2009 saw some solid progress made in various digital content marketplaces but it is too early to start talking about the green shoots of media recovery. The Media Meltdown (the process by which media industries are disrupted and reshaped by digitization of content) will continue to claim scalps throughout 2010 as digital content revenues do little to offset the impact of plummeting physical media sales and as analogue dollars crumble into digital cents. But consumers are not falling out of love with media, rather they are growing tired of paying for its 20th-century product iterations (and those 21st century products that try to reinvent the old products in a digital context). A new framework for media product innovation is now required to align media industry content assets with 21st-century consumer behavior and demand. Forrester proposes what form this should take in a new report ‘Media Product Innovation: Building Products That Thrive In The Media Meltdown’.
The core asset that media companies own is of course the content itself, but Content is no longer king. Or, at least, its throne is no longer undisputed. Instead, content is busy fighting off the republican advances of the channel. ISPs and mobile operators use content to fill their pipes, technology companies to fill their devices, and brands to help sell their products and to meet their branding objectives. The hierarchy is clear.
As the contagion of free continues to infect everything it touches, the old media business models and products are on borrowed time. Only with a new generation of media products that play to the relative strengths of the various digital platforms will new successful media business models be built. In the report we identify how consumers perceptions of value have changed, in no small part due to the demise of content scarcity, the dynamic on which 20th-century media businesses were built. Digitization threw scarcity out of the window, and Napster boarded the window up. Now the monopoly on control is gone, many consumers simply neither need nor want to pay anymore.
Successful future media products must build new concepts of value based upon the principle of Convenience-Based Product Innovation. Content scarcity may be gone, but high quality, unique convenient experiences are scarce in the extreme in the digital arena. When they exist they prosper cf iTunes, xBox, Kindle.
Scarcity isn’t created by a paywall
The pervasiveness of free content means that consumers have to be given more if they are expected to pay. That doesn’t just mean giving them more content — although that’s important, too — but also richer, differentiated experiences. Just erecting a paywall around your existing content will simply drive the vast majority of your audiences to the nearest free alternative. But even with compelling experiences, not all consumers will pay. We propose that monetization of digital content should follow a three tier hierarchy of products and services:
The three-tier approach will require a careful differentiation between tiers that is currently absent. The availability of content will help differentiate the tiers, but only with media product innovation will audiences actually be persuaded to adopt these offerings: without a compelling experience, even the most robust business model will be dead in the water.