Bad news for internet junks that mass consume free content. Within three years, around 90% of high-quality online content will be behind paywalls, expects Simon-Kucher & Partners. The consulting firm bases its forecast on research held among 2,700 managers from several industries.
According to the study, the media sector possesses the most pessimistic outlook compared to any other industry. Only 27% of media companies expect significant profit margin (EBITDA) increases in the next three years. As a result of this negative outlook, two thirds of media companies expect the 'for free all' culture to come to an end. They highlight that by 2016 up to 90% of high-quality content would have to be behind paywalls to maintain the sustainability of their business models.
''Media companies clearly see optimised content offers (print and online) as key success factors for the future, but these offers needs to be priced correctly'' says Mark Billige, partner at SKP and an expert in Technology, Media & Telecoms. He adds: ''Media sector senior management has understood the importance of switching to paid content for websites and apps as digitisation grows''. Billige advises media firms to closely investigate their pricing strategy before starting such initiatives as they might turn out harmful if clients on a large-scale abandon a channel. He recommends firms to establish a dedicated pricing function, which can closely monitor value perception and prices charged.
Educate online population
The consultants acknowledge that the transformation will be received with high criticism from online customers. Consumers have until recently had free access to content, regardless of the resources used to make the material available. ''Readers can however understand the value of the content'' says David Smith, Senior Consultant at SKP. Key will be the strategy the media industry follows in educating clients. ''Customers are naturally sensitive to the value they give to content, and therefore they could be educated to pay more''.