Authorsvenphan

If you are not using free, you will be competing with free – Peter Froberg

Shaping digital content becomes a major challenge for publishers as the shift from content to platform has resulted in the development of new business models. Traditionally, a focus on improved editing, design and marketing are the key features that a publisher develops and adapts to change. However, these changes are not sufficient enough to persist in the modern digital age because the internet has “facilitated the dissemination of artistic works by allowing users to mass distribute files within seconds”(Bittar, 2014, p.1). Instead, a continued integration of innovative solutions is needed where added value and personalized services are just as important as the content itself. Freemium, is the combination of the words “Free” and “Premium” and the idea behind this model is to offer a product or content for free while reserving additional content or services for paid users, also known as premium users. Even though freemium business models does not benefit niche products and content, by adopting the freemium business model, publishers are enabled to expand their audience reach which leads to an increase in revenue in a highly saturated digital market.

Free content is effective for converting users to paid subscribers as it lowers the barrier of entry for readers. Digital products are distributed through different channels and face different distribution cost structures. Often, the only costs associated with distributing a digital product are hosting expenses and platform fees. Low marginal distribution and production costs create the opportunity for a product to be adopted by a “large number of people, quickly, at little to no expense on the developer’s part”(Seufert, p.4,2014). With content being easily accessible via the internet, making content free can lower the barrier of entry for readers. Charging for content suggests that the quality of information is valuable to that certain reader and that they would not be able to find similar or related information elsewhere. A professional reader in search of information about a particular topic would be prepared to pay if it “provided better insight, highly relevant choice in the selected area, and is prepared to pay”(Book Industry Study Group 2013). However, occasional readers desire a range of information from various fields, therefore, such readers can withdraw from the purchase because of high prices as content is to niche for them (Book Industry Study Group 2013). The Los Angeles Times and The New York Times (NYT) each tried charging for access to some content online, then dropped the requirement because it cost them audience and advertising revenue(Salmon, 2011). The introduction of paywalls combined with a freemium strategy proved that freemium model can work in news industry. The NYT wanted to increase their user base, so they created a business strategy that was primarily a freemium model combined with a metered paywall, where users are able to read 10 articles for free. It allows anybody anywhere to read any NYT article they like, which makes them more “open and inviting”(Salmon, 2011). The premium features include, “Subscription to the print edition, digital access to all content on nytimes.com and mobile/tablet apps”(Froberg, 2015). In fact, the NYT after just four months,  converted 224,000 free users to paying ones, which had premium access to the NYT website. (Salmon, 2011). The NYT has taken a different approach and their paywall, which is a modal box that pops over the web browser after reaching your limit has allowed the company to increase its revenue by at least 18% from 2011 Q1 to 2014 Q4 (The New York Times, n.d.). This creates a situation where you can give away the core product for free and create a profitable business model from just up-selling to a few percent. If you hit the paywall on a regular basis and decide to dismiss it, eventually you start feeling a bit of guilt and pay up. One thing to note, if “freeloaders value what they’re getting, a lot of them will end up paying anyway” (Salmon, 2011). In addition, value of free users can take two forms: Some of them become subscribers, and some draw in new members who become subscribers. Typically, a free user is worth “15% to 25% as much as a premium subscriber, with significant value stemming from referrals” (Kumar, 2014). So, a free user can contribute to your revenue model through other means, such as helping publishers grow their user base through referrals and Word of Mouth.

By adopting the freemium business model, it enables publishers to drive engagement with readers and authors. Since you are giving away a core part of your business for free, it is crucial that publishers understand the needs of their users. To be profitable in a freemium business model, without strictly relying on advertisers, 80% of respondents believe that the combination of a subscription model with a freemium strategy would be inevitable (Despot, 2015). Premium features need to convince readers of its value of converting from a free user to a paying one. However, publishers realize that readers are not their only source of revenue and are creating business strategies that can engage multiple users to and have a monetization strategy from both the reader and author. Flat World Knowledge, a well-known textbook publisher, published their material under a Creative Commons license, which means that not only can “readers access the material for free, but they can also reuse it and modify it as they please”(Doscdoce,p.20,2015). Their business model consists of selling different downloadable formats of the same book in PDF format, chapters, and modules, while providing extra assistance. The business model coming from authors include “reduced publishing times, creativity support, and the chance to update their texts”(Doscdoce, p.20,2015). Whereas, the focus on the readers, which is students can read textbooks online for free and are only charged if they want to print the material on demand or if they want to download the eBook version (Dosdoce, p.23 2015).

In my opinion, another method that could help generate revenue could be offering the material for free in a single format, but charging for DRM (Digital Rights Management) free EPUB files so that content would work on multiple ecosystems. As defined by Bittar (2014), DRM is a technique that allows “copyright owners to enforce their rights by controlling what users can do with their digital files, for instance, DRM can determine under what circumstances, how many times, for how long, and on which platforms a user may access a file” (p.5, 2014). A restrictive DRM causes a lack of interoperability, which can increase barriers to entry, switching costs, and network effect, which locks consumers into an e-book ecosystem. In addition, the extent of the DRM restrictions imposed on a file is determined by the copyright holder, which raises serious concerns about users’ privacy and fair use(Bittar, p.20, 2014). Thus, the premium feature of offering an unrestricted DRM file format has a value proposition that allows readers to interact with multiple systems and read on different ebook device without getting “locked” down to one.

The freemium business model is a challenge for niche publishers as their target audience is much smaller. The broader the appeal of a product, the more potential users it can reach and the more widely it will be adopted. A broadly appealing product has a “widely applicable use case, or purpose” (Seufert,p.2,2014). Generally speaking, products that address a universal need, pain point, or genre of entertainment appeal to more people than do products that serve a specific niche. The freemium business model success relies on scaling the user base as there is a low proportion of users who monetize in freemium products, which contributes to the “necessity of large potential scale: a low percentage of monetizing users within a very large total user base might represent a respectable absolute number of people”(Seufert,p.4,2014).This concept is referred to as the 5% rule, or the understanding that “no more than 5% of a freemium product’s user base can be expected to monetize prior to product launch”(Seufert,p.5,2014). Therefore, a focus on growing a user base initially is crucial for publishers adopting this business model. A strategy to making this model work is to offer mixed variety of content, but also services and other features that can engage users to monetize. With topics that are niche, the initial target audience is too small to begin with and the potential for scale may be challenging for niche products and content.

Freemium includes a core of your business for free, but can offer a sustainable business model with additional payment for advanced functionality. The content packaging options and the methods for monetization of content or products will be a great challenge for publishers in the times ahead as premium features must engage users with a clear value proposition in order for free users to switch to paying users. Information wants to be expensive, because it’s so valuable as the right information in the right place can change your life. However, information wants to be “free because the cost of because the cost of getting it out is getting lower and lower all the time”(Levy, 2010), so you have this tension between the two principles. With the saturated digital modern age, publishers are faced with having to create new business models and develop new publishing products and services, which will continue to have an impact on business models in the publishing industry.

References:

Bittar, A. (2014). Unlocking the Gates of Alexandria: DRM, Competition and Access to E-Books. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2620354

Book Industry Study Group. 2013. “Digital books and the new subscription economy, a major new BISG research study, releases today” Accessed November 23, 2014. https://www.bisg.org/news/digital-books-and-new-subscription-economy-major-new-bisg-research-study-releases-today

Despot, I. Lebeda, I. Tomasevic, N. (2015). “Freemium” business models in publishing. New packaging for the needs of readers in the digital age. Retrieved from http://libellarium.org/index.php/libellarium/article/view/216/314

Doscdoce.(2015). New Business Models in The Digital Age. Retrieved from http://www.dosdoce.com/upload/ficheros/noticias/201504/new_business_models_in_the_digital_age__bookmachine_special_edition.pdf

Froberg, P. (2015). Freemium: The New York Times. Retrieved from http://www.freemium.org/new-york-times/

Kumar, V. (2014). Making “Freemium” Work. Retrieved from https://hbr.org/2014/05/making-freemium-work

Levy, S. 2010. Hackers. Sebastopol, CA: O’Reilly Media.

