![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
On Bundling:
A sure-fire way to lose friends is to point out the basic assumptions underlying what they think they are arguing about. As I have often claimed in the past, people tend to have an underlying belief in something, after which they find the arguments that support that underlying belief, after which the disagreements with other people about these surface matters, rather than the underlying concept.
So What Are People Really Disagreeing About?
A simple example of this is gun control in the USA. The two sides of this will never be reconciled because they never touch upon their underlying beliefs. Instead the arguments are on surface matters (number of deaths through use of guns in the US, the fact that penalizing the vast majority of law-abiding gun owners is not the best way to reduce this, and so on). At heart, people who oppose gun control tend to be people whose family owned guns, who are responsible with guns themselves, and who think that teaching their own children respect for guns is the way to go. Supporters of gun control tend to come from families where guns were not part of the underlying culture. Therefore to propose gun control is to attack some people's sense of family, their upbringing, their way of life. It is an attack on a person's sense of being, an assertion that their way of life is "wrong". Meanwhile, proponents of gun control will claim that this is not the case – they are "only" talking about laws controlling gun ownership. That disconnect, with the one side not realizing why they are so emotionally attached to gun ownership and the other side not realizing the extent to which the freedom to own guns links to many Americans' sense of family, dooms any debate to irrelevance, because the argument is not about that which matters.
When We Buy Something, What Do We Buy?
But this is not going to be an essay on the rights and wrongs of gun ownership. What I want to write about is what we buy when we buy something and what we sell when we sell something. And I want to link this into the problem that media producers have today in monetizing content production.
My thesis here is that most marketers and sellers do not really know what they are selling, and that nearly all buyers do not realize what they are buying.
How can this be, you might ask? "If I buy a newspaper, I buy a newspaper. If I buy a gym membership, I buy a gym membership." Or, if you are a marketer or seller, you might say "Nonsense! I know exactly what I am selling. I know all about upselling, brand extension, and the like. You don't need to lecture me about my job, Mr Birks!". But, think about it. A theory of the free market is an exchange of goods and services so that both sides "make a profit". Both, as it were, are better off as a result of the deal. Many of those who sell services sincerely believe that this is the key to success. Identify a person's needs (or a company's needs)" and provide a "solution". There is also (I would argue) a wholly artificial division between the concept of a "good" and the concept of a "service". The difference is one relating to the terms of the contract (and the time for which it is valid), rather than the item being bought and sold. When, for example, does a short-term lease on a property stop being a lease and start being a rent?
Profit Depends On Buyer Inefficiency
However, my argument here is that nearly all profit in the past has been a result of inefficiencies in what is being sold. If those inefficiencies are eliminated, an awful lot of providers, of sellers, of marketers, will not have a job.
And what is the greatest of inefficiencies? It is something which marketers and salespeople focus on most. Bundling. Every time you buy a package, you are part of an entire business model that is focused not on efficiently matching buyers and sellers, but one which depends on inefficiently matching buyers and sellers.
This is not a product of the Internet age, although the Internet age is highlighting it because, for the first time, we can see simpler ways around it. In many cases the Internet has also served to divorce two things – content and form – a point to which I shall return.
Three Examples:
Now, we can see three obvious examples of where bundling is required to make a business model work – gym membership, mobile phone contracts and media packages.
(a) Gym Membership
If I buy a gym membership I buy the right to use that gym either all the time, or at off-peak times. Whichever I buy, it is impossible for me to use all of that which I have been sold. I can't use the gym 24 hours a day, seven days a week. I can't even use it all of the weekend. It's impossible to buy an "efficient" gym membership. Indeed, if people who bought gym memberships all used their gyms as much as they possibly could, the business model would collapse; there wouldn't be enough gym space, or machines, or showers, to cope.
