Harvard’s Nieman Journalism Lab is running a series this week on media trends likely to play out over the coming year. It begins today with a piece by me on how the app explosion is changing consumers’ attitudes toward online media and expanding newspapers’ options for creating new content bundles tailored to different groups of readers. Here’s what I say:
For years now, the line between the software business and the media business has been blurring. Software applications used to take the form of packaged goods, sold through retail outlets at set prices. Today, as a result of cloud computing and other advances, applications look more and more like media products. They’re ad-supported, subscribed to, continually updated, and the content they incorporate is often as important as the functions they provide. As traditional media companies have moved to distribute their wares in digital form — as code, in other words — they’ve come to resemble software companies. They provide not only original content, but an array of online tools and functions that allow customers to view, manipulate, and add to the content in myriad ways.
During 2011, the blending of software and media accelerated greatly, thanks to what might be termed the dis-integration of the internet. The old general-purpose web, where everyone visited the same sites and saw the same stuff, is rapidly being supplanted by specialized packages of digital content geared to particular devices — iPhone, iPad, Android, BlackBerry, Kindle, Nook, Xbox — or to particular members-only sites like Facebook and Google+. Not only has the net left its Wild West days; it’s entered the era of the gated suburban subdivision. As part of this trend, the open, html-based website is being replaced, or at least supplemented, by the proprietary app. In app stores, the already blurry line between software and media disappears altogether. Apps are as much content-delivery services as they are conventional software programs. Newspapers, magazines, books, games, music albums, TV shows: all are being reimagined as apps. Appified, if you will.
Appification promises to be the major force reshaping media in general and news media in particular during 2012. The influence will be exerted directly, through a proliferation of specialized media apps, as well as indirectly, through changes in consumer attitudes, expectations, and purchasing habits. There are all sorts of implications for newspapers, but perhaps the most important is that the app explosion makes it much easier to charge for online news and other content. That’s true not only when the content is delivered through formal apps but also when it is delivered through traditional websites, which may themselves come to be viewed by customers as a form of app. In the old world of the open web, paying for online content seemed at best weird and at worst repugnant. In the new world of the app, paying for online content suddenly seems normal. What’s an app store but a series of paywalls?
Appification opens to newspapers the powerful marketing and pricing strategy that the Berkeley economist (and now Google executive) Hal Varian dubs “versioning.” Long a cornerstone of the software business, versioning is the practice of creating many versions of the same underlying informational product, packaging them in different ways, and selling them at different prices to different sets of customers. A software maker, for example, may give away a bare-bones version of an application, sell a version with more features to mainstream consumers at a modest price, and offer a high-end version, perhaps combined with added services, to professional users at a premium price. As Varian explains, “the point of versioning is to get the consumers to sort themselves into different groups according to their willingness to pay. Consumers with high willingness to pay choose one version, while consumers with lower willingnesses [sic] to pay choose a different version. The producer chooses the versions so as to induce the consumers to ‘self select’ into appropriate categories.”
We already see versioning strategies at work in the “metered” programs operated by a growing number of papers, including the Financial Times, New York Times, and Minneapolis Star Tribune. Readers lacking a willingness to pay get limited access to the papers’ sites for free. Readers who value the content more highly, and hence are willing to pay for it, subscribe for a fee to gain unlimited access. And readers with the greatest willingness to pay shell out even more money to receive both the print edition and unfettered online access. Appification provides an opportunity to create many more versions of the same basic content and deliver them to different customer segments. In 2012, we’ll see versioning strategies become not only more common in the newspaper business but more intricate, sophisticated, and lucrative.
The orthodox view among online pundits has been that paywalls and subscription fees won’t work for general-interest newspapers, that people simply won’t pay for a bundle of news online. Last year, media blogger Jeff Jarvis dismissed the New York Times’s metered plan as “cockeyed economics.” Earlier this year, Nieman Lab blogger Martin Langeveld opined that “newspapers are slowly digging their graves by building paywalls.” It seems likely that 2012 will be the year when we stop hearing such gloomy proclamations. Well-designed versioning strategies, spanning various devices, formats, functions, content bundles, and access plans, will provide smart newspapers with new ways to charge for their products, in both digital and print form, without sacrificing the unique opportunities presented by online distribution. That won’t mean the end of the industry’s struggles, but it does portend a brighter future. And that’s good news.
This post is an installment in an ongoing Rough Type series on News in the Net Age. Earlier posts include: