Rafi Mohammed

The New Pricing Strategy for Online Media: FREE

Posted on September 24th, 2007 (1 Comments)

Last week’s pricing strategy for media companies was sponsored by the word “FREE.”

Monday: The New York Times announced its archive (along with its current) stories will be FREE…foregoing $10 million in revenue per year.

Tuesday: The Wall Street Journal intoned that its site will switch from paid to FREE…foregoing $50 million in revenue per year.

Wednesday: NBC announces it will offer FREE TV show downloads (that include commercials).

Friday: FOX television announces it will give away season premieres of many of its shows for FREE on iTunes.

While I’m generally not a fan of FREE, there are compelling reasons for online media:

Print (free access supported by advertising) (1) Established print media risk losing their relevance/brand as traffic grows to free online news sites like CNN and Yahoo. (2) Search engines are playing a bigger role for news sites. Googling a story often leads to a paid site like the New York Times (NYT) – free access will enhance the NYT’s brand and opens doors to new advertising opportunities. Additionally, free online access is similar to print’s business model, where the bulk of profits comes from advertising.

Television (free downloads supported by advertising). Again, this is inline with television’s current business model: free access with commercials. Downloads is just another distribution outlet. Additionally, free downloads adjust to the flexible viewing demands of key advertising demographics (under age 30).

Music. A surprising number of well established musicians are lowering prices of their new works – they don’t want price to be a barrier to listening to their new music. And just as importantly, these musicians know where the real money in music is…the concert tour. Bruce Springsteen is going one better. Some believe his camp was behind the leak of his new CD “Magic” a full month before its release. In this case, free makes sense. The leak is creating buzz for the new CD release as well as a cash cow concert tour. For example, on his last tour to support his “The Rising” CD, Mr. Springsteen grossed over $15 million in Boston alone! 5 concerts, 15 hours on stage, $15 million. Now that’s impressive!

As these three media mediums illustrate, free can be the right price…just make sure it clearly leads to future profits.

On another note, I want to remind you of the upcoming (October 24 & 25) Professional Pricing Society (PPS) conference in Orlando. The PPS is always a grand event to meet fellow pricing strategists and be exposed to a variety of pricing ideas. I’ll be both attending and giving a talk titled “Elevate Your Pricing from Good to Great.” More information can be found here.

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Readers' Comments on This Blog Entry

From Jon on September 26th, 2007
Rafi, A couple of comments and observations on this post… 1. The LA Times has also recently scraped the monetisation of its website as well; 2. Prince also gave away his latest CD free to (a) people who went to his August shows at London's O2 Arena, and to readers of The Mail on Sunday 3. And regarding you r comment to "just make sure it clearly leads to future profits"…The NYTimes has been charging its 227,000 paying subscribers $7.95 charge for Times Select for the last two years. Will traffic to its website go up following the abolition of this price - yes, probably. Will it be able to charge online advertisers higher CPM rates - yes, probably. But advertising is a cyclical business. What happens when the advertising industry goes into its next cyclical downturn - the NY Times is under pressure to lower is CPM advertising rates. Would that downward pressure be applied by Times Select subscribers - probably not. Moral of the story - may be a good move in prosperous times, but let the next downturn in the advertising industry be the judge. 4. And finally, I think it will be a very sad day, from a pricing perspective, if and when the wsj-dot-com becomes free. It is the best monetised newspaper site on the internet, and I've often upheld it as an example of online pricing best practice. It has 750,000 paying subscribers, who pay $99pa (slightly less if they are a print subscriber). Advertising on the site (last I heard) costs a phenomenal $65CPM. I've met Rupert once when I did pricing at a company he used to own…he has a very interesting online strategy at the moment. Regards, Jon