stories filed under: "price"
Understanding The Difference Between Price And Value; Product And Benefit
from the let's-try-this-again dept
Earlier this year, in response to yet another editorial somewhere where someone insisted that if something has a price of zero, it means that people don't think it has any value, we pointed out that price and value are two different things. Price isn't determined by value -- it's determined by the intersection of supply and demand. Value plays into that, by determining what the demand part is. That is, if I value widget X at $10, then I'd be willing to pay anything less than $10 for it. If the intersection of supply and demand prices widget X at $5, it doesn't mean that I value it at $5, but it does make it likely that I'll buy it. The same is true if the market prices it at $0. It doesn't mean I place a $0 value on it. It just means it's worth getting at that price, since it's below what I value it at.In the past few months, this discussion keeps coming up again and again -- and it's good to see folks pushing back and pointing out the difference between price and value. The latest is Amy Gahran, over at eMedia Tidbits, where she takes a journalism professor to task for asking whether journalism should even be done at all if people don't "find value in what we as journalists do." First, Gahran makes the point that, historically journalism has always been more supported by ads than people anyway, and then makes the price/value distinction:
just because people aren't willing to directly pay cash for something does not necessarily mean they don't "find value" in it. For instance, when was the last time you personally chipped in for a clinical trial? And how are you paying for that air you're breathing right now?She then goes on to make another favorite point: too often, those in dying industries mistake the product they're selling with the benefit they're selling. The horse carriage makers mistakenly thought they were in the horse carriage business (product) rather than the transportation market (benefit). The best way to succeed is not to focus on the product, but the benefit you're providing your customers:
Some benefits are assumed to be part of the environment in which we exist. That's what it means to have an environment. If a benefit grows scarce to the point that people feel they must directly pay cash from their pocket to keep getting it, there's probably a far more dire calamity at hand than that single point of scarcity. Most people will almost always seek other free sources of a benefit first.
I think it's important to bear in mind that people value benefits, not necessarily forms. The key benefit that journalists and news organizations have provided has been relevant, timely, accurate information that helps people make decisions, take action, and form opinions. For over a century we've established an ad-supported business model around packaging that benefit in a form known as "journalism." But that's not the only form this benefit can take, and many parts of the "American public" (and the advertising industry) are figuring that out.Good stuff.
Just Because Content Is Free Doesn't Mean It's Worthless
from the let's-try-this-again dept
A few folks have asked me to comment on a recent post by Jonathan Handel, an entertainment industry lawyer, bemoaning the idea that content has become "worthless." If this sounds familiar, it's because he's merely the latest in a long line of folks to confuse price and value. That's unfortunate, too, because the piece starts off really solidly, with an extremely accurate understanding of the basic economics impacting the content industry. He notes, as we have time and time again here, the reason that price is getting driven to zero. His mistake, though, is equating price with value. He gets really close to recognizing this in his fifth point, where he notes that: "Computers, web services, and consumer electronic devices are more valuable when more content is available." In other words, that content does have value, it's just not reflected in the price (due to the infinite supply).What's really unfortunate, though, is he then comes to exactly the wrong conclusion out of all of this. Rather than recognizing that the fact that content increases the value of so many other things opens up a ton of new business models, he goes off and makes a bunch of statements that simply aren't true about what's happening in the content industry. First, he claims that there's now less money to be made today in content creation. That's simply untrue. There's a lot more money being made in content creation than ever before -- but it's much more dispersed. It's no longer all being made by a few big content companies. Then he says (and this is almost laughable): "Another effect is that the market for professional content is becoming more concentrated and less diverse." That's simply not true at all. The number of people producing content for money is larger than at any time in history.
The problem seems to be that Handel only considers content made by big content companies as legitimate professional content. This isn't just elitist, it's wrong. What these new models have done is created legitimate ways for totally new forms of professional (and, yes, it is professional) content creation. Professional content is coming from many sources these days, and while that may be a threat to the old infrastructure -- it's not a threat to professional content, which has actually become less concentrated and significantly more diverse. Anyone who thinks there's less diverse content available these days isn't looking very hard.
Finally, he claims, oddly, that "audiences are shifting more of their spending to hit properties" which pretty much goes against everything that most of us are seeing online with "the long tail" and such things. Since Handel seems to only define media as big media and assumes that all content that is free is "worthless" it's no surprise that he'd ignore it in his calculation. But, the simple fact is that he's wrong about what's happening. Content may be becoming free, but that's opening up tremendous value (which drives more content creations) and that content is coming from a much longer tail of diverse and varied content producers. It may be troublesome for the big entertainment infrastructure he's used to dealing with, but it's hardly bad for the real content industry.
Filed Under: content, diversity, free, price, value, worthless
