Five Choices: Or, Why I Won't Give Dave Pell Twelve Dollars

Prologue

Last week at the New Directions forum in Wisconsin (summarized here) I suggested that online content providers should get used to the idea that they will not make a lot of money from online content.

"Content is of diminishing value," I said. "We can only keep royalties up by creating artificial shortages."

And I received the usual arguments back. People deserve to be paid. People won't produce content unless they're paid. And my suggestion that people get another job - that's preposterous!

But I look now at the trillions of dollars lost by investors when the dot com bubble burst. Much of this money was lost by companies - like Salon, say, or the Industry Standard, or any of the dozens (hundreds?) of companies that went belly up or nearly so - who thought they could make a go of it by offering quality content on the internet.

Content didn't sell on the net, and it won't sell on the net, because the premises of the rejoinder are false: people sometimes don't deserve to be paid, even if they work hard, because the market doesn't work that way. And people will produce content, even if they don't get paid for the content. The online evidence for this is overwhelming, as two billion free web pages will attest.

But still these business plans were launched on the belief that, somehow, this content or that subscription model is, somehow, different. But the interenet is a harsh place, and people learn to become humble in a hurry. Believe me, I know. And so they lost their shirts.

I would like very much to see e-learning avoid this error. This means dashing some hopes (and maybe even a few business plans). It means saying harsh things, sometimes. But if education as an industry loses a trillion dollars, it is not unwitting investors who pay the price. It is colleges, universities, the governments that support them and the students who attend them who must pay the cost.

So, this article. In my email today I received my daily issue of NextDraft, a high quality news summary authored by Dave Pell. Dave has been producing this newsletter for free for some time now, and he would like to make a business of it. I wrote back saying, in essence, the numbers just won't support it.

What I want to suggest is that exactly the same argument applies to online educational content. It's harsh, but it has to be said: you think your content is unique, but it's not.

So read on. The numbers are real.

Hiya Dave,

You wrote,

"So I'm looking for places to take NextDraft in the future. One thing I know is that sooner or later, I've got to make this more of a business and less of a hobby. It's too much work for the latter and someone's got to pay for my satellite television addiction. One idea would be to try to get NextDraft picked up as part of an existing publication. Another would be to include ads.

"And here's another. What if NextDraft became a pay service? I'm thinking of something on the very low-end, say about a buck a month. There might ultimately be two versions of the newsletter, one paid and one free (the free on would either be much shorter, have no links or come weekly - or something like that. Any ideas on that would be quite appreciated)."

Dave, I won't be paying 12 dollars a year and I voted "no" on the poll. Not because I don't like NextDraft. Not even because I think all content should be free. But because I am not willing or able to support this model of paid content. It's not personal or even professional. And it has nothing to do with me, really.

I subscribe to maybe 100 newsletters. A number of them are dailies, like yours. Others are weekly or even monthly. At $12 a pop (a low end figure; most people seem to expect more than $12) I'm looking at $1200 per year, which in Canadian dollars is more like $1800 per year. Or, for me, $150 per month.

That's not bad, but if you add to that my access costs of $50 per month, plus the cost of my own comuter and equipment - I just spent another $700 for my wireless home network yesterday - plus odds and ends, and now I'm looking at a pretty hefty bill. Plus the fact that I would have to go out and type my credit card number 100 times (at least I have a credit card; until a couple months ago I didn't - talk about making online purchasing difficult).

All this for significantly less content than I get in my newspaper (for one year, $172.90) or even the 60 or so channels on my television (one year, $600). And the newspaper doesn't require me to purchase additional reading devices (though I should include the cost of the coffee I drink with the paper).

As I said, I like your column. I like it about as much as a well written editorial, a story and box score of yesterday's Montreal Expos game, a column by Alan Fortheringham or Gynne Dyer. In my newspaper I'll get about 40 or 50 of these items a day (it's not much of a newspaper). Say 40. That means any given column costs me $4.30 per year.

So if we consider the $12 a year you're asking for (which is, again, compared to similar subscription requests, very reasonable), it is three times the cost of the equivalent cost of a newspaper article. Not counting the cost of my computer equipment and access. And not even considering the fact that you don't have to print it on paper and physically deliver it to my door.

