Saturday, May 9, 2009

Paying for value not a new idea

Paying for value is not the new idea.

The new idea was paying upfront, by which I mean, you purchase something before you check it out, or even see it, like if you have a newspaper subscription--you're paying for newspapers that haven't even been printed yet!

People do not do that normally. They get a haircut and then pay. Usually order their food, eat it, and then pay, unless it's fast food. Even at the grocery store, you get possession of your food first, in your grocery cart, and later you pay.

ONLY with novel items or very well-known products, like fast food, do we pay upfront. Can you imagine giving the grocery store people a list of foods that you plan on buying, paying first and then going into the store to collect your items?

But you buy a newspaper in that way. Or you may have a subscription to cable television in that way, paying before you can check out for quality first.

It may be hard to see a newspaper as a novel item, but behavior says it is, as news was not a commodity, until maybe with the Internet.

Somehow the Internet has turned news into less of a novel item so most people refuse to pay upfront, and they don't see it as a known commodity--where you don't worry as much about quality like with fast food--so they can't be convinced to pay upfront.

And We, the people, are right! Buying upfront on television for so many years gave us a lot of crappy TV!!! People decried the quality problems but entertainment executives had a lot of power in being able to choose what could be watched, because people would buy with their attention anyway. And we got a lot of crap, but kept watching that novel thing called a television for years. But now, increasingly we won't. So television revenues can be predicted to crash.

My guess is that what is happening to the newspaper industry is the canary in a mine, and that a very rapid collapse in revenue can occur for the television industry, and it could be the next industry asking for a bail-out.

Buying behavior is not that complicated: novel items can become wanted before being checked out so people pay upfront. Newspapers, television and some other things were novel enough that executives in those industries got spoiled by the power to choose for people who would still buy. Today somehow the Internet has reverted people back to normal buying behavior, so they wish to carefully pick and choose--and pay later.

However, industry executives who had a lot of power don't want to give that up, and they don't trust the public, so unlike, say, a high end restaurant owner who trusts you to pay for your meal so doesn't make you pay first, executives in media are claiming that either you pay upfront--as you cannot be trusted--or the content must be paid for by advertising, and then they don't let you pay any other way.

Their power will be gone. The return to old buying behaviors will make crappy popular television shows a thing of the past, as it will force change, but no surprise, people who had lots of power in the old system can't seem to figure out the simple solution that your barber knows--pay after.

Could it be they fear the loss of that power? That industry executives will cling to it as long as they can even if newspapers go down in flames and later television stations begin to follow?
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