Europeans Will Pay For Content–Why Are There So Few Compelling Options?

I’m often asked to name companies with a successful paid digital content strategy.

It’s harder than it should be to answer that question, especially in Europe.

In news, the FT still heads a small field, along with some B2B publishers while, in music, despite some innovative companies, the digital revenues beyond iTunes are still small.

Amazon (NSDQ: AMZN) is driving the market for e-books. Steam provides a great model for games downloads but targets the hard core gamer rather than the casual player. In videos and movies, while free catch-up services have been popular, no one in Europe is close to building a service that, like Netflix (NSDQ: NFLX), is now primarily about digital revenues.

This lack of options for potential customers has created a depressing trend, as revealed in a recent Forrester survey of European consumers: The paid content market, far from growing, is actually stagnating.

At the end of 2010, we asked European consumers what digital content they had paid for in the last month. We had asked the same question in 2009, so were anticipating perhaps a small increase in the number of users actually paying. In fact, even fewer are doing so

So is this the consumers’ fault? Are we all anarchists and cheapskates, unwilling to pay a decent price for digital content, preferring instead to seek out dodgy downloads? Are we chronically unwilling to pay?

Not necessarily. We also asked consumers what digital content they would be willing to pay for in future, and found that consumers’ appetite for the concept of paying for content is rising: 31% of European internet users in 2010, for example, were interested in paying for digital movies, up from 26% in 2009. Yet this demand remains largely unmet: Only 8% said they had done so in 2010.

The paid content market, then, is simply failing to meet consumer demand. Yes, companies are right to be vigilant about piracy, but they need a carrot as well as a stick. Where are the compellingly priced and convenient paid-content services to meet the demand from legitimate fans willing to pay? For most consumers, they are simply not there.

The media meltdown is hardly news: Many media companies have been dealing with the disruptive threat of digitisation for a decade or more. Yet, even with that long notice period, most have failed so far to adapt their products to meet the evolving needs of customers.

Media companies urgently need to innovate their products – starting with a new definition of what their product is, exactly. Otherwise, even those theoretically willing to pay for digital content will abandon paid models altogether.

Yes, international licensing models are complex. Yes, release windows have been a successful way of monetizing content in the past. But media executives clinging on to old analog realities will ultimately undermine the relevance of their products as other, nimbler competitors steal their market share.

Nick Thomas is a senior analyst for Consumer Product Strategy at Forrester. He blogs here.

This article originally appeared in Forrester Research.

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