(b) Mobile Phone Contracts
Mobile phone packages, you might think, are designed to match needs and demands. There's no end of "what package is right for you?" comparison sites. But, nevertheless, packages are dependent on inefficiencies. No-one uses precisely 1,000 texts a month or the exact amount of hours aloud. Indeed, when such a package exists (I have a PAYG package with O2 that enables me to "carry over" credit) the companies stop selling it. These days you pay your tenner for an amount of data and a number of free calls, but the credit is not carried over. Smart arses like me were efficient in our use of the offering, and that efficiency made the offering insufficiently profitable. The mobile phone companies MUST sell "waste".
(c) Media bundling
Now, media packages are interesting, because (i) they link us with the past and (ii) the unsustainability of the model is becoming plain.
In the business-to-consumer world, the old model is, effectively, dead. But it's interesting to examine the inefficiencies inherent in the old model. When you buy a physical newspaper, you will not ready every word of that paper; you will not take in every advertisement. But the person placing the advertisement pays "per reader" and the buyer of the newspaper has to buy the whole caboodle.
When you subscribe to Netflix, or Sky, or anything, I would guess that you rarely use more than 1% (in terms of product) or 10% (in terms of your available time) of that which you are entitled to use.
The inefficiency is plain to see there, but what we fail to realize is that this inefficiency spreads to nearly everything that we buy.
It's Not Just Digital
Take a saucepan. When you buy a saucepan you buy the "right" to use that when you like, how you like, as often as you like, "in perpetuity" (i.e., until you wear it out or you die). But how often do you use it? If it's more than 1% of your waking time, then it's probably your favourite pan.
The same applies to nearly every physical thing in the house. Not for nothing do bed salespeople emphasize that you spend a third of your life using their product. Strangely, you don't hear vacuum cleaner sales people saying "of course, you'll only use it for an hour a week".
How much more efficient it would be if we could "timeshare" saucepans, somehow magicking one up when we needed it from a nationwide pool of shared saucepans, returning it to that pool when we had finished using it.
The concept of "timesharing" certain products is, indeed, offensive to many in the developed world. "Bed sharing" (as immigrants were said to do in the 1960s) was something of a slur. But no-one murmurs about "bathroom sharing", as long as it's sequential rather than contemporaneous.
Why should this be? As with my earlier point, this is a matter of form and content. When we buy a newspaper we don't really buy "form"; as the saying goes, yesterday's newspaper is only good for fish and chips. But when we buy books, we buy form and content. We keep a book. There are and have been more than one method of "timesharing" books – the Popular Book Centre on Clapham Road was an established part of my life when I was young; libraries are a system that enables the sequential sharing of books. But a book has "form". And the point here is that, when we buy anything, we buy two things – the utility that comes from using it, and the right to use it as and when we please. Both of these have value (think of the relative value of getting mini-cabs everywhere and having a 24-hour chauffeur on call), and the proportions in which that value is distributed amongst owners can now be measured to a far greater degree than was possible when, with most products, you had to buy the two together.
The Developing Conflict
The problem here is that which we experience when a system appears that maximizes the efficiency of product distribution. If most business models depend for sustainability on inefficiencies (packages), the creation of more efficient packages by other companies leads to a shift in the economic model of either a business sector or – possibly, society as a whole.
And here we come to news media.
Despite no end of board meetings, strategy meetings, analyses and the like, I found little evidence that anyone in either business to business (b2b) or business to consumer (b2c) publishing really had a clue what to do. This is not to say that they did not know what needed to be done. They knew precisely what needed to be done. Create value so that people will want to pay for the content they get. Even better, create value so that people will NEED to pay for the content they get.
(What was not stated was "also, try to bundle up packages so that, even though they only need a small part of it, they have to pay for a lot more". This was in fact a fundamental Insurance Day strategy about four years ago, when the insurance newsletters were merged into Insurance Day and the price was doubled on the grounds that "much more is being offered". It was in fact the opposite of "meeting customers' needs". It was the archetype of "bundling", a shift towards rather than away from inefficiencies.
