SubscribeTrends in Media: Freemium
Posted in Television, Publishing, Music, Mobile, News, Free on November 2nd, 2007. By Eduard F. Vinyamata.
Freemium is business model that works by offering basic services for free, which potentially attracts a large customer base, and then charging a premium for advanced or special features. Let’s see how this Web 2.0 trend is working (or could potentially work) for media, from mobile platforms to publishing.
The Mobile Platform
The mobile platform, as a media consumption device, remains even today a mystery to many in the media industry. Japan and South Korea notwithstanding, hardly anyone uses their mobile phone as an iPod, to catch up with last night’s TV series or for all those many things the mobile could do and be today.
Still the general opinion is that “If you are not thinking mobile…you don’t get it!” And it’s easy to see why: there are 3 billion mobile users, against just 1 billion computer users. Plus many of today’s mobiles can easily download, manage and display media. So why isn’t the mobile platform blooming as the ultimate portable, always with you media device?
We might find the answer on a recent (spanish) blog post by Ricard Ruiz de Querol where he takes a look at the last trimester results from Nokia. Out of the 286 million mobile phone terminals sold last trimester, 111.7 million were Nokia phones. Yet the average price paid per Nokia phone was 82€, compared to this year’s second trimester at 90€ and to last year’s third trimester at 93€. This decrease in average price is due to Nokia’s market leadership and high margins in the basic, under 30€, lineup of phones. So, as Ricard points out, while Nokia’s image is based on the technology, design and features of their latest models, their business growth is based on the cheap, non media centric models. Nokia’s growth is based on a Freemium model: selling free or very cheap models while marketing premium, advanced ones.
Technology limitations of basic phone models notwithstanding (as they’ll be soon history), maybe media on the mobile could work if it catered to under 30€ terminal buyers, people who might consume media if it’s free or very cheap, and who may later on pay for premium services, Freemium, an strategy that is working for Nokia. Sprint, seems to understand it as well with it’s just launched original TV programing offering…free of charge.
The Music Industry
Everything in the music industry is up (except for those plastic discs). And this despite evil piracy practices and Apple’s successful attempt at destroying music “pricing”.
Actually we’ve been blogging about one of the results of all this changes: Radiohead’s latest album distribution. It made the band about $10 million (via Meneame) and it’s pure Freemium. Anyone can order Radiohead’s latest work in two formats, the free, very cheap (or name your own price) version, or the premium version. The “basic” version works for most people. 160kpbs MP3 tracks, which is lower than CD quality, no artwork and no extras. Or the premium version which will include a CD, booklets, 2 extra songs, etc.
Radiohead could have released their premium offering at the same time as their free one. It would have been ripped at CD or lossless quality, booklets and artwork would have been scanned and extra songs added and distributed as a torrent, destroying the author’s free alternative. Yet Radiohead delayed the release of the premium version of their work effectively using the free alternative to promote it to those who later on will consume other premium services: from concerts to deluxe physical CD’s. Perfect Freemium.
The Cinema & TV Industry
Freemium could become part of the solution for TV and Cinema executives facing the challenges of Internet empowered users and piracy consumers. Take streaming, for example. Freely streaming contents doesn’t seem to cannibalize audiences on a more premium context such as TV or DVD. This of course challenges the whole notion that a downloaded (or streamed) copy is a lost sale, or lost eyeballs.
For Freemium to work there has to be a free or very cheap offer, and a premium one. The problem with TV and Cinema executives is that until very recently they’ve only wanted to offer Premium and Super Premium. Premium as in $7 + ads cinema tickets or 40 minutes series with 20 minutes ads in between. And super Premium as in DVD collector boxes.
TV and Cinema executives could offer a free, easier, better quality offer that could reach customers faster than what pirates can achieve today, and control with it the distribution channel and the audience information. This would at the same time enhance their current premium offers.
The challenge in this case is not so much the adoption of a Freemium business model as the fact that old mindsets should be abandoned: implementing “appointment TV” and scheduling on the Internet, enforcing artificial frontiers on International media distribution and delivery…This all works against the Freemium model, based on achieving the largest possible base of free consumers. And, it is pointless anyways, as any artificial barriers are automatically destroyed by piracy, making piracy all that much more attractive.
The Publishing Industry
Riding the wave of Radiohead, Paste Magazine is offering a yearly subscription to their magazine for a minimum of $1 and up to whatever their readers wish to pay. Sounds like Freemium:
While it’s certainly a bit unconventional, we also see it as a chance to get our product in the hands of people who could become lifelong fans. It’s been our experience that once people become familiar with Paste, they turn into loyal readers.
Early Reviewers, an experiment under Librarything.com also reminds us of this business model:
Publishers have given us some advance copies of books soon to be published. We’re sharing these with you to read and review. You get free books, and share your opinions with a wide audience. LibraryThing makes everyone happy and keeps everything free and fair.
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