My friend and co-author Nicholas Lovell regularly sets out his belief that the future of digital media is a tiered business model where the majority of users get the content for free and heavy users pay, with very heavy users paying heavily. The games industry has made this model work with free to play games supported by virtual goods and/or subscriptions for true fans – companies like Mind Candy (Moshi Monsters) and Bigpoint stand out as having made this work really well.
Whilst the games industry has figured out a way to make this model work, the same cannot be said for the news, book, TV, movie or music industries, not yet at least. Part of the challenge is the absence of an equivalent to virtual goods.
That said, it seems the New York Times is now thinking along the lines that Nicholas suggests.
Peter Kafka of MediaMemo recently interviewed Ken Doctor, the Digital Czar of the New York Times (I think the New York Times website has the largest revenues of any digital news organisation) and Ken said the following:
But I’d just remind you that we’re still very much in the advertising business. It’s our core business. We don’t expect the vast majority of our users to see the paywall, and we expect to remain a very very large player on the web.
That sounds like the beginning of a ‘whale strategy’ to me. The next step would be to offer these core users opportunities to spend even more money – maybe for conferences, access to celebs, or even early access to news. Bigpoints biggest customers spend tens of thousands of dollars a year on virtual goods, and the New York Times can get something similar going it would reduce their dependence on advertising and drive up the amount they can spend on generating quality content.