after the company failed to license the original photo that was made famous a few years ago.

Now, I find the people who claim that 3M was "stealing" the concept just as (if not more) silly as those who claim that downloading an unauthorized song is "stealing." 3M tried to license the photo and couldn't agree on a price, so it made its own. It didn't "steal" the idea, it just found it more cost effective to do it on its own (the classic buy vs. build decision). However, it does appear that the company didn't take the backlash cost into account in figuring out that buy vs. build equation.

This is actually quite important. Often, when we talk about things like plagiarism or copyright infringement, people insist that others will always "rip you off" and copy your work and there's absolutely no recourse. Yet, they fail to acknowledge the importance of reputation. If you are caught so uncreatively copying someone else, without doing anything new or innovative on top of that, it's not surprising that people will call you out, often vehemently, for your uncreative copying efforts. That can have quite a big cost in terms of reputation and credibility, probably a lot more than it would have cost to have reached an agreement with the original creator. So, before thinking it's so easy for big companies flat out "rip off" someone else's creative work, just remember that there are some pretty serious hidden reputation costs in them doing so.

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Yet Another Report On Why Forcing A La Carte Cable Is A Bad Idea

from the think-it-through dept

If there's one topic that we regularly discuss that many of our readers (even those who agree with us on most other things) disagree with us on, it would be mandatory a la carte cable. We've explained repeatedly why forcing cable companies to offer a la carte cable is a bad idea that would likely lead to higher prices and less choice. Yet people still argue against it, claiming (incorrectly) that they would just order a few channels and prices would decrease. Instead, those fewer channels would inevitably cost a lot more (if they were still available at all) because a la carte pricing for channels reduces demand for individual channels, resulting in higher (not lower) prices per channel. Jeff Eisenach and Adam Thierer have put together a short report looking at the problems of a la carte cable, and noting that even if the intentions of those supporting mandatory a la carte cable are strong, the end result isn't likely to be what they'd expect.

On top of that, it's probably worth pointing out that this debate may soon be moot anyway. As we move increasingly to a world where most TV programs are available online, the entire concept of the channel will go away. It won't matter what channel a particular program is on, because you'll just subscribe to that program, and it will get delivered over the internet. In the meantime, though, there's simply no reason to force cable companies into providing a la carte channel selections.

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Advocates Of A La Carte Mandates Misunderstand Infinite Goods

from the bundling dept

Some minority organizations are making the case that a la carte mandates would destroy the market for niche channels. They point out that the market for minority programming like BET and Univision is relatively small, so they (and minority viewers) benefit from being able to tag along with channels that have broader interest. FCC chairman Kevin Martin disagrees, saying that "if a cable operator only wants to carry one channel, it should not be required to buy 10 or 20 channels in order to do so." Martin seems to be thinking of cable channels as tangible products like cars or toasters: if people are only "required" to buy the channels they really want, they'll save money because they won't be "forced" to waste money on other channels they're not interested in. But this argument ignores the fact that television content is an infinite good. The costs of delivering cable content is almost all fixed; once coax has been run to a customer's house, it costs almost exactly the same to provide a given customer with every channel on the cable network or with only one channel. As a result, bundling is economically efficient: throwing in additional channels increases the value of the cable service without imposing any extra costs on the system.

People imagine that an a la carte mandate would mean that if they're currently paying $50 per month for 50 channels, then they should be able to pay $1 per month for one channel. But that doesn't make any sense. Switching a given customer from 50 channels to 1 channel doesn't reduce costs (the other 49 channels would presumably still be produced for other viewers), so why should the customer expect a lower bill? If anything a switch to a la carte actually makes things more expensive because in some cases cable companies have to install new equipment and set up a more complicated ordering and billing system to keep track of who had signed up for which channels. In reality, what would happen is that the cost of each channel would go up a lot. Instead of $1/channel, cable companies might charge something like $8/channel, with each customer choosing 6 channels on average. The result would be that most people would pay about the same for a lot fewer channels.

It's a mistake to think of bundling as being "forced" to pay for channels we don't want. After all, non-sports fans don't get outraged about the fact that they're "forced" to take the sports section with their morning paper. The right way to think about it is that you're paying for the parts of the bundle that interest you, and the rest of the paper is a freebie that doesn't cost you anything extra. It would be silly to demand that newspapers price each section of their paper separately and let you do without the sections you don't want. It's equally silly to demand that cable companies not show you channels you're not interested in watching, since those aren't costing you anything either.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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TV Companies Embracing Online Streaming... But Why Not BitTorrent?

from the solves-the-bandwidth-problem dept

The NY Times has an article talking about how the various TV producers are finally embracing the idea of offering up TV shows online, noting that Warner Brothers is now opening the vault and adding a bunch of old shows that can be streamed directly online. This isn't all that surprising. However, what's odd is that the article includes a few complaints about the cost of doing this compared to the revenue, with NBC Universal boss Jeff Zucker complaining "there are streaming costs so you have to make sure you’re covering that." Of course, that brings me back to a discussion some folks had around here over four years ago -- when we started wondering why television companies didn't just use BitTorrent to distribute their shows. If you combined RSS and BitTorrent (which was briefly referred to as "Broadcatching" by Ernest Miller) television companies could make it very easy for people to watch their shows. With RSS, they would "subscribe" to the shows, so as soon as a new one came out, subscribers would definitely see it. It would increase loyalty and remind people to watch their favorite shows. And by using BitTorrent, it would take the bandwidth cost away from the television companies. Unfortunately, the entertainment industry is still too scared of BitTorrent to realize how it can be embraced. So they complain about bandwidth costs for absolutely no reason.

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