Salmon, F. (2011). How the New York Times PayWall is Working. Retrieved from http://www.wired.com/2011/08/new-york-times-paywall/

Salmon, F.(2011). The New York Times PayWall is Working. Retrieved from http://blogs.reuters.com/felix-salmon/2011/07/26/the-nyt-paywall-is-working/

Seufert, E. (2014). The Freemium Business Model. Retrieved from http://scitechconnect.elsevier.com/wp-content/uploads/2014/02/Chapter-1.pdf

The New York Times. (n.d.). Retrieved from http://www.responsiveads.com/new-york-times-paywall-starbucks-ads-local-advertisin/

Pushing The Boundaries Of The Software and Publishing Industry Through Technology.

In the summer of 2015, during a presentation done by Mark Zuckerberg at Facebook Headquarters, I remember being in disbelief by all the technological advancements that had yet to be produced and disrupt industries. The Oculus Rift, which was a virtual reality headset had a $1billion market place valuation and hasn’t even been produced was an example of disruptive piece of technology yet to reach market. The constant advancement of technology has both been beneficial for some and has changed the job market for others. In particular, the publishing industry and software industry has been challenged to adapt to technologies. Of course, the publishing industry has been around longer than the software industry with roots tracing back to news prints. However, with the introduction of the internet, personal computers and mobile devices; technology has radically shifted the production, distribution and consumption model of both industries equally.

Publishing is an established industry with its foundation rooted in the print culture evolving organically with technology overtime. Similarly, the processes of software have developed organically and utilizes the advancement of technology to its benefit. Software is defined on an open source software site called OpenProjects as a “collection of computer data and instructions”, which can be further broken down into two software systems and applications software.(OpenProjects, n.d.). For the purpose of this essay, software will be discussed at a higher level.

Production of code and content in both these industries tended to have a linear path, starting from either the software engineer or author. The intended audience had no role in the former and only a limited role in the latter(Lloyd,2008). However, with Tim Berner’s Lee invention, dubbed the internet, digital natives have morphed into “prosumers” whom Lloyd defines in A Book Publisher’s Manifesto for the 21st century as producers who are consumers that “expect a great deal more involvement in both of these areas of activity if they are to be engaged by texts.”(Lloyd,2008). An instance in publishing where prosumers engaged in the text was Chris Anderson’s, The Long Tail, which was written “‘in public’ via a blog, allowing readers to post comments and to be involved in the very act of writing the book.”(Lloyd,2008). Today, reading is a much less passive activity and it is connected with many and diverse related activities.The reintegration of producers and consumers with the support of technology is just an “extension of the decentralization”(Alstyne, n.d.). New media tools have evolved to support this trend, as consumers are ever so empowered to create their own content reversing their role as passive consumers. Examples of consumers becoming producers with new media tools include the “creators of Web sites and blogs, podcasters who create their own radio shows for other MP3 users, iMovies users who can create their own movies from raw video footage” (Alstyne, n.d.).

