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How to keep your content valuable and keep customers paying for it!

Why Free Is Not the Future of Digital Content in Education

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http://www.wired.com/2015/03/free-not-future-digital-content-education/

The important takeaway from the article above is the value proposition.  Content with real value will always be able to command a price, despite downward price pressures.

Take the music industry, as cited by Mary Cullinane in this article.  It has a history of downward price pressure.  Look back at the days of record stores, when music was distributed exclusively on vinyl or tape (cassette or 8-track – take your pick!) and later on CDs.  New releases always cost more than items that had been out for a year or more.  That’s because the content hadn’t changed (it was still the same song!) and, thus, its value hadn’t increased.  More people owned the album and it had gotten considerable play on the radio, so there was less interest in buying a product that could be heard almost everywhere.

The invention of the CD may have been the most insidious attack on the music industry in history!  Within a short time, the average person was able to find ways to copy CDs and distribute them to friends (or pirate them for sale).  Suddenly, the value of the music content dropped because consumers were able to easily access the content without paying for it.

It was an even shorter jump to playing the music from a hard drive.  Even the music industry’s attempt at protecting content using the CDA format for tracks on the CD was short-lived as software enabled conversion to alternate formats such as MP3.  And again, the value of the content declined because “sharing” became exceptionally easy and users didn’t have to pay for their favorite music.

Eventually, the music industry stabilized to where we are now.  You can buy just one song on iTunes for around $1.00, or unlimited streaming music from Spotify for $9.99 per month.  Sure, it’s easy to make copies of music and give it to friends for free, but the cost to consume it has become so low that it seems more of a hassle to copy and share it than to pay the minimal amount required to own it or stream it.

But, even with all of these developments, why couldn’t music maintain its value?  Imagine if the music industry had a business model whereby the song itself changed, improved and needed to be updated occasionally to be “true”.  (I think I hear someone saying, “It does change – I had to buy it again when it came out on CD.”  That’s not a change to the music, just to the platform that presents the music.)  If a song really did change, or improve, or adapt to your needs (perhaps automatically playing louder when sensing a listener with hearing loss, or alter the song to better suit your tastes such as using a female voice instead of a male voice, or alter the sound of a rock and roll song to make it a country song), music would maintain a higher value.

One company I worked for in the 1990s had a strong value proposition.  Our products were the best and most expensive in the industry and management was committed to never reducing prices.  The strategy to accomplish that goal was to always offer more value.  Improved software, improved hardware, new development was always in process.  And it worked.  Despite never reducing prices, every year we sold more than the previous year, despite an ever-increasing number of competitors with lower priced systems.

Mary Cullinane, in her article, posits that educational content will fall into the same category of having ongoing value, or increasing value, because it will be adaptable to the needs of the student.  Thus, she is confident educational content won’t be free.  And, while I agree there is little risk of transitioning to a free approach, she ignores one significant element capable of an adverse effect on educational content’s value proposition.  That effect is competition.

Competitors may enter the market with lower priced solutions which can have a negative impact on sales or the pricing for her company’s products.  But competition alone does not necessarily mean that educational content, or any other content, will become free.  Let’s go back to the company I worked for in the 1990s.  New competitors were constantly entering the market and all of them had lower priced options.  Yet, every year, our company increased sales and exceeded goals.  That’s not to say that we sold more units than our competitors did.  Many of them probably sold a greater number of units than we did.  But our model wasn’t built on a value proposition that required us to compete on a “who can sell more units” basis.  Our model was built on manufacturing systems that did more, did it better, did it more reliably, and continually provided our customers with more features and benefits than any competitor could offer.

There are many examples of this approach succeeding.  Software is an excellent one.  Many software companies sell very expensive solutions (a number of Adobe and Microsoft products come to mind) in the face of free competition.  This would not be possible if the free products worked just as well as their expensive counterparts.

No matter what you manufacture or sell, if your value proposition involves offering a superior product or service, combined with strong support for what you sell, you won’t have to succumb to giving it away for free and you can control your company’s destiny.

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