Why get something for free when you can pay for it?

Media to Google: Pay for our content

Google to media: Get stuffed, its free.

Maureen Dowd talks to Eric Schmidt about the media getting some of those Google riches for its own

He declines to pony up money, noting that newspapers could opt out of giving their content to Google free and adding, “We actually like making our own money for obviously good capitalist reasons.”

Yes, there is a crisis in the media but like so many other crises, this one is based on poor economics. Many people point to issues of the declining quality of content that is hurting the media. This is no doubt true, to a certain extent.

But more so it is because the media doesn't understand the economics of its own business in the new online world. They love Google because it drives content to their sites. They hate Google because Google, through its targeted advertising, is really the only ones making money in this transaction.

They give links to Google for free but then demand payment. Paying for something you would otherwise get free is not a wise economic decision and Google is not staffed by dummies.

For too long, the media has been giving away its content, which therefore has become increasingly commoditized. You can basically read the same story or opinion anywhere on the web. Most news sites have really very little content that is differentiated and therefore valuable.

The media will not make money by giving away content, even if it makes up for it in volume.

Apple tells music retailers how to behave

Here is a great example of a market leader signaling to its competitors the rules of engagement. So Apple is the market leader in downloading music, right? So when it raises its prices, what should the competition do? Lower their prices in order to win over users and gain marketshare, right?

Wrong?

They just follow right along and raise their prices too! Apple goes from 99 cents to $1.29 and so does Amazon, Rhapsody and others.
The concept is simple and is illustrated so well by Bruce Greenwald and basic economic theory.

Apple rules the market for downloadable music and every competitor knows, Apple could credibly take them on if it really wanted to. So who wants to launch a margin-busting price war with Apple when you could just imitate their prices and maintain your own comfortable share of the market.

Because of its dominant position, Apple is able to set prices for the rest of the market and everyone follows in proper obedience.

This example is a great counterpoint to the magazine industry that is fragmented, without a clear leader, and totally unaware of its own value.

Rather than the industry raising prices to protect their own margins, magazines are on this destructive race for the bottom in a vain attempt to attract subscribers. In the end they just end up commoditizing their own business because they are now unable to spend in order to innovate, and they create the perception that their product is cheap and replaceable.