Steve Jobs Is Wrong: The iTunes Model Won’t Help Media

81 Comments

In his interview with Walt Mossberg and Kara Swisher at the D8 conference (transcribed by All Things Digital and Engadget), Steve Jobs raised the hopes of media executives everywhere — including, no doubt, News Corp. (s nws) CEO Rupert Murdoch, who made some opening remarks before the Apple (s aapl) founder took the stage — by saying he believes people will pay for other forms of media, just as they have been paying for movies and music. This is the closest Jobs has come to endorsing the “iTunes for news” model that many newspaper and magazine publishers have dreamed about. The Apple CEO said:

I think people are willing to pay for content. I believe it for music and video, and I believe it for the media.

And how would this work? Jobs described it this way:

I can tell you as one of the largest sellers of content on the internet to date — price it aggressively and go for volume. That has worked for us. I’m trying to get the press to do the same thing. They need to do it differently than they do it for print.

The vision of an iTunes that served up paid-for newspaper and magazine content to millions of adoring readers has captivated the traditional media for some time. One of the most eloquent pleas for such a model came from New York Times media writer David Carr last year, in a column entitled “Will Someone Please Invent iTunes For News?” Carr described Apple’s success in selling music, and then said he hoped that someone like Jobs would come along and convince “the millions of interested readers who get their news every day free on newspapers sites that it’s time to pay up.”

It seems like a slam-dunk idea in so many ways: If record labels can cut a deal with Steve Jobs that sees music sold through iTunes instead of being downloaded for free, then why couldn’t newspapers and magazines do the same thing with their content? Bundle it up, cut a deal with Apple to create an iTunes for news and watch the cash roll in.

But this vision has two fundamental flaws — one psychological and one economic. The psychological flaw is that news stories and other forms of content that appear in newspapers and magazines (with very few exceptions) are not the same as music or even movies or books, in the sense that users want to keep them forever and read or watch them repeatedly, as media gurus Clay Shirky and Jeff Jarvis have also pointed out. In addition, all of that content is currently available in a completely legal way for nothing, from the websites of the content creators themselves, whereas music and movies are not.

Both of these factors suggest that the price for news would have to be orders of magnitude lower than it is for music — pennies, or even fractions of pennies, instead of dollars. Is that really a viable model for these media entities?

The economic flaw, meanwhile, is that cutting this kind of deal would involve handing over control of a significant part of your newspaper or magazine’s destiny to Steve Jobs. Is that really a bargain that media outlets want to strike? It’s true that Apple has sold billions of songs through iTunes since the store launched, and that has done great things for one company: Apple. Record labels and movie studios, for the most part, haven’t seen truckloads of money come their way from the arrangement. If anything, iTunes pricing has put downward pressure on the prices they charge for CDs and DVDs.

The bottom line is that an iTunes for news might be in Steve Jobs’ best interests — primarily because it might help to sell iPads — but it’s not clear that it would be in media outlets’ best interests, as attractive as it seems. Nor is it obvious that it would even work, if it ever actually came to pass. More than anything, it feels like an industry grasping at any straw it can, in the hope of building a life raft.

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Post and thumbnail photos courtesy of All Things Digital

81 Comments

bob

The topics in question cause thousands of very qualified people to loose sleep every night, I assure you.

The traditional journalist has been both liberated and made redundent by HTML and the TCP/IP protocol. Humans, for the first time in history, can now share ideas and information to everybody without censorship by a governing body, instantly.

When Tim Berner-Lee pressed the proverbial ‘on-button’ for the first time, Rupert Murdoch no doubt felt a cold shiver run through his spine. Jobs knows what he felt, and is now going to make a lot of money from it regardless of wheather or not he helps Murdoch.

@LandGero makes a very good point that “anyone these days can be a news reporter”, Internet users know this. I don’t trust the opinion of a traditional ‘journalist’ sitting in a big news corporation anymore than a blogger with 10,000+ readers. I believe that this may be the feeling of the current Internet generation, and that it is not goint to change, why should it? That consumers are closer to the blogger and may even trust them more. Who would you trust more, a journalist with Murdoch as his/her boss, or a simple blogger with Google adds as revenue? I believe that this is one reason why consumers really question the subscription model. If I want an opinion, I won’t feel like going to a news corporation.

