Content is a Service Business

I’ve been a fan of Trent Reznor‘s music since first hearing Pretty Hate Machine in junior high school, but in the past few years I’ve been increasingly impressed by his attitude and approach to the economics of the modern digital media business. His release of Ghosts I-IV is a case study in how to do exactly what Kevin Kelly outlines in Better than Free : “When copies are free, you need to sell things which cannot be copied.” Notice that even though the Free Download option is right there at the top, the $300 “ultra-deluxe” version is sold out (and was sold out within 24 hours of being released).

On his forum a few days ago, Reznor posted advice to aspiring young musicians eager to make it in the music business, and the advice is just as applicable to writers and other artists working in almost any digital medium and attempting to compete with the vast content available on the Web:

[W]hat you NEED to do is this – give your music away as high-quality DRM-free MP3s. Collect people’s email info in exchange (which means having the infrastructure to do so) and start building your database of potential customers. Then, offer a variety of premium packages for sale and make them limited editions / scarce goods. Base the price and amount available on what you think you can sell. Make the packages special – make them by hand, sign them, make them unique, make them something YOU would want to have as a fan. Make a premium download available that includes high-resolution versions (for sale at a reasonable price) and include the download as something immediately available with any physical purchase. Sell T-shirts. Sell buttons, posters… whatever. [emphasis added]

This is not just about using free digital content to sell physical goods. It’s an acknowledgment that what you’re selling as an artist (or an author, or a publisher for that matter) is not content. What you sell is providing something that the customer/reader/fan wants. That may be entertainment, it may be information, it may be a souvenir of an event or of who they were at a particular moment in their life (Kelly describes something similar as his eight “qualities that can’t be copied”: Immediacy, Personalization, Interpretation, Authenticity, Accessibility, Embodiment, Patronage, and Findability). Note that that list doesn’t include “content.” The thing that most publishers (and authors) spend most of their time fretting about (making it, selling it, distributing it, “protecting” it) isn’t the thing that their customers are actually buying.

Whether they realize it or not, media companies are in the service business, not the content business. Look at iTunes: if people paid for content, then it would follow that better content would cost more money. But every song costs the same. Why would people pay the same price for goods of (often vastly) different quality? Because they’re not paying for the goods they’re paying Apple for the service of providing a selection of convenient options easy to pay for and easy to download.

This is not new to digital content. Why would the price of admission to see a given year’s Razzie Award winner be equivalent to the price of admission to see the year’s Best Picture? Because the price of admission is not for the content. It’s for the privilege of seeing it early, and doing so on a big screen in a social environment — movie patrons pay for the service provided by the theater, not for the movies themselves (here’s a counterpoint on movie pricing). That’s the point that Reznor and Kelly are making: think long and hard about what your customers want, and provide the service of giving that to them.[1]

“But people are still buying content when they buy a book or an album,” the argument goes. Yes, they are. The same way that you’re buying food when you go to a restaurant. You are purchasing calories that your body will convert to energy. But few restaurants (especially those you visit frequently) have ingredients any different from those you can get yourself at the corner store, for much less money. So it can’t be true that your primary goal is to purchase food; you’re purchasing a meal, prepared so you don’t have to, cleaned up so you don’t have to, and done so in a pleasing and convenient atmosphere. You are paying for the preparation of the food and the experience of eating it in the restaurant, not the food itself [2] (beyond the raw cost of the physical ingredients, which in the case of digital content is effectively zero).