This is my problem. Even leaving aside the inconvenience factor, your content would cost me more than other, more traditional content that is of roughly equal value to me. Three times more. And yet it seems to me that the cost of information online should be substantially less than what I am paying for my paper-based content.

How much lower? In various talks I have talked about the target of "two-times order of magnitude." That means that if a column cost me $4.30 per year under the old model, I should be looking at 4.3 cents under the new model. Now you might think that this is absurd, but look even at the situation now. If you look at the average cost of everything I read, say, fifteen years ago and compare it to the average cost of what I read today, you can see that this cost reduction has already been achieved.

As I said, I receive about 100 newsletters. Every one of them is free. I also access dozens of web pages daily, read a number of journal articles, and read about 200 emails (tossing out another 200 spams). I also read three newspapers, which I pay for, the odd magazine, part of a book (on a daily average basis). I subscribe to cable, but my radio access (using an old Rockport radio my mother gave me) is free.

Fifteen years ago, radio (on my old Rockport radio) was free, but everything else cost me money. Oh sure, cable was half what it is now, but I got less than half the channels. Newspapers cost about the same. Fifteen years ago I was averaging more than a book a day, some obtained from the library, but most paid for out of my own pocket (according to the movers, I now own about two tons of books). Free content? Once or twice a month I would get a letter (as opposed to a bill or a flyer). I suppose if I had paid the $20 cents per to send mail I would have received more back.

It should be clear that I pay much less per item today than I did 15 years ago. Easily two-times order of magnitude. Probably more so. So I think I'm on good grounds here.

Now you may say that the information I get is of much lower quality than the information I paid for fifteen years ago. But I would beg to differ. Your own newsletter is a case in point. It is easily of as high a quality as anything in the newspaper now or then. The same can't be said for all the newsletters I receive, but then again, I was never really impressed by Dear Abby yet paid my 2 cents daily for it (fifteen years ago) each day (sometimes two or three times, depending on whch papers I read). I read some discussion from Curtis Bonk yesterday which would certainly equal the quality of the same material were he to put it in a book, but with the added advantage that he said it yesterday, not three years ago.

No, I don't think I need to concede anything on the quality side of things. Television fifteen years ago was even more of a wasteland than it is today. The purchase of books was always risky, especially when you shelled out as much money as I did for cheap science fiction paperbacks. Even supposedly authoritative texts, refereed, audited and selected by a university professor, would contain a certain amount of dreck - so much so, in fact, that we would often skip entire chapters in our study of the work.

So, no. It's not that today's content is of significantly poorer quality. Most of it comes from the same people I would have read in print fifteen years ago, saying the same things (only more recently), in much the same way. I live with a certain amount of poor content, which i dismiss quickly, and I spend most of my days poring over very high quality content. The difference is not the quality. It's that it is cheaper to produce, it's easier to access, and there's so much more of it. That's what drives the cost down.

So finally we turn to the real reason you would like $1 per month for NextDraft: your desire to make it less of a hobby and more of a business. As you say, it's a lot of work, and like me, you have expenses. I would certainly agree that you're underpaid - earning nothing is underpaid by anyone's scale. You certainly deserve to make a few dollars out of NextDraft, maybe even a living. I know the work that you put into your publication, since I do eactly the same thing for more than 1000 readers with my own newsletter.

You may say, "What's a dollar - 5 cents an issue? Surely it's a fair compensation for all the work that I put into NextDraft." But my point is that it's not fair compensation. The value of your column on the open marketplace is not determined by the amount of work you put into it or even the quality of the content. It is determined by what people are willing to pay, more accurately, what people actually pay, for the column. And columns on the internet average much less than five cents per issue. If we apply the two-times order of magnitude rule, it's more like five cents per year.

The real issue here for you, of course, is not how much I pay per issue or per year. It's how much you earn per issue or per year. Let's run some numbers that would tell us, given the current market for online content, what success would look like. Suppose you wanted to make a living off your column. That's, say, $50,000 per year (I picked a number that makes everything add up nicely; adjust according to your lifestyle preferences). To earn $50,000 per year, you need one million subscribers. Probably more, because it's going to cost you a few dollars to send a million emails a day (though, as spammers know, it's not nearly as expensive as you'd think).

