A Different, Better, Business Model for On-line Content Providers
The Content Providers’ Crucial Mistake Is That They’ve Picked The WRONG Time Frame. They’re Selling Content PER MONTH Instead Of PER SECOND
By David Grace (Amazon Page — David Grace Website)
A Good Business Model Works WITH, Not AGAINST Human Nature
Three Rules Of Human Nature:
1) Buying More Than You Think You Can Use Is Contrary To Human Nature
First, people hate buying more of something than they think they can use, so they will resist doing that.
Even if the cost per fluid ounce for your shampoo is low, few people will be willing to buy shampoo in a five gallon container. A business model based on selling shampoo in five gallon containers is contrary to human nature and will have a very limited demographic.
2) Buying Something When You Can’t Tell If The Price Is A Good Deal Or A Bad One Is Contrary To Human Nature
Second, people hate buying something when they can’t determine if the price is a good deal or a bad one.
Without researching how much shampoo your family uses in a year times what a regular bottle of shampoo costs, most people won’t be willing to pay a flat fee of $100 to get a year’s supply of shampoo because they won’t know if that price is a good deal or a bad one.
That kind of business model runs contrary to human nature and it will have a very limited demographic.
3) Limiting How Much You Will Spend On One Product Category Is Human Nature
Third, people hate buying too many units of the same thing from several different vendors.
If local families are already shopping at three different drug stores and four different grocery stores, a new, fifth, grocery store in the same neighborhood is likely to have very limited success.
Applying These Rules of Human Nature to the Sale of On-line Content
1) Is Your Product More Content Than A Consumer Needs?
First, it’s difficult for most potential customers to determine if they’re buying more monthly content (reading/listening/watching) from you than they can use.
Put differently, they’re asking themselves if, each month, will they read/listen/watch your content often enough and long enough to justify the up-front cost? Are you asking them buy a gallon of content when they only need a pint?
The consumer will resolve any uncertainty by answering “No.”
2) Is The Price Of Your Content A Good Deal?
A Monthly Subscription Is Like An All-You-Can-Eat Buffet
Selling a monthly subscription to your content is like a new restaurant offering an all-you-can-eat buffet. Whether that buffet at that price is a good deal or a bad one is mostly dependent on the type, variety, and quality of the food offered.
If the potential customer isn’t convinced IN ADVANCE that the type, variety and quality of the food your buffet will provide is worth the price you’re asking, they’re not going to see it as a good deal.
It’s difficult for most potential customers to determine if the purchase price of an “all you can use” month of your content is a good deal.
It’s not a question of how much time they might want to spend reading/watching/listening to content, but rather how much of your content they’re sure will be worth their time and money.
Will they like enough of the books/articles/music/movies you’re offering in order to make your monthly subscription price appear to be a good deal for them?
Any uncertainty will be resolved by the potential customer answering “No.”
3) Are There Too Many Other Producers Trying To Sell “All-you-can- consume” Monthly Content To Your Potential Customers?
Each consumer has to ask, “Am I going to buy a monthly subscription to Netflix and Prime and Disney+ and HBOMax and Spotify and Pandora and Business Insider and the New York Times and The Atlantic and Hulu and Medium and, and, and . . . . ?”
For the consumer it’s poverty by a thousand cuts. There will be a few winners and the rest will be losers.
There are too many sellers chasing the same monthly dollars, so each new $5 monthly subscription becomes harder and harder to sell AND TO RETAIN.
The Problem Is The Pre-Paid Monthly Charge To The Consumer
The problem isn’t so much that sellers have adopted a fee business model instead of an ad-supported business model. The problem is that content providers have adopted a fee PER MONTH business model instead of a fee PER SECOND business model.
You can think of a fee-per-second business model as a pay-as-you-go business model, a piecework business model, or a micro-charge business model.
Essentially, it’s a business model where the consumer pays based on the amount of your content they actually choose to consume instead of how much of your content they are theoretically allowed to consume.
An Example Using Medium
Paying For A Month’s Content Versus A Second’s Content
If I subscribe to Medium, I pay a fee of $5 for all the content I could theoretically read in one month.
But what if I paid Medium $.0003 for only the content that I actually read in one second?
Some Example Numbers
A five minute read would cost me 300 seconds X $.0003 = $.09 — nine cents. I’m not going to have a problem spending nine cents.
- First human nature problem solved, because when I pay by the second I’m never buying more than I can use.
- Second human nature problem solved, because when I pay by the second there’s no uncertainty if the content I’m buying is a good deal or a bad deal.
- Third human nature problem solved, because without an up-front cost, there’s no barrier to my patronizing Medium for content that I choose to purchase in addition to all of my other media providers.
How Would This Work?
New Medium subscribers would pay an initial deposit of $1 and would be required to keep a positive balance of no more than $1 in their account.
So, if the reader’s balance that started at $1 went negative, then an additional dollar would be charged against their account.
For example, if my reading time reduced my initial $1 credit to a negative 17 cents then a dollar would be charged to my credit card and my account would then have an 83 cents credit balance.
If I read three articles per day, let’s say that’s 15 minutes/day, and I did that for 15 days that month, that would be 15 minutes X 15 days =3.75 hours (13,500 seconds) X $.0003 = $4.05 which would be charged to my credit card.
But let’s say that I’m a heavy reader and I read double that amount for $8.10.
To put the reader’s mind at ease, Medium would set a cap of $8.00/month no matter how many seconds the user spent reading. So, my minimum monthly cost to sign up with Medium would be $0 and my maximum cost in any month would be $8.
When I quit, any credit balance would be refunded to my credit card.
Switching To A Monthly Or A Yearly Plan
Of course, users could switch their time frame from a $.0003 per-second plan to a $5 per month plan or a $50 per year plan.
A casual reader who might never be willing to subscribe at the rate of $5/month might be very willing to read Medium articles for a charge of $.0003/second for the content they actually chose to consume. If the per-second user found their usage often exceeded $5/month they could switch to a $5/month plan.
Would Users’ Switching Cost Medium Money?
“But,” you ask, “won’t this cause Medium to lose money because the $5/month people who don’t read a lot will switch to the per-second plan and pay less?”
Some might, but on the other end there are huge numbers of people who right now pay nothing, but who would be very willing to pay a dollar or two a month to read only those articles that appeal to them.
On top of that, many of those new customers would be surprised to learn that they were reading a lot more than they expected and they would eventually switch from a per-second plan to a per month plan.
In fact, more people might switch from a $.0003/second plan to a $5/month plan than would switch from a $5/month plan to a $.0003/second plan.
Other Content Providers
I doubt that Disney+ is worried about gaining and holding enough monthly subscribers to make their numbers, but what about HBOMax, Discovery+, Paramount+ and Peacock? They might do much better by offering a per-second fee structure as an alternative option to their per-month fee structure.
I know that I might well sign up for all of them if the only costs were for the specific items that I chose to watch.
At the very least, Medium should definitely offer a per-second payment alternative. I would sign up for that in a flash.
— David Grace (Amazon Page — David Grace Website)
