Monetizing Digital Media Problem Overview

Problem Definition

When digital content first became available online, many companies in the news publishing and magazine industry offered “free” online content.  These past prices are likely to act as anchors for today’s prices.  Therefore, consumers have been conditioned to expect the price of such digital content to be “free.” Publishers are now faced with the challenge of changing people’s perceptions of the value of digitized media.  The pain of paying for content that is expected to be free presents a difficulty to adjusting from that initial reference point.  According to a 2010 Nielsen survey, 85% of internet users felt that online content which is currently free should remain free.   The survey further found that consumers are less inclined to pay for news and user-created videos when compared to purchases of other certain media, such as movies and games.

Background

The newspaper and magazine sectors initially offered their online content as “free” with an advertising-based business model, where the majority of revenue came from advertisements on their websites. Publishers are now beginning to realize that their traditional methods of monetizing digital content including online advertising are no longer as profitable as before.  This is due to various economic, social, and technological factors.  For instance, the U.S newspaper industry lost $3.1 billion in online advertising during the economic recession of 2008-2009 and in the following years, it has experienced flat or marginal growth. Also, the prominence of Google and its online aggregators which collect news together from multiple online sources has siphoned revenue from publishers.  These online aggregators have made it much easier for internet users to access information by organizing content in useful ways.  The growing number of users has made these aggregators very attractive for advertisers to use. As a result, the preferred medium for advertisers to interact with potential consumers...