That's not necessarily a bad thing in terms of profit-generation. If someone desperately needs something and you are the only supplier, then in the short term you make more money by making them buy other stuff as well. In the long term, particularly in the world of information and analysis, what happens is that someone else comes along to offer better value.)
So, the messages came from on high that, in the land of b2b, "news" was becoming commoditized, and we had to provide analysis, because that had value. What was missed was that (a) analysis is what people like McKinsey provided, and they paid their staff a lot more than publishers paid. And (b) if everybody in b2b moved over to analysis, you would be back where you started.
How so? Well, one of the things that marketers and salespeople missed was that it was not just a question of money that companies were spending. It was also time. It was "attention". In a world where the purchaser was cash rich and time poor, it was the attention that had value. Even if you added tons of value through top-notch analysis, if everybody else was doing it, you were competing for a fixed amount of attention that was available in your market. The one thing that you cannot create more of is time.
(This is not quite true. My own product at Informa, IIN 24, was one of the first to spot the value of time. Although it LOOKED like it only produced a commoditized news service, what I offered was a filter. No analysis, but I have acted as a filter for the reader. While newspapers were getting bigger and fatter, IIN24 stayed small, thin, and easily read. Its selling point was not what was in it, so much as what the editor had discarded as not worthy of the reader's attention. IIN24 was not selling content, it was really selling information time management. This was quite a radical concept in the early 2000s, before it was widely recognized that there was "too much" information out there. This was another example of people often not realizing what they were buying or what they were selling.)
If Everything Is Free, Why Pay?
For my generation, the sheer availability of free content is mind-boggling. I still remember being bored when young because there was "nothing to do". There were only three TV channels, four radio channels (none 'dedicated' to news), books were unavailable, the newspaper had been read. Obtaining information was difficult and pricy.
Today, it's all about time allocation. To get me to spend money on information requires marketing tricks along the lines of "I don't want to be left out" (this works well in the USA, less well in the UK) or "I really want it NOW" (a trick that works well with those who have problems with delayed gratification).
But, note, in both cases, what is being sold goes beyond the content. And, in a time-poor world, what is being sold is, distinctively, time sensitive.
The argument is in many places that there is "too much" content – be that too many films, too much news, too much analysis. I don't buy this argument. I don't think that the amount of content will magically shrink back to what traditional business publishers call a "sustainable level" just because there is more out there than people can consume. The current level is sustainable – it just isn't sustainable in a way that will keep marketers, journalists, salespeople and board executives in the lifestyle to which they would like to become accustomed.
Tom Mullaly made this comment on a The Media Briefing essay by Kevin Anderson. I don't think I can improve on what he wrote:
A frequent homily heard by the grunts in the b2b business is the need to "evolve". This is a misnomer. First, species do not consciously evolve. Random things happen to DNA, most of which are irrelevant, a small proportion of which are fatal, and a much smaller proportion of which improve the survivability of the species. In other words, conscious evolution in the corporate sense is most likely to generate a lot of aggravation without making any difference, is less likely to cause the company to collapse and die, and MUCH less likely to generate an improvement.
When the question is therefore asked (rhetorically) in a strategy meeting – "are you saying that we should do nothing and slowly die? " to be followed by the consensus of "we have to do something, so let's pretend to the board that this strategy is going to work, even though we have no idea whether it will or not", what you really have a mutually agreed pretence and self-delusion, rather than a sound strategy.
A sure-fire way to lose friends is to point out the basic assumptions underlying what they think they are arguing about. As I have often claimed in the past, people tend to have an underlying belief in something, after which they find the arguments that support that underlying belief, after which the disagreements with other people about these surface matters, rather than the underlying concept.
So What Are People Really Disagreeing About?
