The rationalization of publishing

Now that the ad-only experiment has decidedly failed, quality information providers will be able to build strong businesses, and consumers will be better served than ever

That is: With no printing costs and the ability to reach a much larger audience, publishing — the kind that had been traditionally supported by a combination of direct consumer dollars and advertising — could be supported by advertising alone. If so, it would be a huge win/win: Free information for the world and strong businesses with global reach.

It wasn’t obvious 20 years ago that by going down that road, publishers — who traditionally differentiated on brand, quality, and audience — were entering a commodity business that would be dominated by software and scale. And, even if it was, was there a better option? Getting money from consumers over the internet wasn’t easy back then. Entering a credit card was a lot of friction, and no one trusted it. Besides, publishers were getting paid. Advertisers still cared about brand and context. And, really, how bad was a little banner ad? It’s not like they were taking over your screen and tracking you across the web. And certainly they weren’t influencing what was getting published. It was an okay trade-off for access to great content (most of which was paid for by print ad money anyway).

The only thing that went wrong was the inevitable. Business always optimizes for where the money comes from, and advertisers weren’t in it for the public good. Which means they eventually got the better end of the deal, with the rest of us suffering through an experience that was necessarily compromised.

That story has played out. It will continue to play out for years — free, cheaply produced content isn’t disappearing. It will just get worse. But there will also be an abundance of non-free, non-cheaply produced content that an increasingly large and discerning audience is hungry for.

Look at the renaissance in television — it was driven by a better (non-advertising) business model. Even though there’s still plenty of free, ad-supported TV. A hundred million households pay Netflix alone for delicious, differentiated, ad-free fare. Look at music. At one point, the sky was falling in that industry because everyone was downloading music for free. Yesterday, Spotify went public and is worth $30B, helping the labels bounce back with them.

With both TV and music, the consumer offering is far superior to anything we had before, and there are more options for creators. (True, musicians at the top aren’t making as much as the glory days — but far more musicians are making some money, and it’s way easier than ever to get your music out to a fanbase.) This is the power of a differentiated, competitive market — increasing quality and convenience for consumers, and riches for the winners.

There are three arguments you typically hear against the TV and music/publishing analogy:

1) People will pay for entertainment but not information

This is silly. It might not be as big as entertainment, but the global demand for information — I’m talking news, journalism, analysis, opinion, essays, instruction, etc. — is not small. There are certainly some people who only will pay for entertainment, but the people who have the most money care about understanding the world and their place in it.

2) People will pay for audio and video but not text

This also doesn’t make a lot of sense. People value time, convenience, and quality. People read more than ever. And books are still a multi-billion dollar market.

3) People won’t pay for what they’ve historically gotten for free

This is true and would be a problem if you also assume: They will continue to be able to get it for free and/or the thing they’re asked to pay for is the same as they’d get for free.

People are not dumb. But their information diet has been subsidized by print ad revenues and no-longer-sustainable digital CPMs for a lot of years. It will be painful, especially for publishers, to ween off that drug. But supply and demand will kick in. As paywalls go up (and, inevitably, many publishers go out of business), there’s just going to be less great stuff to get for free.

Will people just lower their standards? Perhaps. In fact, our standards have been gradually lowering for years. We’ll read crap on the web we wouldn’t have put up with in print. But as advertising gets replaced with better business models (subscription, inevitably), people will see they can expect more. No one was clamoring to pay more for TV before The Sopranos came around. (People subscribed to HBO for the second-run movies.) No one even imagined such TV. Now we can’t stand to sit through ads or crappy content. The same thing will happen.

There is — and probably always will be — a surplus of free content. But that’s like saying there’s a surplus of free food in the dumpster behind the alley. Some of it may be perfectly good, but most of us would rather pay for something more reliable and convenient if we’re able. And many people will pay a lot for something superior.

This is the case in media — TV and music, as mentioned, but also video games and radio make billions per year from consumers who can access free alternatives. But it’s also the case in every other market, from coffee to clothes. People choose the level and style they want and are willing to pay for — and providers compete to get their business.

The reason quality — of content and experience — has gone down in publishing, not up, despite the power of competition and technology, is because publishers are competing for advertiser dollars, not audience dollars. Business model is gravity. Once publishers are competing for audience dollars, the product they produce will get dramatically better.

How it will play out

This is not to say that every publisher just needs to start charging a subscription, and people will run for their credit cards. (Monthly recurring revenue FTW 💸!) The average thinking, reading person reads from dozens of sources per month. Even if they were very cheap, there will be subscription fatigue. Cognitively, and economically, people will be able to rationalize a handful of content subscriptions at most (in addition to their 2–3 music/TV subscriptions).

Outlets that are very big in terms of content volume/frequency or that have superfans will be able to make subscriptions work — see NYT and The New Yorker. Or that have very low costs and a niche audience — see Stratechery.

That leaves out the vast majority of publishers in the world. If everyone had a digital wallet in their browser and was willing to do micropayments as they cruise around the web, that might be a solution. But that’s very unlikely. And, it’s not clear how to design that to create a healthy feedback loop (i.e., keep click bait and popularity from being rewarded over quality).

There is a likely solution, though. And it’s, again, demonstrated by other media types. There’s a reason we don’t subscribe to TV shows or our favorite bands individually: 1) It would be a pain in the butt. 2) It would be a much worse deal. We pay for bundles, which give us access to lots of options. It’s great, and it will be great for published content, as well.

There won’t be a Spotify of publishing — with literally everything you want. But there will be a Netflix and Hulu and Amazon, etc. — each with a substantial amount of things you want. You might also have your superfan subscriptions (Patreon-based individuals), and your company-expensed subscriptions (The Information), but most consumers will have one or two of the big bundles.

Publishers generally don’t like this idea, but I think it will actually be good for creators, as well as consumers. In the same way that Spotify gets a lot more money from consumers to record labels and musicians than they could on their own. Netflix does the same for studios and show producers. Both pay for marketing, discovery, and technology infrastructure that allows creators to do their job. (The fact that small publishers have to be experts in technology, and distribution, and, now, funnel optimization, is a huge drain.)

Who will offer these bundles? Well, Apple just bought one. So far, Google and Facebook are talking about helping publishers charge subscriptions individually, but I’d expect a bundle down the road as publishers get comfortable with it. Startups like Blendle are developing alternatives. And of course, Medium has a growing bundle of thousands of independent writers and publishers. In the end, the best convenience and value for the consumer will win.

And at the same time, writers and publishers who offer high-value, differentiated content that competes for its ability to drive revenue from consumers, not just eyeballs, will win, as well.

This is a world I’m looking forward to.

See also: The Medium Model.

Written by

CEO of Medium, partner at Obvious Ventures, co-founder of Twitter, curious consumer of ideas

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