@Rocky Agrawal makes another good point here that “you can’t copyright facts”. The old ‘newspaper/magazine’ model has died. For example, the recent ‘next generation iPhone leak (leak/loss/sale/recovery/bar/DA) story’ firstly got to me through, let me think, a friend’s Facebook status update I think. Such a fact would have been worth a lot of money to a specific news source, be it a news paper, under the traditional print media model; such a head line might have sold many copies of papers. Now, I believe, news stories are not worth the same; Internet users don’t need to rely on a single news source in order to investigate a story, he or she can research a story through multiple sources, the source has become the Internet.

Finally, @Marc points out that news pieces are not like music and movies that “take considerable amount of time to put together”. I feel that consumers do not really consider a news piece to be a self containing entity like other forms of digital media.

The author of this blog points at the psychology of news media consumers; I believe that a better understanding of the consumer has to be made in order for news content provides to survive.

Tom

Seems you’re mixing “media” with “news” which is a subset. Jobs’ view fits ok with the greater media type, maybe less so with news.

But then look at the Guardian app – people are buying an app for that, to get their news that way. The news media can add the extra features (Instapaper link ups, accounts to link up and store liked articles, share articles with other users etc).

I think Jobs is more about App Store for news, than iTunes. But having a lot for free on the web – guess a lot will feel annoyed that what is or was free is now being pulled away – and wonder if there’s a decent justification as to why.

Marc

Also, music and movies are individual pieces of art that the artists spend months and even years creating. The good ones are pretty unique and take considerable amount of time to put together. They are a self-contained piece of art.

News isn’t that at all. When something important happens, there are hundreds of different articles that all essentially transmit the same key points about that something. Journalists, except for investigative ones, can’t spend months on an article/news piece. Their time frame for production ranges from a couple days to as little as minutes.

In order for somebody to want to pay for something, it has to be unique and valuable. Most news isn’t unique or very valuable. So most people won’t pay for most news.

Lito Lupena

apple via itunes does have a rent model where, after downloading you have 30 days to consume the media (currently only for movies and tv shows) and once you start it you have 48 hours to ‘consume’ it, after which it is automatically deleted from your hard disk. also, with podcasts, you have subscription. these two together just might make it work for newspapers – subscribe, read, delete – maybe even a save option for articles you DO want to keep. so i think jobs is on to something. oh – i did ignore the p/l angle. the business guys will take care of that. as a consumer, i think iTunes will have a way of addressing my need.

korey Sed

Personally i bought the iPad partially to be able to read my magazine subscriptions on it. My fault for not doing good research, but I am not willing to pay news stand prices for an electronic copy.

I think part of the problem is that most of these publishers now feel they have to add interactivity to the electronic copy to make it attractive and that costs time and money.

It cannot cost more to distribute the same print copy electronically. I don’t want fancy stuff. For my money just give me. PDF I can read on the iPad and I still get to see all the ads etc. As the print version. Just make it cost the same as it’s paper equivalent subscription. Having it look like the books in Ibooks is a bonus.

I think this needs to be a tierd service. They already go through all tohe trouble to make the print version. So just distribute that as the basic subscription and if there is demand then build the interactive stuff. They have to get the buy in first, cuz like it or not paper is gonna go away eventually.

Rocky Agrawal

A fundamental problem for the news industry in trying to charge for content is that you can’t copyright facts. As a result, they are in a worse position than the music and movie industries.

The value of a song or a movie is in the expression of the movie. Expression is subject to copyright.

The value in a news story (more often than not) is in the facts of the story, not the specifics of how it is written. Anyone can legally take that information and re-write it with different words. This happens all of the time — and it’s not just bloggers. MSM take stories from bloggers too. See Danny Sullivan’s piece on this: daggle.com/mainstream-media-stole-news-story-credit-1906

sleepdawg

Related content from GigaOM Pro (sub required).

Har har. You were saying?