A simple example of this is gun control in the USA. The two sides of this will never be reconciled because they never touch upon their underlying beliefs. Instead the arguments are on surface matters (number of deaths through use of guns in the US, the fact that penalizing the vast majority of law-abiding gun owners is not the best way to reduce this, and so on). At heart, people who oppose gun control tend to be people whose family owned guns, who are responsible with guns themselves, and who think that teaching their own children respect for guns is the way to go. Supporters of gun control tend to come from families where guns were not part of the underlying culture. Therefore to propose gun control is to attack some people's sense of family, their upbringing, their way of life. It is an attack on a person's sense of being, an assertion that their way of life is "wrong". Meanwhile, proponents of gun control will claim that this is not the case – they are "only" talking about laws controlling gun ownership. That disconnect, with the one side not realizing why they are so emotionally attached to gun ownership and the other side not realizing the extent to which the freedom to own guns links to many Americans' sense of family, dooms any debate to irrelevance, because the argument is not about that which matters.
When We Buy Something, What Do We Buy?
But this is not going to be an essay on the rights and wrongs of gun ownership. What I want to write about is what we buy when we buy something and what we sell when we sell something. And I want to link this into the problem that media producers have today in monetizing content production.
My thesis here is that most marketers and sellers do not really know what they are selling, and that nearly all buyers do not realize what they are buying.
How can this be, you might ask? "If I buy a newspaper, I buy a newspaper. If I buy a gym membership, I buy a gym membership." Or, if you are a marketer or seller, you might say "Nonsense! I know exactly what I am selling. I know all about upselling, brand extension, and the like. You don't need to lecture me about my job, Mr Birks!". But, think about it. A theory of the free market is an exchange of goods and services so that both sides "make a profit". Both, as it were, are better off as a result of the deal. Many of those who sell services sincerely believe that this is the key to success. Identify a person's needs (or a company's needs)" and provide a "solution". There is also (I would argue) a wholly artificial division between the concept of a "good" and the concept of a "service". The difference is one relating to the terms of the contract (and the time for which it is valid), rather than the item being bought and sold. When, for example, does a short-term lease on a property stop being a lease and start being a rent?
Profit Depends On Buyer Inefficiency
However, my argument here is that nearly all profit in the past has been a result of inefficiencies in what is being sold. If those inefficiencies are eliminated, an awful lot of providers, of sellers, of marketers, will not have a job.
And what is the greatest of inefficiencies? It is something which marketers and salespeople focus on most. Bundling. Every time you buy a package, you are part of an entire business model that is focused not on efficiently matching buyers and sellers, but one which depends on inefficiently matching buyers and sellers.
This is not a product of the Internet age, although the Internet age is highlighting it because, for the first time, we can see simpler ways around it. In many cases the Internet has also served to divorce two things – content and form – a point to which I shall return.
Three Examples:
Now, we can see three obvious examples of where bundling is required to make a business model work – gym membership, mobile phone contracts and media packages.
(a) Gym Membership
If I buy a gym membership I buy the right to use that gym either all the time, or at off-peak times. Whichever I buy, it is impossible for me to use all of that which I have been sold. I can't use the gym 24 hours a day, seven days a week. I can't even use it all of the weekend. It's impossible to buy an "efficient" gym membership. Indeed, if people who bought gym memberships all used their gyms as much as they possibly could, the business model would collapse; there wouldn't be enough gym space, or machines, or showers, to cope.
(b) Mobile Phone Contracts
Mobile phone packages, you might think, are designed to match needs and demands. There's no end of "what package is right for you?" comparison sites. But, nevertheless, packages are dependent on inefficiencies. No-one uses precisely 1,000 texts a month or the exact amount of hours aloud. Indeed, when such a package exists (I have a PAYG package with O2 that enables me to "carry over" credit) the companies stop selling it. These days you pay your tenner for an amount of data and a number of free calls, but the credit is not carried over. Smart arses like me were efficient in our use of the offering, and that efficiency made the offering insufficiently profitable. The mobile phone companies MUST sell "waste".
(c) Media bundling
Now, media packages are interesting, because (i) they link us with the past and (ii) the unsustainability of the model is becoming plain.
