Media Curmudgeon

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October 03, 2007

Content Shouldn't Be Free

Guest blogger Bill Grimes, former CEO of ESPN, Univision, and Multimedia, responds to the Media Curmudgeon with a cogent argument:

"In all the discourse over your 'content shall be free' notion, it seems to me that content has actually become a lot less free during the past thirty years. And people are paying more money every year for content. How so? In 1977 there were less than 10 million US households subscribing to cable TV. Total content revenues for the industry were less than $1 billion or $100 per year per subscriber. (I might also point out here that The National Enquirer cost a quarter in 1977 and is $2.99 an issue today.)

Currently 93 million U.S. households subscribe to cable and satellite TV for content. These subscribers pay about about $500 per year for this video content (basic, tiers and pay). A staggering $47 billion.

So I think any discussion of 'content be free', as you claim it will be citing your assurance that Murdoch will relieve 800,000 wealthy online subscribers of their committed obligation to pay $80 per year to view The Wall Street Journal content online, should begin with recognition that media content has become more, not less, expensive in recent years. In fact it is arguable that the cost of content has risen faster than any consumer product. Note the real cost decrease of telephony, computers, and cameras and the lower-than-inflation increase in the cost of consumer products like appliances, clothing and food. Thank you China and Walmart! Content costs are roaring ahead when measured against other consumer product price increases.

The other economic reality about the cost of media, whether it's news or entertainment, is that the American consumer is already paying (and has been for nearly 200 years) for content. Consumers do this every time they purchase an advertised product, since the manufacturer is recapturing the expense of advertising in the price it charges the consumer for the product. Nothing new about this, but it is easily overlooked in the egalitarian frenzy over Internet content which is assumed to be free.

So content has never been free. Nor will it ever be free whatever Google, any charitable trust, or Murdoch does. And I am awaiting your promised announcement from Rupert that the Wall Street Journal's content will be free for all. Which, of course, it will not be even if he decides to take a $70 million writeoff from those current WSJ online subscribers, a mere bagatelle for News Corp.

On a related note I had lunch today with a very knowledgeable media man who noted that over 60 percent of the estimated $21 billion spent in online advertising expenditures this year has resulted from advertiser budget shifts. That means that traditional media has lost over $12 billion in revenues this year alone. Citing two different industry analysts, web advertising is expected to double by 2012. He believes that virtually all this incremental Internet ad spending will be from cannibalization of traditional media company revenues. (Assuming 4-5 percent annual increases in total ad spending in U.S. this computes reasonably.) The implications of this for traditional media companies are grim. Their content will have to become less free or more expensive or else a lot of yacht owners are going to have to decide that funding content is a better charitable gifting idea than curing cancer, AIDS, and other world maladies."

Please add your comments to Bill's response to my "The Future: Non-Profit News" post and to my post.

Posted by Charles Warner at October 3, 2007 10:02 PM

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