Sean OBrien

The extremism implied here is unwarranted. To claim that nobody will make money off of an iTunes model is absurd. And it is as absurd to claim that everybody will make money and iTunes will be savior of print media.

Let’s be reasonable here, somebody will make some money by charging for content. Some won’t and many of those will go bankrupt. If I save 75% off of my newspaper subscription I’ll probably buy it on the web. If I save nothing (or have to pay more) I won’t.

Mike Snow

News organizations are making the same mistake music publishers made. They are trying to preserve a pricing model that was made possible by the physical packaging and media model, in the electronic packaging and media model. By bulking up a large physical package filled with some things you wanted (sports page!) and a lot of stuff you didn’t (ad’s, society columns,etc.), they charged you a higher fee. Now that consumers can select only the things they are interested in, they don’t want to pay for all the stuff they don’t want.
So get the industry restructured, eliminate the admin & overhead, set the pricing very low, partner with Google to target ad’s so you get premium ad rates, and create the future.

Doug Petrosky

I think there is a big flaw in your thinking. News is not currently Free on web sites. News on websites is paid for by ad’s and there is no reason that the same couldn’t be true in any solution offered by iTunes via iAd. Also, many magazines hold back “premium” content or delay access on their website and again there is no reason to believe this will not also be possible. Finally, having archive access to news can be very valuable so your estimated costs are probably very low.

Finally the whole value equation is totally different. It costs a lot more to distribute a printed mag or newspaper than it does to transmit a file. So, if a discounted subscription to your local paper is $10/month most of that money goes to printing and delivering that paper and the money is made on everything else that is added into the paper (ad’s and coupons). So a $1 monthly fee would probably be an increase in distribution revenue and might encourage more people to subscribe (which is more eyes, and more dollars for ad’s etc.)

Oh ya! And that whole putting pressure on DVD and CD prices is BS! That has to do with decades old deals that give more money to one group for one type of media than for other types. The music and video industries just need to reboot royalties so that we can start distributing content better and cheaper. Trying to protect DVD sales today is like trying to protect VHS sales 5 years ago! It is bad business.

Mathew Ingram

Doug, you are quite right that the cost structure is different for online — but media outlets can’t simply dismantle their existing businesses and make do with online-only revenue. Like the record companies and movie studios, they have to continue to run their existing businesses as well somehow, and iTunes-level revenue is not going to help much.

Doug Petrosky

I’m not saying it will not hurt but evolve or die is not my law….

And I’m suggesting they shift existing business (and try to grow in the process). Will this speed up the death of print (because economies of scale will disapear)? Sure but what is the option.

Holding on to a shrinking business model is death for an industry.

Ralf Schremper

Good point Doug! Indeed the whole cost structure has to be taken into account here.

I think though that your comment regarding the music and video industry is a little too simplified. These industries just cannot simply “reboot” the royalties unilaterally. There is a whole ecosystem of agents, artists, industry organizations that would need to do this jointly. And a joint effort is not likely as not all of the individual parties necessarily benefit from this.

Doug Petrosky

I understand that it is a more complex problem than I can even fathom and one that may not be able to be solved, I was simply pointing out that it is that broken system trying to hold on to a dying technology that causes stupid prices not iTunes.

Ralf Schremper

I like to add that music and video companies just cannot simply “reboot” their royalty schemes. There is a whole ecosystem of artists, agents, industry organizations, collection societies etc. involved in this.

LandGero

Mathew, you’re right, Steve Jobs is wrong.

Look at what happened to AOL when they built a “fence” over content a decade or so ago. Though content is still king on the internet, news is not something one can avail only from iTunes.

With the so many networking sites providing free storage, and the accesibility of so many people to digital cameras and instant upload, news is more than writtens texts from the likes of New York Times. One person can either shoot an actual event/news as it happen and upload it to his/her YouTube account or text small news to his/her Twitter or Facebook account. And someone who happen to read about it can do the same and/or link or add it to his/her Digg and other sites that does the same.

One doesn’t need to pay anything for content when anyone these days can be a news reporter.

Benoit Felten

I fully agree. I would add that, for all his posturing that ‘his motives are pure’ (didn’t that use to be Google’s shtick?), Jobs has been adept at screwing over not just the content industry, but the telcos as well.