One million sounds like a lot of readers when you have a few thousand subscribers. But ask yourself, how many newspaper columnists have a few thousand readers? Not a one. Daily circulation for newspapers is in the hundreds of thousands. Syndicated columnists can count on a million regular readers. And if we look at a potential worldwide audience of a billion or so people online (give or take 500 million), you can see that you need to reach only a miniscule 1 percent of them to make a living from your column. So it's not unreasonable that you could make your living off your column. But, with market demand for online columns being what it is, and with your cuirculation being what it is, you have to overcharge to even hope to pay for your satellite dish.

This is the thing. You can say that "you ought to pay" or that you "desrve" to be paid as much as you want, but I am not forced to pay. Should you charge money, I can always decline to subscribe - an option I exercised by selecting "no" in the opinion poll - and to read a cheaper (or free) publication instead. The point is (and I hate to state it so harshly) is that I don't owe you a living, for the simply reason that I could not possibly pay all the people I would "owe a living" under such conditions. No, the relation between you and I has nothing to do with morality, no matter what the advocates of paid online services say. It is a purely market transaction: you offer to sell me a service at a price, I consider my options, and accept or decline.

The other harsh reality is that, if you do go ahead with your subscription model, you should expect to lose roughly 98 percent of your readers (figures vary depending on who you read). So say you have 10,000 subscribers (which would make yours a very successful internet newsletter, as these things go). You would be left with 200 subscribers. At $12 a pop, you're looking at $2400 per year. That's not bad: it will pay for your satellite system.

But don't forget, that's a percentage based on the churn your free newsletter has already generated. People passing it to their friends. People linking to your home page or to your articles. You have to expect this to drop off once you enter the subscription mode. Oh sure, you will still generate some churn your your abbreviated free version, but a lot less, because it's simply not as good as it was. And sure, people may still link, but many fewer, because people don't linke to link to a sign-up screen.

You may generate enough new subscriptions to offset the inevitable attrition. Hard to say. But it seems likely, unless your newsletter is so much better than the free content that it becomes a "must-read," that you will be fighting a never ending battle to obtain subscriptions. This means advertising and other expenses that you may not have counted on. Just to maintain your current 200 subscribers you may find yourself eating into more and more of your $2400 annual income. And how are you going to advertise to a market that spans the globe?

Your major issue isn't the fact that I won't pay. It is that you are by no means alone.There are hundreds of thousands of blog writers (half a million, according to a recent (free) MSNBC article. On top of that, hundreds of thousands more authors of various sorts, including university professors (each of whom thinks he has the one best way to teach calculus, and that the would ought to pay for it), politicians (who will now and always write for free), sports fans, pundits and consultants, and more. heck, there are even software programs out there that will do much of what you already do - gather relevant news headlines and display them on a page. I know you add a lot of valuable commentary to what you write. So do I - and yet one of my competitors (or it would be, if I were a commercial service) simply harvests topical headlines from PR newswire and has five times more subscribers than I do. It may not be fair that your competition numbers in the thousands, uses automated tools, and produces a lower quality product, but that's life on the internet.

So. You want to make a living with your hobby. In my view, you have limited options.

1. Lower your production costs. That's what some services do. Use a reasonably well-programmed harvester to do most of the work, then take a half hour to add some comments. That way your hobby is more like a hobby again and you don't need to worry about making a living from it.

2. Increase your volume. You may not get a million people to read your one newsletter, but if you managed to get 10,000 people to read 100 newsletters you are obtaining the same result. Unfortunately, you've just increased your workload by a factor of 100, which probably not what you had in mind. You will have to lower your workload by the same amount.

3. Get a million subscribers. For you, probably not a real possibility unless you were to join some sort of larger service that really does have the capacity to reach a million people. You could get a million subscribers by becoming a columnist for the New York Times, for example. For most of us, this probably isn't a live possibility. But it will work for some people.

4. Create higher value content. Let's face it, you are putting out the equivant of a newspaper article. It's good, it's useful, but it's not a "must-read". You can't charge more for it because you wouldn't be able to charge more for it in the traditional print-and-paper world. But if you were able to generate absolutely unqique content that nobody else could offer, you would then have effectively eliminated your competition and thereby increased your market value. That's how companies get away with charging money for stock quotes, for example (of course, having an artificial monopoly on that content helps). Consultants such as Forrester charge more research results that only they have (because they did the research themsleves). For most of us, that too isn't really an option: few of us own stock markets or research institutes.

