What Are You Paying For?

The predictable lament of digital publishing, "What will make them pay?" has gotten a fair airing all year on countless conference panels and in the business press. I keep hearing those dreaded terms "retraining consumers" and "reset the relationship with consumers." Well, all of that remains to be seen. I would recommend that publishers look closer to home when exploring paid models that work. For instance, take a look at what you may already be paying for. I did. By asking myself, "What am I paying for?" I came closer to understanding what is and isn't likely to work for others.

Netflix: For a mere $9.99 a month, I get access to a good-not-great library of films and TV shows that is accessible on my iPad, PC Xbox 360, Wii, and PS3. While the collection itself is hit-or-miss, this Watch Instantly service from the mail-order DVD rental company started as a nice add-on to the already-successful disc service. Now it is a real selling point. The value here is in the completeness and ubiquity of the content. Whatever is not in the Watch Instantly library I can rent on disc. More to the point, my media experience is synchronized across platforms, so I literally can stop watching a film on one device and pick it up at that precise point on another. Netflix gets my money because it succeeds in patching up its own weaknesses and providing a depth and presence of media that is exceptionally valuable to a media maven like me.

I should point out that Hulu Plus recently launched with a similar model to Netflix. However, this current and retrospective library of TV content (also at $10 a month) will likely lose me as a subscriber after a few months. Its narrow focus on TV content (the film library is laughable) misses the audience target. What earns my temporary subscription with them is the selective depth of the content. They wisely offer full runs of TV series (SNL, Buffy, etc.), so at first the customer feels like a kid in a candy store getting superserved. But Hulu has no way of filling in what it is missing, and once I am done with my handful of favorites there is little to keep me behind the sub wall.

Virtual Spending: There is a reason why social gaming and dating companies are generating substantial revenue from the virtual currency economy. They provide fun for an incremental cost. I can send my daughter an item to use in her Facebook game effortlessly and at a ridiculously low price for a simple act of giving. In the Wii and Xbox Live environments, I can get downloadable games for the price of a paperback, and I don't really think twice about the value proposition. A universal payment system works. Yet the real genius of this model is that unlike standard "subscription" content, virtual goods set no limit on how much a user can spend with your brand. To wit, only 1% to 3% of players in social network games such as Farmville actually pay for goods and upgrades in the otherwise free game. But those who do pay spend a lot and enough to make the titles very lucrative.

Delineate and Value the Service: A new mobile app from BRIDES magazine uses a freemium model that defines carefully what delineates free from paid. The sponsored no-fee download for iPhone is a localized shopping guide for brides. But a $2.99 upgrade transforms the app into a bridal planning to-do list that keeps your calendar, parses tasks out to bridal party members via email, and is accessible on the phone and synchronized to a personalized website. The free component is fine for casual wedding dress browsers, but the paid content is targeted finely at a subset of those people who have a specific need that maps well against the upgrade. I got it for my fiancée. It is the cheapest thing I will buy for the entire wedding, I am sure.

The paid models that work are already here, and there is no secret to their success. They superserve me with content; keep the incremental cost so low and payment so easy that a purchase is trivial; define the value proposition clearly so I can judge its worth; and give me a sense of ownership of the content by making it available everywhere. Now that should be easy, shouldn't it?