I do feel the news guys desperate enough to sign withe devil though…

FreeRange

Go back to your nap. Your BS rant is making you look very confused, or at least mentally deficient. Apple threw the music industry a life line. How is that screwing them? And just how have they screwed the telcos when they have created huge opportunities for telcos in selling more expensive, and more profitable, data plans? It is such stupidity that litters the internet like a field of trailer trash.

Will White

Maybe I’m just an old-fart (41), but I’d pay for subscriptions on an iPad, and I’d pay nearly as much (or more) as existing discount subscription rates … call it $1 an issue.

One thing I hate about the web news sites is there is no finished product. Its always changing, so it’s never really well put together, but instead, a hodge-podge of jammed together stories that are changing all the time. It’s distracting frankly.

The thing I don’t like about the wired model is having a separate app for every magazine I want to read.

When you look at it from iTunes, with the ability to buy back issues like podcasts, think of the options!

The thing that has continued to be difficult for music / movie studios and would also be difficult for print houses, is that you just don’t need the same budget and man-power for releasing a digital product, but releasing on iTunes, or any other digital market, makes your marginal cost for each hard copy higher which pushes existing hard-copy purchasers out of the market.

This is really just a great opportunity for smaller on-line only publishers and existing publishers that can find a way to use these facts to their advantage. One common model would be to create incentives for on-line and print readers to move to the magazine, like gigaom does with subscriber only content.

Mathew Ingram

Thanks for the comment, Will. You are quite right that there is a sense of completion when you finish a printed newspaper or magazine — a feeling that you know everything you need to know. Even if it is an illusion, it’s very comforting :-)

duskrider

And on that note, e versions of articles could automatically thread to follow up articles, giving you a huge tech advantage over paper.

Imagine reading an article, tagging it for follow-ups and being able to easily follow a story as it unfolds, over time.

This is just one tiny sample of value-ad that they can bring to the table that I would pay for. Save me time, enhance my experience, I’ll give you money.

Brian S Hall

Information wants to be monetized.
No one has done more to make this true that Apple or Google. The harsh reality is that platforms for content creation, access and distribution are fundamentally reshaping the existing industries. If I were in the music or film or newspaper business, I’d much rather work with Jobs/Apple, who have long shown a willingness to work with high quality content providers, then with, say, Google, which is incentivized to grind all content pricing down to zero.

Franz

I don’t know why you’re comparing Apple to Google. because as of today, Google is not in the business of selling media content online (sending out urls is not selling content, those websites are free in the first place), although they will have a online bookstore soon. And there’s no indication the content will be second-rate or publishers will a get a raw deal. As pointed out in the article, iTunes isn’t making tons of money for record companies and it actually pushes down prices of CDs. Also, as a result of iTunes, no one buys albums anymore.

Erik Schwartz

Of course the real problem with the ITMS model is that ITMS is a loss leader. It’s great if you also have another line of business that runs at 50% gross margin (like iPods for instance) but unless you have some other complementary business you’re in big trouble.

Jack C

That ship sailed several years ago; just another example of a complacent industry.

The music and film industry faces neither the scale nor the quality of competition that news media outlets do currently.

Shirky has written eloquently on this issue several times, both specifically on problems with the iTunes solution (cited above) and also on plausible models of modern journalism (http://www.shirky.com/weblog/2009/10/rescuing-the-reporters/).

DD

One word: iAds.

See, newspapers have forgotten what business they are in. They think they are in the news business but really, they are in the advertising business. News is the commoditized stuff that fills the empty space around the ads. Online though, their advertising lunch has been wallowed, whole hog, by the Google monster while the classifieds have been undercut by Craigslist etc.

So here comes Apple. Those clever folks have realized that with mobile devices, the cheap, downloadable App is being used more and more to find information. This is very differnt from the PC where information is obtained almost completely through the Google filter. Thus iAds. It really does give Appmakers (especially news orgs) the opportunity to rake in some Google-free cash. It’s an outstanding business model and avoids the whole subscription issue. Everybody wins (except Google of course).