This came up during a discussion on Peter Brantley‘s email list recently, in the context of what someone is paying for when they buy one of our Cookbooks (which contain “Recipes” for how to accomplish specific tasks with a particular computer language or technology, often culled and curated from material and techniques previously published in blog posts, mailing lists, or help forums). I asserted that rather than the content itself, people are paying for the preparation of that content, to the extent that it helps them solve their problems more quickly and conveniently. When you think about what we do as a service business, then it makes perfect sense: readers are paying us for the service of finding a bunch of great and interesting stuff, and putting it together in a convenient package. It’s the convenience of not having to find it themself, and the concise package that saves them from having to dig through a bunch of web bookmarks or search results. I didn’t buy “Home Buying for Dummies” last year because I wanted a book on home buying; I bought it because I didn’t want to screw up something really important (buying a house) and was willing to pay someone to spell out all of the stuff I needed to worry about in one place. People don’t buy Jim Cramer‘s books because they want Jim Cramer’s content — they buy his books because they think it will help them get rich, and they think paying him is a great shortcut alternative to acquiring his knowledge (knowledge, not “content”) themselves. These are services, not products.

The recent (and absurd) notion put forward by European publishers to “strengthen copyright protection as a way to lay the groundwork for new ways to generate revenue online” is intimately tied up with this issue of the value of content (and therefore the value of various players in the content value chain, like authors, publishers and the latest bogeyman, aggregators and search engines). Arguing that you need to beef up copyright protection to make sure there are ways to generate revenue online incorrectly assumes that what people are paying for is the copyrighted content itself. People do not care about content, they care about themselves and their problems.

You don’t get an “A” for effort just by spending time and money creating content (and you are not entitled to your business model — you have to earn that money every day by doing something that people find worth paying for — and they decide it’s worth paying for, not you). Content only has value to the extent that someone will pay for it because it accomplishes something they’d rather exchange money for than do themselves — and when was the last time you said “Gee, I really need some content. I could write some of it for myself to read today, but I’d rather pay someone else to do it.” [3] Google and other aggregators haven’t stolen any value from the creators of the content they are aggregating — they have done what intermediaries have always done, which is create new value based on doing for customers what those customers cannot or do not want to do themselves — the service of sorting through all that content to find the thing that solves their problem. (I use “problem” loosely — it may be boredom, loneliness, a tax audit, an idea for a first date,…) Again I’ll return to Kevin Kelly, who elucidated the role of aggregators in relation to content creators far more eloquently than I ever could:

The giant aggregators such as Amazon and Netflix make their living in part by helping the audience find works they love. They bring out the good news of the “long tail” phenomenon, which we all know, connects niche audiences with niche productions. But sadly, the long tail is only good news for the giant aggregators, and larger mid-level aggregators such as publishers, studios, and labels. The “long tail” is only lukewarm news to creators themselves. But since findability can really only happen at the systems level, creators need aggregators. This is why publishers, studios, and labels (PSL) will never disappear. They are not needed for distribution of the copies (the internet machine does that). Rather the PSL are needed for the distribution of the users’ attention back to the works. From an ocean of possibilities the PSL find, nurture and refine the work of creators that they believe fans will connect with. Other intermediates such as critics and reviewers also channel attention. Fans rely on this multi-level apparatus of findability to discover the works of worth out of the zillions produced. There is money to be made (indirectly for the creatives) by finding talent. For many years the paper publication TV Guide made more money than all of the 3 major TV networks it “guided” combined. The magazine guided and pointed viewers to the good stuff on the tube that week. Stuff, it is worth noting, that was free to the viewers. There is little doubt that besides the mega-aggregators, in the world of the free many PDLs will make money selling findability — in addition to the other generative qualities.

I love his metaphor of the internet machine (“a very large device that copies promiscuously and constantly”), and it’s one worth keeping in mind if you think you’re in the business of selling “content,” because you are probably wrong.

Update: Jim Lichtenberg kindly reminded me he gave a presentation [PPT] on the same topic at the 2008 TOC Conference. Worth a read.

1. Many publishers have actually been doing the same thing for years with hardcover, trade, and mass-market editions of the exact same content at different prices.

2. This is why celebrity chefs aren’t particularly worried that doing TV shows and selling cookbooks describing exactly how to make the food they serve in their restaurants will harm business.

3. There are people who do in fact want to pay someone to write content for them as a service. They’re called publishers.

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