The Business Model For Surviving The Media Apocalypse

If you work in the media industry, you’re probably aware of a seemingly paradoxical situation the business currently faces: A record number of dollars are flowing into digital advertising and yet publishers, particularly news publications, are struggling to survive. Music is not doing much better. Even pure video plays from traditional broadcasters and multichannel video programming distributors (MVPDs) are suffering, as the TV ad revenue they had a steady lock on increasingly flows to Google and Facebook — 89% of the “growth” in digital ad dollars in 2016 went to the “duopoly”. Meanwhile, ad-free subscription services are soaring. Roughly 200 years after Benjamin Day introduced ad revenue to the New York Sun, so that he could drop its price to $0.01 and grow circulation, we’re seeing business models come full circle: fewer ads, if any, and higher prices.

If you’re looking for something to blame, blame legacy systems and our inability to shake them off. Access to content in digital has long been subsidized by revenue from other sources. Newspapers have print subscription and print ad dollars, music has listeners who purchase physical formats, and television has carriage fees and linear TV ad revenue. All of those revenue streams still exist but they’re dwindling daily, and becoming insufficient to support the kind of costs required to produce and distribute premium content. Some digital-first publishers that have never had these revenue streams are actually faring better, having grown up lighter, leaner, and without any of the sunk costs that older publishers carry. Even then they can’t escape this trend, as evidenced by a recent litany of announcements about layoffs and missed revenue targets.

Historically, our idea of how to monetize content has been an either-or: charge a subscription, or support with ads. What if this didn’t have to be the case — and what if pursuing a hybrid model would put us on the path to solving the crisis in media?

It’s no secret that the gulf between subscription- and ad-supported media is growing wider, and that’s creating a landscape that’s far from ideal. On one hand, access to high-quality content is narrowed and divided between a few premium sources available for those with the ability to pay. On the other, there’s an endless scrolling feed of cheap content designed to go viral while still generating enough ad revenue to be profitable. (Of course, there are other folks to blame beyond Google and Facebook, such as the drive towards short term returns by private equity investors in news media.) Consumers, publishers, and advertisers all suffer in this world. (Not to mention that it’s also basically the plot of Idiocracy, which sadly looks more like a documentary with every passing year.)

This isn’t just an inconvenience. The balkanization of content and audience has real consequences; among them, the much-talked-about “fake news” phenomenon, as discussed by BuzzFeed CEOJonah Peretti at a recent conference:

“[You also don’t want] this small group of elites getting better and better journalism with subscription-based business models, and this wasteland where someone like Trump can say things that are completely false but say them in a way that causes them to spread.”

— Jonah Peretti

In order to avoid a world where buildings are tied together to keep them standing (the future projected in Idiocracy) we need a revenue model that content creators can rely on — one capable of supporting content that appeals to more than a high-dollar niche audience. Maybe the solution lies in the fact that, in a digital-first economy, advertising support and paid subscriptions can exist in tandem. The future of paid content could lie in new hybrid models.

The good news (pun intended) is that this doesn’t require a huge leap in technological innovation. It’s actually pretty simple. Consumers are in full control of every other aspect of their media experiences from one moment to the next, whether they binge-watch a whole TV series in an afternoon with their Roku device or watch it in 15-minute clips on their iPhone while commuting. In an on-demand world where users are calling the shots in terms of what content they read, when they’ll read it, and what device they read it on why not also give users a flexible form of control over how they pay for it?

Publishers already make a decision whether to offer ad-supported, subscription-supported, or a combination of both models (Hulu, for example, offers both ad-supported and ad-free options) for revenue. Therefore, the basic infrastructure already exists. What is holding back progress is the fact that publishers who give consumers a variety of plans for paying (or not paying) effectively make consumers pick one track and stick with it. But sometimes you’ll put up with ads and sometimes you won’t. The next step is to extend this level of user control to how their content is monetized, through a true hybrid of ad support and subscription.

Here’s how that could work:

1. Publishers set a flat price for a piece of content; let’s say $0.25 for an article of a particular length.
2. Upon accessing a piece of content, users are presented with a choice: pick any combination of ads and direct payment that equals the publisher’s price. This would be a sliding scale with zero ads on one side, $0 cost to the user on the other, and numerous combinations between the two, based on standard IAB ad types and available ads and bids for that user.

Let’s illustrate that further through a typical user’s journey.

A user opens an article and is notified that their desired piece of content costs $0.25. Ad exchanges have already been called and returned inventory. Based on that, the user is presented with the opportunity to choose a combination of short video ads and payment. The user may decide, for example, that they’re willing to pay $0.10 and watch four 30-second video ads, after which they’re able to read the article. Now there are some issues with this at first glance, most notably that the UX sounds a bit clunky in writing, but in practice this would run like a well-designed paywall with additional choices on the page.

What if one of the options involves a user sitting through 13 back-to-back six-second ads? Well, that’s an experience that happens in practice already thanks to our industry’s comfort in overloading consumers with ads. The real functionality of a user payment choice system is that it lays bare the quality and value of each user’s attention, so that it can be used as a transactional currency. It tells you, in effect, exactly how much your attention is worth, and how efficiently the ads that can be exchanged for it are priced. Historically, the owners of the currency being traded — the users, and their attention — have never had a say in the price of it. With this model they can.

This model adds checks and balances to a system that lacks them, improving the experience for all by encouraging proper behavior. Presented upfront with a poor, and clearly overwhelming, ad experience that demonstrates how little brands will spend for attention and what publishers will accept, most users will choose to buy their attention back. In so doing, they will create scarcity and force brands to value attention appropriately instead of just chasing cheap views. Those that really want to impact the consumer will have to improve their quality, as well as increase their bids to the point where their offering is compelling enough to be selected by the user voluntarily. And this leads to a better experience for both by reducing overall ad load.

We talk about “fewer, better” ads all the time but it’s the users who have the power to really drive that change — we just have to give them the tools first.