DD

crcb

Exactly. Newspapers and news magazines have never survived by selling content, but by selling access to their readers to advertisers. The newsstand/subscription sales were always a tiny part of the revenue stream, not nearly enough to cover production costs.

The problem isn’t that these entities now want to charge for news. The problem is that they now want to become content-selling businesses rather than ad-selling businesses. If they want to change their business model, fine, but they shouldn’t expect the transition to be painless, or the results to be guaranteed.

Glenn

Yup – that sums it up perfectly… Something Murdoch needs to listen to!

They sell advertising not content, always have always will. This is about moving with the times not trying to prevent it.

Quote James “not so bright” Murdoch said, “profit drives news” absolutely rubbish, profit drives content that sells, not news. News has to remainn impartial and not driven by purely by profits otherwise all we would ever hear about first is the next celebrity make up disaster not valuable news content.

AK

Matt, regarding your 2 flaws, I see it the other way around. I mean handling the control of your destiny to one person is more a phylosophical issue than an economic one to me. Also, the fact that Steve want us to pay for something that, according to you, “is currently available in a completely legal way for nothing” looks more economic to me. Now sbout the free & legal content available. I completely disagree with you. I would pay for content for the iPad. Why? Quality! Seriously, blogs are fun but monre than 90% of them are crap. And even when you find great articles there, the reading experience is different because they’ve been written for the web. They are not made to be deep. Even newspaper websites shorten their articles online. It will be different with the iPad, not to mention the perfect integration with graphics and videos. People are already paying for apps. So the press and the medias should just make the iPad version of their content more “appable”…

AK

Yeah but let’s not get caught in a philosophical debate ;-) That said, don’t you think iAd would be a way to help the media make more money?

Santiago

Another thing working against them would be the stream of information already available online. One could argue newspapers and magazine are virtually obsolete. I constantly find out more information, and information tailored to me via various social networks and forums, blogs, google, etc.. As information becomes easier to transmit, and receive, and available to everyone everywhere, it will become more difficult for the media groups to charge for it.

Chris K

Content isn’t free though. Newspapers are losing money hand over fist.

They have to charge for it or go extinct.

Jobs is right. They need to charge a lower price though. Certainly lower than the print content.

Doesn’t mean you have to buy per article either like iTunes. IT just means your price should be low.

YOu should be getting people used to the idea of paying.

damianduchamps

Content is free. That’s a fact. You can get it anywhere. Newspapers can’t sell news any longer. What they can sell is curated content and opinion pieces (editorials, columns, op-eds, …).

Marc

Good content isn’t free. Having knowledge is free and the cost of transmitting knowledge is near free. But attaining knowledge and communicating it in a way that attracts consumers is far from free.

There’s very few opinions I would ever pay for. There’s an over-abundance of opinions, everyone has them, and most of them are just echoes of other people’s opinions.

“Curated content”…that’s an interesting (and probably Steve-Jobs-influenced term). Isn’t “curated content” really just what we used to call good reporting? A great reporter investigates and learns all the facts (content) and then creates a consumable news piece that effectively communicates that content (curated).

Rich

@ Kevin C. Tofel: I don’t consider paying $2.00 for a copy of The Washington Post or several dollars for a copy of Newsweek “free.”

Kevin C. Tofel

Rich, neither do I, but those are examples of where the media isn’t free and outlets that are already charging. There are numerous other examples of newspaper websites that are free and have been free — those are the ones that will struggle to reverse the model.

And in the case of Newsweek – there’s plenty of free content on their site, so I personally have no plans to start paying for the paper copy of Newsweek. Not suggesting that you should do the same, of course, just responding to explain what I meant. ;)

sfmitch

The iTunes model could absolutely HELP media.

If the question was can the iTunes model SAVE media then that’s a whole other can of worms.

Rich

“It feels like an industry grasping at any straw it can, in the hope of building a life raft.” So you’re offering no future for newspapers and magazines? That can’t be right. People will always consume news and magazines’ content. All that needs to happen is for someone to figure out a way to sell them in the modern era, and someone will.

Marc

The problem is people holding on for dear life to this concept of newspapers or magazines. Newspapers & magazines will die just like records, tapes and CD’s have.

