Monday, December 5, 2011

Paid Media Pyramid - Old and New

Seth Godin's got an interesting blog post on "The erosion in the paid media pyramid."  He starts with the suggestion that since the development of media, there's been a model of value and pricing options for paid media.

   Basically, he differentiates paid media into 4 groups, with value and pricing related to supply, or the breadth of demand.  At the bottom of the pyramid is Free content.  He describes this kind of content as including content that is delivered to anyone who is interested in consuming it - primarily as a draw for sales of something else.  Chris Anderson's Free covers the same ideas.
  Mass content includes media products where the cost of replication and delivery are relatively low, allowing lower prices with the development of mass markets.  With mass markets, value can be aggregated over larger numbers.
Limited content, Godin suggests, is rare and thus expensive.  This can be the result of higher costs of replication and delivery, requireing higher pricing and limited markets, or can be a decision that inherent value is high enough that income can be mazimized by restricting the size of the market.
At the tip of the pyramid is Bespoke content - which for any media product is the most expensive, as it needs to recoup the whole cost (and value) with a single exchange rather than averaging costs over a larger market.
  Godin suggests that with the rise of competition, convergence, and the digital network economy, three things have occured that have eroded, or upset, the pyramid.
  1. Digital media have significantly reduced replication and distribution costs, and have also expanded the availability of content.  He suggests that this has led to an explosion of choice, or from the point of traditional media content producers, an explosion of competition and clutter.
  2. As a result, attention is worth more than ever before.  In the old model, attention was the important value in Free, or even some Mass content, but was low compared to most other costs, and therefore didn't have a big impact.
  3. Again, as a result of #1, the marginal cost of one more copy in the digital world is zero (or close enough that nobody cares).  This is important because general economic theory recommends setting price at marginal cost.
Godin argues that as a result, there's a "huge sucking sound" of value leaving the media model (or at least prices and revenues from sales falling dramatically).  The new media pyramid, he suggests, will be a whole lot flatter, with a whole lot of free, and a little bit of high end limited content trying to subsidize everything.
  I'm working on my own pyramid for this new environment, which I'll post as the first in what I hope will be a series of targeted reports/analyses.  Look for a new header in the sidebar in a day or two.

Source -  The erosion in the paid media pyramidSeth Godin's Blog

2 comments:

  1. I think this correlates directly with the limited revenue stream media outlets are seeing these days. Everything is free or cheaper to find somewhere else because of electronic media. If media outlets could find a way to successfully price more of its information, maybe more people would have jobs today.

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