Consumers want content. They love it and can’t get enough of it, but are they willing to pay for it? This is exactly what web video producers and distributors are asking as they search for the right business model to monetize online video and develop a sustainable consumer offering.
Today, the primary consumption model for non-user generated video is cable, satellite and streaming networks. Each of these distribution channels for the most part charge a monthly fee for unlimited consumption of content from their networks. Consumers can opt in and pay additional subscription fees for premium and on-demand content and many consumers are compelled to purchase these offerings. These services differ in cost, but each represents consumers paying for the right to consume content.
The laws of supply and demand simply state that consumers will purchase more of something at a lower price and producers will make more available for sale at a higher price. At the intersection of these two curves the market is at equilibrium and the market price is set – enough consumers are willing to purchase the amount of goods and services producers are willing to create and sell. Applying these principles to web video, I believe that consumers are willing to pay for online content, but many consumers are willing to pay for it at a far less price than producers and distributors are willing to sell content.
Taking this one step further – the market for online content is out of balance and either the price has to be lowered, or the quantity of content has to be reduced in order to reach market equilibrium. Many producers and distributors would argue that the price is already too low and that with the large quantity of free user generated content available on the web – they cannot compete at current market demand. The primary belief is that awareness is the issue and that driving more consumers to the web to consume high quality content will provide critical mass to allow online video to operate as low-cost, high-volume industry.
Driving awareness will bring more consumers to the web to consume video, but awareness alone isn’t going to build a business and allow producers and distributors to monetize content. Scarcity and exclusivity of content will have to be created in order to drive up the price consumers are willing to spend to consume web video. Creating this market condition will entice consumers to move the dollars they are spending with traditional media to new forms of content and specifically web video. Consumers are spending money on content, so online video producers and distributors should focus on encouraging a reallocation of existing consumer spend vs. trying to increase overall consumer spend.
Web video producers and distributors can create exclusivity and scarcity by distributing content on new platforms that take advantage of faster networks, new devices and attract early adopters. This goes against conventional wisdom of getting content in front of as many people as possible to increase views and attract advertisers. Instead, I advocate going after target markets and building a strong community through innovative and contextual high quality content, distribution and engagement opportunities. Early adopters will be much more likely to move their current spend away from traditional media and will pave the way for producers and distributors to grow their market share and business.
For example, content can be targeted to specific devices such as tablets and be optimized for that user experience. The content and interaction model would be developed to leverage how consumers use the tablet, the viewing experience and other features of the device. The content would be marketed to users of the tablet, who are most likely early adopters in general and would have a higher likelihood of adopting this new targeted form of content. The content would be priced higher in the same fashion that new devices are priced higher when they are first introduced to the market and help producers and distributors recoup their initial investment.
Consumers are already paying for content and they will spend money on web video. Existing traditional models still operate in a relatively one-size-fits all paradigm, so online video producers and distributors have an opportunity to create high quality content for niche and targeted consumers that will encourage consumers to redistribute their content spend away from traditional and to new media sources. To do this, producers and distributors need to utilize new technology to provide innovative forms of content, distribution and engagement. This approach will create an environment of exclusivity and scarcity were consumers are more likely to pay a higher price to consume content. Web video can then operate as a low volume, high price industry that provides enough revenue for producers and distributors to flourish and grow their offerings for mainstream consumers in the future.