In the business-to-consumer world, the old model is, effectively, dead. But it's interesting to examine the inefficiencies inherent in the old model. When you buy a physical newspaper, you will not ready every word of that paper; you will not take in every advertisement. But the person placing the advertisement pays "per reader" and the buyer of the newspaper has to buy the whole caboodle.
When you subscribe to Netflix, or Sky, or anything, I would guess that you rarely use more than 1% (in terms of product) or 10% (in terms of your available time) of that which you are entitled to use.
The inefficiency is plain to see there, but what we fail to realize is that this inefficiency spreads to nearly everything that we buy.
It's Not Just Digital
Take a saucepan. When you buy a saucepan you buy the "right" to use that when you like, how you like, as often as you like, "in perpetuity" (i.e., until you wear it out or you die). But how often do you use it? If it's more than 1% of your waking time, then it's probably your favourite pan.
The same applies to nearly every physical thing in the house. Not for nothing do bed salespeople emphasize that you spend a third of your life using their product. Strangely, you don't hear vacuum cleaner sales people saying "of course, you'll only use it for an hour a week".
How much more efficient it would be if we could "timeshare" saucepans, somehow magicking one up when we needed it from a nationwide pool of shared saucepans, returning it to that pool when we had finished using it.
The concept of "timesharing" certain products is, indeed, offensive to many in the developed world. "Bed sharing" (as immigrants were said to do in the 1960s) was something of a slur. But no-one murmurs about "bathroom sharing", as long as it's sequential rather than contemporaneous.
Why should this be? As with my earlier point, this is a matter of form and content. When we buy a newspaper we don't really buy "form"; as the saying goes, yesterday's newspaper is only good for fish and chips. But when we buy books, we buy form and content. We keep a book. There are and have been more than one method of "timesharing" books – the Popular Book Centre on Clapham Road was an established part of my life when I was young; libraries are a system that enables the sequential sharing of books. But a book has "form". And the point here is that, when we buy anything, we buy two things – the utility that comes from using it, and the right to use it as and when we please. Both of these have value (think of the relative value of getting mini-cabs everywhere and having a 24-hour chauffeur on call), and the proportions in which that value is distributed amongst owners can now be measured to a far greater degree than was possible when, with most products, you had to buy the two together.
The Developing Conflict
The problem here is that which we experience when a system appears that maximizes the efficiency of product distribution. If most business models depend for sustainability on inefficiencies (packages), the creation of more efficient packages by other companies leads to a shift in the economic model of either a business sector or – possibly, society as a whole.
And here we come to news media.
Despite no end of board meetings, strategy meetings, analyses and the like, I found little evidence that anyone in either business to business (b2b) or business to consumer (b2c) publishing really had a clue what to do. This is not to say that they did not know what needed to be done. They knew precisely what needed to be done. Create value so that people will want to pay for the content they get. Even better, create value so that people will NEED to pay for the content they get.
(What was not stated was "also, try to bundle up packages so that, even though they only need a small part of it, they have to pay for a lot more". This was in fact a fundamental Insurance Day strategy about four years ago, when the insurance newsletters were merged into Insurance Day and the price was doubled on the grounds that "much more is being offered". It was in fact the opposite of "meeting customers' needs". It was the archetype of "bundling", a shift towards rather than away from inefficiencies.
That's not necessarily a bad thing in terms of profit-generation. If someone desperately needs something and you are the only supplier, then in the short term you make more money by making them buy other stuff as well. In the long term, particularly in the world of information and analysis, what happens is that someone else comes along to offer better value.)
So, the messages came from on high that, in the land of b2b, "news" was becoming commoditized, and we had to provide analysis, because that had value. What was missed was that (a) analysis is what people like McKinsey provided, and they paid their staff a lot more than publishers paid. And (b) if everybody in b2b moved over to analysis, you would be back where you started.