Information gathering and distribution will always exist. Those that do it really well will be able to make a living off of it.

The reason many media organizations are dying today though is because they don’t do it well anymore. Their content is not very efficient or informative and its not something that people would be willing to pay for.

Alex

You’re talking about two different things.

Newspapers & Magazines vs Stories.

People will always want more stories. What will change is how the people get the stories. In the new world order, journalists will sell their stories directly to a distribution house, readers will buy from the distribution house. Journalists who suck will not sell.

I am curious about the future of shock jocks (Paul Thurrot & the ilk). Will people keep paying for that kind of nonsense? looks at the news stand with National Enquirier being sold out every day… guess that answers my question.

Vinayak

Agree with the analysis that it’s going to take a few pennies from a lot of consumers to make this viable, which itself might make this a non-starter. Also, paying for news seems like a bad idea…….how many news portals today can claim to be making a profit by charging readers? Unless the content involves some valuble analysis (like the editorials from the NYT, for example), charging the reader is not going to work. It has to involve some sort of advertising supported model. Maybe the iAd with the iPad might make it work, but then, would it need an iTunes?

Kevin C. Tofel

One problem that traditional print media faces is one that the music industry never did – the content became free. Going back to charge for something that was once free is a tough road to hoe for newspapers. Had music companies offered free music in the past, I don’t think they would be successful in today’s $0.99 a song market.

jediker

Has it been so long since the days of napster and knutella and other file sharing sites? MP3 were flying off and everyone was downloading them, the RIAA had to suit their own customers to stop the flow! The music industry had the same problem, but I get that news does not equal music.
Does this mean that news will be distributed through iTunes, no, but certainly the App store is providing a viable alternative.
I think if there is an editorial and fact checking process put in place people will know what they’re getting; not what we have in the blogsphere random posts or rants that has not been fully vetted. I applaud Wired for experimenting with a new model and so far it proves that some people can recognize quality and are willing to pay for their content. This is not rocket science.

ftm

Guys, the newspapers are as different from music as chalk is from cheese. It is not just that music has a shelf life far longer than that of news. The music industry is self-financing. The media is ad financed. And that is the big difference. As long as news media continues to be fed by the ad gravy machine, why would the model of paid readership ever work? There will always be a media house that will undercut readership costs using an ad based model. So, it’s time the media guys are reminded to stop whining about how unfair the world is. They better figure out how to fix their gravy train, or take a bold step and get out of that dependency.

Duskrider

You’re right about media being fed by the ad gravy train being the issue. That has to stop. We are so sick of ads that we don’t even see them anymore.

On the other hand, give me top-notch content (quality), delivered to my device (simple access), automatically (easy) and maybe syndicate with other providers to give me variety (keep me interested) and I could easily see paying real money for that.

This is where the iTunes music model does compare well: I prefer to buy my music from iTunes because delivery is simple, they let me sample first and the ecosystem closes well with my devices being at the end of the chain. The cost of the music is in line with the experience. If the cost were $5 per song, spending some effort ripping CD’s, or finding music illegally would be worth it, but the iTunes model is higher value.

Newspapers have the opportunity through this model to reach audiences they never have in the past. They need to stop regionalizing themselves, understand a worldwide market and bring value to that table. They may need to rethink price as they would be better off making $5/mth from millions upon millions of users than where they are headed now, trying to get $25/mth from each user and still get ad revenue.

It’s just sad to see that they clung onto their old model for so long instead of leveraging their brand value worldwide that now many won’t make it that should have, based on content value.

Bill Day

subscription models won’t save print – even in the best of times revenue from circ sales made up less than 20% of total revenues

the music industry has always been a model driven by paid content – iTunes simply shifted the price (downward) and delivery model

looking to an iNews solution to save newspapers is like trying bail out the Titantic with a teacup…

Doug Petrosky

I think you discount the HUGE cost associated with distribution and how this shift should dramatically change things. The prime example of this is the newspaper. The price of the newspaper does not cover the materials and distribution costs. So adding subscribers actually costs money which is offset by ad dollars. In comparison the cost of CD distribution was only a fraction of the cost of the sale so going digital only saved a small amount of money.