The software industry has adopted a collaborative method that is comparable to the publishing industry. Particularly, with the support of technology advancement, open source software has been really able to take off. This, allows multiple developers to comment and develop programs in a shared method.  According to TechTerms, Open Source means the “program’s source code is freely available to the public. Unlike commercial software, open source programs can be modified and distributed by anyone and are often developed as a community rather than by a single organization.”(Christensson,2008). Pre internet, software was written in different languages specialized for an individual network. Arpanet, which was the strategy to connect networks of computers had multiple languages that made it difficult for software engineers to collaborate with each other. However, with the internet, it was the first time that networks communicated in one language, making it interconnected between different networks (ColdFusion, 2013). Furthermore, Tim Berner’s Lee was one of the first to pioneer “open source” code as he released his project, which was the internet as “open source” itself.  For the first time, software engineers could comment and view the source code for free. Linux is the best-known and most-used open source operating system that was developed through a collaboration between software engineers. As an operating system, Linux is software that sits underneath all of the other software on a computer it “receives requests from those programs and relaying these requests to the computer’s hardware.”(OpenSource,n.d.). Collaboration between software engineers is a behaviour that is widely recognized now and is only possible with the advancement of technology. Popular tools are built to support this interaction between software engineers, such as Github, which provides an “open-source distribution of such a software library — to be used, to show how it can be done, and to enlist the help of other like-minded software engineers in advancing a world-class platform suitable for large-scale, industrial software product development.”(Fleming, 2014)

Distribution is the process of getting your product to the consumer. In particular, the publishing industry had the biggest advantage with distribution as it was the biggest hurdle to overcome for new authors. The publisher had the control and the network that allowed books to be distributed to bookstores (Lloyd,2008). Originally, without a publisher, authors were challenged in trying to reach international audiences. However, technology advancement have changed the way books have been distributed. Digital technology has no boundaries in geography and time because books can be published, marketed, bought and read anytime and anywhere(Essays, 2013). The power that came from physical distribution has disappeared as retailers or salespeople have no influence in the actual “buying and selling behaviour as they did before because traditional printing is no longer the only way to have content published”(Essays, 2013). This, has given power to authors, allowing them to be an in-house self publication. Self publishing is an industry that has evolved from the online distribution model. As defined in a blog post on Scribendi called Traditional Publishing Versus Self Publishing, self publishers are authors that take on the role as a publisher. “The author must proofread the final text and provide the funds required to publish the book, as well as the camera-ready artwork. The author is responsible for marketing and distributing the book, filling orders, and running advertising campaigns”(Sribendi,n.d.). Services such as Amazon, Blurb, and CreateSpace have been created to support the self publishing industry. Once was a publishers strongest tool is now being disrupted by technology itself.

Originally, independent engineers had software distribution limitations as well because international reach was troublesome as software was distributed physically through either CD’s, DVD’s or passing around USB drives. Larger software companies who had the resources had the power to reach audiences globally (AvantGate, n.d.). When consumers needed an update, separate physical copies would have to be mailed out. Methods today allow any software engineer to reach their audience at an international scale. Electronic Software Distribution is a solution devised by software producers that is defined in Wikipedia as a distribution model “meant to allow users to download software products over the Internet (i.e. electronically)”.(Digital Distribution, n.d.). Software products distributed electronically have the advantage of costing less than software distributed on physical media it offers buyers permanent access to software products, 24/7, regardless of time or place. (AvantGate, n.d.). This has enabled software engineers to release there products online and reach new audiences without the barrier of physical distribution.

Today, product consumption is highly more immersive and interactive with the evolution of technology. In the publishing industry, technology has enhanced the reading experience, enabling it to happen across more “disparate networks and allowed it to be recorded, aggregated and interlinked in exciting new ways.”(Lloyd,2008). Authors and publishers need to acknowledge that books are essentially a “networked book that contains the conversation it engenders and which, in turn, engenders it.”(Lloyd,2008). Devices that enable this include the Kindle and mobile devices of today, such as the IPhone. In fact, Overall, 50% of Americans now have a dedicated handheld device–either a tablet computer like an iPad, or an e-reader such as a Kindle or Nook for reading digital content.(Zickhur,2014). E-books typically have in-use features such search and cross reference function, hypertext links, bookmarks, annotations, highlights, multimedia objects and interactive tools. With physical books, you didn’t have the concept of hyperlinks. Hyperlinks allow authors to integrate contextual information form other resources by linking readers to that resource. Hyperlinks is defined as a“ digital object with textual and/or other content, which arises as a result of integrating the familiar concept of a book with features that can be provided in an electronic environment” (Carreiro, 2010, p.221). This, allows readers to discover an in-depth view about a certain reading by linking them out with hyperlinks.

