Digitalwall: Three Musts of Digital Content Biz (1) Content is Cheap

Producers of digital content, despite their key roles, are seldom sufficiently rewarded.

If I dare say it out loud that "human wisdom is valuable but can not be put on sale for a price," I might be laughed at, lashed out at, or left unnoticed. Enlighten me on which is worse. However, with the following analysis, I intend to convert some of the readers into my believers.

Ever since the dawn of the Internet age, when all were looking for a viable business model, I have reasoned that one can not charge for information disseminated on the Internet, since throughout the history of human consumption, we have never really paid much in exchange for information.

At a free-access seminar, where a world-renowned guru had been invited as the inaugural keynote speaker, two thousand people applied for admission, which, thankfully, was not a problem as the organizer had prepared for a capacity crowd.

As there was no charge for admission, the venue, the cost of flying the guru in including board, lodging, and traffic, the remuneration for the speech itself, the compensation for the staff, not to mention advertising, including newspaper ads and print materials for on-site distribution, were almost entirely paid for by a number of corporate sponsors.

A closer look shows that of all the sponsorship, only about 10% went to the guru's speech, meaning venue, wages, ads, and travel took up 90% of the sponsorship. Considering that the guru's wisdom was the only thing that justified all the trouble of holding such a speech, this cost structure didn't really make much sense.

That is, has the organizer spent too much on things other than the wisdom of the guru? Think again. Ninety percent of the sponsorship went to facilities and advertisement, leaving only 10% as rewards to the key figure that made the whole even possible.

However, this anomaly is hardly rare in the realm of education and training industry . In fact, people have gotten so used to this anomaly that they have started to see it as normal. For a training course that lasts 36 hours for 30 trainees, its common for every one enrolled in must to pay a fee of US$600-700, of which, again, only 10% is headed for the lecturer's wallet.

Where has rest of the money gone? One must ask. The answer is the venue, the printed materials, and the advertisement. These costs and compensation to the lecturer deducted, the organizer is still left with some slim profits. Things have always been this way in the world of training and education industry .

An even more convincing example is with the publishing industry, in which a writer has to rack his brains to get a book out and be rewarded with a royalty of 10%, give or take, depending on the level of fame this particular writer enjoys. That is, if the book sells for US$6-7 a copy, the author will be cut a share of less than US$1.

That brings us back to the same old question of where has the rest of the dough goes. A closer look will reveal that there is the cost of print materials, the cost of paper, the wages of administrative staff with the publishing company, the cost of advertisement and promotion, the cost of transporting book (yes, no such thing as a walking book), the cost of warehousing (unless you own the warehouse), and finally, the publishing company would not say no to some profits.

The same situation is true of the recording industry, where lyricists and music writers get the smallest shares of the big pie, as most of the US$10 tag price that consumers pay to get the CD album goes to the compact disc, the packing, the transport, and ads before the little that's left can trickle down to those that make the product even possible.

The movie industry is no exception to the rule that content is cheap. Do you think that by buying tickets at cinemas you are being supportive of the cinematic creation? Pardon my French, but…you wish. The cruel fact of life is that most of your money is used to rent the movie theater, maintain the facilities and pay for the utilities.

For hundreds, if not thousands, of years, people have grown accustomed to such uneven distribution of profits. They don't feel a thing any more. Content might be "priceless," but there is a price for content, a low one, on the market. In the worst case, when detached from the container, content becomes really priceless, this time literally.

We have encountered too many examples of this on the Internet. At the dawn of the Internet age, someone made the first ever attempt to sell news stories on the Net, the first time in human history when news was completely detached from its paper-based carrier. The result proved disastrous as plenty people would pay 30 cents for paper, but no one would pay anything for news on the Net.

Right now, around the globe, governments are encouraging development of digital content, which is good, because once content in books, music albums, movies, and educational curricula is digitized, the transfer of it can be done through the Net to save a great deal on hardware.

Companies will no longer need to dispatch CDs over to retailers and save on packaging and transport by adopting sales of digital music; neither do companies need to ever print the wisdom of authors on paper again as there is the convenience of eBook. For educational event organizers, venue will stop being a source of cost; instead, they can channel what financial resources they have into getting as good lecturers as they can afford by providing digital learning.

However, one little thing still stands in the way to that digital paradise. Consumers' emotional attachment to containers, that is. In a world where things without something wrapped around them can hardly have a price, how can one convince consumers to whip out their wallet and pay? For people who have learned to appreciate music only contained in a CD, how can we teach him to give music in files as much credit?

The absence of hardware cost means that price can be driven down. But this is hardly enough to induce change in consumer behaviors. In fact, in an age when content is removed from containers to be sold as pure electronic files, people in the content business must have themselves undergo a makeover of thought by flushing the idea of selling things in a container down the drains and embracing a business platform built upon monthly fees.

The take-off of digital content industry hinges upon consumers' will to pay. And for consumers to pay, three pieces must fall into place. They are monthly payment, online community, and real-time connection. All three must start with online businesses' willingness to quite the obsession with selling stuff put in containers. (
2004/09/12 - By Digitalwall.com - Way to
China Internet/Telecom )