Most magazines probably more than pay for the cost of printing and distribution but the per unit profit is a small fraction of monthly subscription costs, and most of the real money is made in ad’s.

So a digital magazine has a near zero per unit cost and as such can be sold to consumers dramatically cheaper which should dramatically increase distribution which will increase the amount made in ad’s.

jediker

It’s way too early to say how this is going to play out, and to assume that’s going to fail right from the get go is rather arrogant. Mobile computing and media appliances are just beginning to percolate into the consumer hands, I say let the market dictate what content is worth. There were 84,000 Wired apps downloads, and I think if users can see value they will pay for it. Some one has to invent a revenue model that’s going to work for the news industry and it remains to be seeing what this paradigm will be.

alexander

i am no expert in the P&L of movie and music companies, but i dont think the statement that they have not seen truckloads of money coming their way is on point. true, revenue from online music sales may be lower per unit, but so is the associated cost ie almost zero. compare that to production, inventorisation, and distribution of CDs, which is no doubt a very significant cost.

Mathew Ingram

Alexander, most of the costs associated with the music industry remain the same regardless of whether that music is sold online or offline, with the exception of the production and distribution of the actual discs. All of the marketing and other music-production costs are the same.

Scott

I’ve tried to point this out in the comments on several posts about the pricing structure of ebooks, and it’s both fascinating and extremely frustrating to observe how people who think that the electronic versions of content should be free or nearly free will simply stick their fingers in their ears and keep saying “I can’t hear you!” when confronted with the data that defeats their argument.

Alex

Mathew, you’ve basically agreed with Alexander there.

The cost from recording through to pre-press is the same, regardless of distribution mechanism.

The incremental cost of distribution by CD or other prerecorded media is the cost of the media, plus the cost of the effort of recording onto that media.

The incremental cost of distribution by iTunes is zero.

My understanding of what Steve Jobs is saying is that any entity selling through the iTunes Store or similar endeavor should realize that people will buy more stuff through the digital distribution chain than through the physical distribution chain – even though it means they’re spending more money.

iTunes sells more music content than Walmart – the proof, as they say, is in the pudding.

If you want advice about distributing news in the iTunes era, do you seek the advice of the people who run iTunes, or the people who read for-free web sites?

Nat

Just because the people who currently benefit from working in bloated organizations might loose their unnecessary jobs does not mean that Steve Jobs is wrong. For decades, music-, movie- and media industry fed on their customers like vampires. All the managers, administrators, accountants and bureaucrats the gravy train of their business. But this time comes to an end.
And don’t come with the argument of expensive music-production: modern recording technology is more advanced and cheaper than 20 years ago. Studio technicians and sound engineers don’t cost so much.
The same for books: some publishers want their authors to typeset and layout the books themselves, so what do you need else? An editor, ok. Marketing can be outsourced.
Coaches were replaced by cars, assembly line workers were replaced by industrial robots. Adapt or suffer extinction but please stop whining.

jamEs

You use the example of the same relative cost, yet fail to factor in how much the industry rehashes content. How many times have people bought and rebought the same Beatles albums? Big content providers have been running a unsustainable business model for 30 years of reselling back catalog content every 5 years and assuming people will keep lapping it up. Rehashed content costs little to nothing to produce yet still content providers still want premium pricing for it.

Glenn

Surely, there are saving to be had by distributing music or other media digitally, not least a MASSIVE benefit to the environment. The cost to manufacture and deliver CDs carries a cost both which is obviously offer set with the reduced cost you pay for digital content (justifiably so) but the real winner is the environment, not plastic to produce that never bio-degrades and no oil to deliver the goods.

As for digital newspapers, Steve is right, content is critical for it’s success. People are not used to paying to watch the news and with so much good content available for free on the Internet the online publications need to offer value add over that to win.

Murcoch’s answer is to try and shut all available free news sites downs, hence his desire to kill the BBC but that’s not the solution, the solution is about offer contend people value and are willing to pay for a low cost, stack it high sell it cheap, model but do something different.

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