5. Or - as I suggested (to much derision) at a conference the other day, get another job. The fact is, online content production doesn't pay the bills. But it can act as a loss-leader for the provision of other services. By reaching a wide audience with your free online content you are able to display - almost without cost - your unique expertise or skills. You may be able to obtain employment based on these credentials. Or secure consulting gigs or speaking fees. Or you may do some writing for hire for a firm that could use your easy touch with a typewriter. If you have sufficient expertise and credentials, teach an online class.

To wrap up my discussion, let me sketch a small analogy that, in my view, nails it down.

I play darts. I work very hard at my dart game; I practise for a couple of hours a day. I am actually very good at darts and can walk into most pubs and whip the locals. I have invested a lot of my time, energy and sweat into becoming a good dart player. Just like the hundreds of thousands of people who play baseball, basketball or hockey. We do it for fun, and there are enough of us who are good enough to say that we could be on the verge of turning pro.

We're good, but it turns out that there just isn't enough of a market for all of us. No matter how much I practise playing darts, I'm only going to make a few hundred dollars a year, no matter how much I deserve more for all the work I put into it. It's not fair, but sports isn't fair, and professional sports are even less fair.

So my choices as a dart player are much like yours above. I could practise less (of course, my game might not be as good). I could play in more tournaments - though probably I could never play in enough to earn any sort of reasonable money. I could convince more people to watch darts - but I would need to own ESPN in order to pull that off. I could improve my game and maybe win the big prizes. That means being one of the top ten players in the world, though. Or I could write my darts off as a hobby and derive any value I can from it - the contacts that I make, the line on my resume, the improvement in my character, or the use of darts as a great analogy from time to time as I pursue my day job.

It's not a question of right or wrong, fair or unfair. It's just that there are too many dart players and too few people interested in paying to watch darts. There's nothing I can do about it, but I can say this as certainly as I've said anything else: if I charged $12 a year for people to watch me play darts, nothing's going to change. I still won't get paid any more than I'm making now. And I will have succeeded only in annoying my friends.

Epilogue

See, it is easy to stand at the front of the room in a (sparsely attended) forum and denounce my suggestions as preposterous. It is easy to say that content authors deserve more money, and that anyone who thinks otherwise just isn't in touch with reality.

But the hard numbers don't support the case. The only way to raise the price of online content is to severely restrict the supply. That's why so many LMS and LCMS vendors are signing "exclusive deals" with publishing companies. They know you won't pay several hundred dollars a pop for some B-grade online learning content unless (a) it's the only material available on the subject, and (b) you need it.

It won't last. And even if it does last, I want all of you who are would-be educational content authors to run through the following calculation:

How much did you earn from publishing journal articles and books last year? Take one percent of that? That's how much you will earn from online content.

Now, for those of you creating your online magnum opus, you may be thinking something like this: but I'm already making more than that. I got a $40,000 grant or project or dispensation to create this content.

Well yes. You got $40,000. But the content is unlikely to earn $40,000 back. Not in a free and open market. Do some real calculations: outside of your own course, how many institutions and professors used your online content? How much did they pay for it? How much did you actually put in the bank over and above your own salary?

See, everybody is in the "loss-leader" frenzy right now. The golden era before the bubble bursts. They're drawing a salary, but very few are really selling content. Oh sure, the commercial vendors have established a (temporary) corporate market for (custom) content. But the colleges and universities?

Like it or not, your five options are the same as David Pell's.

1. You can lower your production costs by employing content authoring tools, reusable learning objects, and low paid (graduate student) labour. But this impacts the quality of what you offer.

2. You can dramatically increase your production of courses. This means lowering production costs. And even then, you probably won't be able to lower production costs enough.

3. You can get a million students (if you're the Open University or the University of Phoenix) per course.

4. You can create higher value content, content so good and so unique that people will have to pay for it. But fair warning: it had better be really good - better than MIT's, which is already online for free.

5. Or you can give up on the dream of making money from content and get back to your real job, providing an education. Your content will get people in the door. And it will make your job of providing a service easier. Cheaper for students. But it won't pay the bills.


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