Online content producers in the UK still cling to the idea that users will pay for their content because it has an intrinsic value — but according to a new report from Forrester Research (Nasdaq: FORR), they are wrong. Only by measuring “user payment potential” will companies focus interactive developments to maximize companywide returns. Forrester advises media firms that the marketing and user relationship benefits of online content plays are crucial complements to financial measures of success.
“By believing that content has an absolute value across media, measured only by business-unit-centric financial returns, content producers aren’t reaping maximum benefits from new media projects,” said Forrester Analyst Rebecca Ulph. “Consumers access content when and where they need it, not when providers want to give it to them, and they won’t pay for new media content since it doesn’t eliminate their need for paid-for offline sources. Consolidation will reduce the number of players with this problem, not solve it. Indeed, the true value of content depends on the wider business context, and the next wave of technology like mobile or PDAs offers opportunities not answers. Fundamentally, today’s silo-based economics don’t properly measure full business contributions.”
User payment potential recognizes that new media fits within a user’s media consumption patterns as an extra rather than a unique source, and measures the potential for incremental payments for new media activities through product functionality, substitutability, and exclusiveness. Forrester built a three-tier scorecard to determine user payment potential. Payment pushers are new media projects that can drive incremental user payments. Relationship reapers are new media projects that deepen and extend user relationships while producing ad revenues and low levels of incremental payments. Brand builders are new media projects that focus on ad revenues and brand-awareness-related returns only.
“Synchronizing cross-media activities will deliver significant incremental benefits for content providers,” Ulph added. “Content providers must adopt a consumer-centric content view, and they must tailor business goals to their new media strategies, recognizing the different benefits of each strategy. Also, providers need new metrics to measure the variety of end goals for each strategy, and these metrics must make clear the full business rationale for new media activities and the impact on company-level financial results.
“Most content providers will be relationship reapers or brand builders in new media. Television stations and local newspapers have the biggest opportunities to drive user payments, while radio must reconcile itself to alternative revenue streams. Content providers must adopt a consumer-centric content view, with only content directed at audiences displaced from other media sources likely to raise user revenues. They must tailor business goals to their new media strategies, recognizing the different benefits of brand builders, relationship reapers, and payment pushers.”
For the report “Making Content Pay,” Forrester surveyed 32 UK online content providers — both cross-media firms and pure plays.