I will be chairing the Mobile Content Summit in London on Thursday 2nd October. In advance of the event, BusinessTechnology interviewed me for my thoughts on free and making money in a digital age. The interview is reproduced (with permission) below.
The customers of the digital world expect more for less. We read openly-available news online, stream music from Spotify for free, and play chart-topping games like Angry Birds and Candy Crush Saga without parting with any of our cash – initially, at least.
It’s a growing trend, with even big-budget video games available to play for free on consoles during special weekends, and according to Nicholas Lovell, author of The Curve and host of The Mobile Content Summit 2014, it is one that businesses need to embrace.
“When your competitors work out that they can give away for free what you charge for and make their money elsewhere, they will start doing that,” he says. “And all the digital rights management and fancy lawyers in the world aren’t going to help you if your competition is giving stuff away for free.”
The way to counter this involves three steps, Lovell says. Firms must give away something valuable but cheaply-copied to start a relationship with customers, earn the right to speak to them again, and then enable “super fans” to spend what they like on higher-value products. These devoted followers are where bulk of the revenue will come from.
While previously consumers all paid roughly the same amount for products, Lovell says in the digital world it is possible for the majority of a company’s takings to come from just one or two per cent of its most devoted customers.
“You let people spend much more than they used to on things that they really care about,” he says. “You have to start thinking about what people will pay for when they’re expecting to get so much for free.”
A good way to find out what people will pay for, he says, is to check crowdfunding sites like Kickstarter and Indiegogo, where creators offer rewards based on the size of users’ donations. Lovell says these sites are “a treasure trove of insight” into other firms’ experiments with different price tiers.
Lovell is “very pleased” with The Guardian’s experimentation with a membership scheme
But firms can no longer charge simply for the delivery of content. While this was possible at the height of print publishing, the internet means that there are few barriers to anybody making their work available for free online.
“I can reach an audience just sitting at home publishing to the web,” Lovell says. “We can’t change for solving the difficult problem of distribution because it’s not difficult anymore.”
Instead, he explains, people will pay for products based on what resonates with their identity, rather than how much or how little the item cost to make.
“People value status,” Lovell says. “People buy the Financial Times or The Guardian in physical form because of what it says about them to themselves and other people.”
For a publisher, The Curve’s model might mean giving content away for free but offering options for those who want to support the organisation. One example is The Guardian’s recently-launched membership scheme, which gives access to special events in return for a fee. It is a project Lovell is “very pleased” about.
“Members want to be part of The Guardian because they want to reward them for the Snowden revelations, because they believe that social justice The Guardian campaigns for is worth having,” he says. “A whole bunch of people are saying, ‘I want The Guardian to continue to exist. I want to support what it does.’”
Unhappy with U2 appearing on your iPod? That’s because your music collection is part of your identity, says Lovell
Less successful was a recent Apple campaign, during which the technology giant gave its iTunes customers U2’s latest album for free. There was a social media outcry when the record appeared in the collections of users who had no interest in the group. Eventually Apple released an app specifically to allow them to remove the album.
“Your music collection is a part of your identity and Apple steamed in and said, ‘No, it’s ours,’” Lovell says. “The backlash was all about that piece of identity.”
This focus will be crucial to the development of profitable business models in the digital world, Lovell says. While businesses could previously charge for their output, the internet means there is always a risk of being undercut by a competitor who can give their content away for free. But customers will still pay for what resonates with their values.
“The books you choose to keep on your bookshelf, and the ones you choose to hide on your Kindle, are a conscious decision,” he says. “I think that most media businesses are about identity rather than access these days, and the successful ones will really be just that.”
See Nicholas Lovell speak at The Mobile Content Summit 2014, which will take place at the Queen Elizabeth II Conference Centre in London on Thursday 2nd October.