How so? Well, one of the things that marketers and salespeople missed was that it was not just a question of money that companies were spending. It was also time. It was "attention". In a world where the purchaser was cash rich and time poor, it was the attention that had value. Even if you added tons of value through top-notch analysis, if everybody else was doing it, you were competing for a fixed amount of attention that was available in your market. The one thing that you cannot create more of is time.
(This is not quite true. My own product at Informa, IIN 24, was one of the first to spot the value of time. Although it LOOKED like it only produced a commoditized news service, what I offered was a filter. No analysis, but I have acted as a filter for the reader. While newspapers were getting bigger and fatter, IIN24 stayed small, thin, and easily read. Its selling point was not what was in it, so much as what the editor had discarded as not worthy of the reader's attention. IIN24 was not selling content, it was really selling information time management. This was quite a radical concept in the early 2000s, before it was widely recognized that there was "too much" information out there. This was another example of people often not realizing what they were buying or what they were selling.)
If Everything Is Free, Why Pay?
For my generation, the sheer availability of free content is mind-boggling. I still remember being bored when young because there was "nothing to do". There were only three TV channels, four radio channels (none 'dedicated' to news), books were unavailable, the newspaper had been read. Obtaining information was difficult and pricy.
Today, it's all about time allocation. To get me to spend money on information requires marketing tricks along the lines of "I don't want to be left out" (this works well in the USA, less well in the UK) or "I really want it NOW" (a trick that works well with those who have problems with delayed gratification).
But, note, in both cases, what is being sold goes beyond the content. And, in a time-poor world, what is being sold is, distinctively, time sensitive.
The argument is in many places that there is "too much" content – be that too many films, too much news, too much analysis. I don't buy this argument. I don't think that the amount of content will magically shrink back to what traditional business publishers call a "sustainable level" just because there is more out there than people can consume. The current level is sustainable – it just isn't sustainable in a way that will keep marketers, journalists, salespeople and board executives in the lifestyle to which they would like to become accustomed.
Tom Mullaly made this comment on a The Media Briefing essay by Kevin Anderson. I don't think I can improve on what he wrote:
"‘News’ is from a time when barriers to content creation existed. W/those barriers gone news orgs are marginalized water dealers in a never-ending rainstorm. In 100 yrs the time of ‘News ‘ will be seen as the anomaly, not the current period. I say that to point out the futility of mourning the death of the old model.
"The market does not 'abhor super-abundance'. Businesses trading in a super-abundant commodity abhor its abundance, and that's an entirely different thing. Consumers of it revel in it, and that means you can monetize it, even if it's not quite the news you knew.
"I have endless respect for good journalism and I know how valuable it is in a free society. So do many people watching cat videos and reading 'You won't believe how one weird trick etc.' articles. But we are collectively voting with our attention. Mourn it if you insist, but don't deny what's happening.
"Monetization. The trick is not to monetize the 'news'. It's to monetize attention. Look at the business models that are working. No, they won't support news organizations as we knew them, though high quality journalism will still exist. There is a desire for it, and people will still pay. But they will pay with attention. And that will be enough. Outdated thinking doesn't see it yet.
"You do not sell someone what you want to make. You sell them what they want."
A frequent homily heard by the grunts in the b2b business is the need to "evolve". This is a misnomer. First, species do not consciously evolve. Random things happen to DNA, most of which are irrelevant, a small proportion of which are fatal, and a much smaller proportion of which improve the survivability of the species. In other words, conscious evolution in the corporate sense is most likely to generate a lot of aggravation without making any difference, is less likely to cause the company to collapse and die, and MUCH less likely to generate an improvement.
When the question is therefore asked (rhetorically) in a strategy meeting – "are you saying that we should do nothing and slowly die? " to be followed by the consensus of "we have to do something, so let's pretend to the board that this strategy is going to work, even though we have no idea whether it will or not", what you really have a mutually agreed pretence and self-delusion, rather than a sound strategy.