On the other hand, Apps have integrated existing service’s API’s into their own apps to develop interactivity. API is an abbreviation for “application programming interface that is a set of protocols, routines and tools used for building software to integrate within their own app ecosystem”(Beal,2015). By integrating APIs make it possible for big services like Google Maps or Facebook to let other apps “piggyback” on their offerings (Proffitt,2013) .An instance where APIs support an interactive environment is when you achieve a high score in a game, you are able to “share, chat, post high scores and invite friends to play via Facebook, right there in the middle of a game”(Proffitt,2013). By “piggybacking” off of other services through both hyperlinks and APIs, it allows producers to enhance the main experience for their intended audiences.

Technology has radically shifted the publishing industry and software industry in all aspects of production, distribution and consumptions. Benefitting the actual consumers themselves who then have turned into contributors to the projects. Without the internet, there would have been a handful of individuals that would have not been able to share their creations with an international audience. However, the evolving landscape has given tools to creators and allowed for a fair competitive industry for self starters to create their first fiction book or small app without the assistance of corporations. Collaboration and sharing of knowledge has connected both publishers and developers to their intended audience. This has produced a much more complex consumer business model as the process to create code or a book has many different paths.

Alstyne, G (n.d.).The Prosumer: Consumer as content producer [Blog post]. Retrieved from http://2020mediafutures.ca/The+Prosumer%3A+Consumer+as+content+producer

AvantGate (2015). Electronic Software Distribution and e-Commerce – Where Do They Meet?[Blog Post]. Retrieved from  http://www.avangate.com/avangate-resources/article/electronic-software-distribution.html

Beal, V. (2015). API – application program interface [Blog Post]. Retrieved from http://www.webopedia.com/TERM/A/API.html

Carreiro, E. (2010). Electronic Books: How digital devices and supplementary new technologies are changing the face of the publishing industry. Publishing Research Quarterly , 26 (4), 219-235.

Christensson, P. (2008, October 30). Open Source Definition. Retrieved from http://techterms.com

ColdFusion. (2013, August 03). The Greatest Story Ever Told, Where It All Began [Video File]. Retrieved from https://www.youtube.com/watch?v=A2wG0sXbMhw

Digital Distribution. (n.d.). In Wikipedia. Retrieved October 04, 2015, from https://en.wikipedia.org/wiki/Digital_distribution

Essays, UK. (November 2013). Effect Of Technology On The Publishing Industry Media Essay. Retrieved from http://www.ukessays.com/essays/media/effect-of-technology-on-the-publishing-industry-media-essay.php?cref=1

Fleming, K. (2014, November 03).  Mission Statement. Retrieved from https://github.com/bloomberg/bde/wiki/Mission-Statement

Open Projects. (n.d.).Computer Software Definition. Retrieved from http://www.openprojects.org/software-definition.htm

Open Source (n.d.). What is Linux? Retrieved from http://opensource.com/resources/what-is-linux

Proffitt , B(September,13,2013). What APIs are and Why They Are Important. Retrieved from http://readwrite.com/2013/09/19/api-defined

Sara Lloyd. 2008 A Book Publisher’s Manifesto for the 21st Century. The Digitalist (Pan MacMillan).

Scribendi.(n.d.). Traditional Publishing versus Self-Publishing. Retrieved from http://www.scribendi.com/advice/traditional_versus_self_publishing.en.html

Zickuhr, K (January,16,2014). E-Reading Rises as Device Ownership Jumps. Retrieved from http://www.pewinternet.org/2014/01/16/e-reading-rises-as-device-ownership-jumps/

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