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Number
20: September 17, 2003
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This week in Katydid:
Packaging
as Copy Protection
Copyright. Trademarks. In America, we like to own things. We are as
acquisitive as we are inquisitive. For publishers of music and software
the issue goes beyond rights to profitability. People are stealing their
creative work by making copies.
Michael Schrage who writes a column for MIT's Technology
Review recently poked fun at publishers in an article titled,
"The Customer as Enemy."
Increasingly, innovators are trying to constrain, curtail, confine,
and control their customers as opposed to cost-effectively creating
greater choices for them. For understandable but controversial
reasons, innovators invest heavily in techniques and technologies that
treat customers as potential thieves and competitors. (Sept. '03, p22)
To some degree, the publishers of music and software have lost touch
with their roots. In the 80's, Microsoft used to sell one copy of Word per
company. Because they couldn't prevent copying, they charged a
higher price. In part, this is the reason that CDs initially were so
expensive. The publishers knew how easy it was to make clean copies.
It's kind of an inverse pyramid, the first buyer pays the premium, and
everyone else rides free.
Of course, the publishers benefit also. Easy copies lead to more
universal adoption, which means more companies buy the software, more
consumers purchase music. That's the reason behind the rapid rise of
Linux and (because of underground tapes) the prominence of Rap music.
Supporting this strategy were two key factors: support and packaging.
If someone ran into a problem with their software, they had to prove
ownership, which meant it was worth buying the product to get support.
Additionally, software publishers used to include manuals and other aids
such as quick references.
Over time, the publishers stopped thinking of the retail price of
their product as a compensation for copying and began to think of it as
the actual value. I guess they got used to spending the money. Rather
than look at all those users spreading their brand, they began to see
them as lost revenue.
For me the point where it became adversarial is when software
publishers stopped including manuals. They saw licensing the books as a
new revenue stream. So, if you wanted to use the software effectively,
you still had to pay $50. This helped capture the lost revenue, but it
meant that the honest customer now had to pay twice – and the price of
the software was rising rapidly.
With music, packaging also played a key role. Think back to the first
CD or album you purchased. I'll bet you can remember the smell and feel
of the paper, or the drama of the design, as much as you remember the
music. There's a sense of ritual to opening a package. The breaking of
the seal, the anticipation of those first notes, reading the lyrics and
singing along - these are all part of the experience. You get none of
these from a MP3.
In Japan, they consider it rude to give a gift without wrapping it.
Even business cards come wrapped. I believe that every interaction
should be packaged as a gift. A gift carries promise. Trust is built by
fulfilling promises. Therefore, when you make the experience of your
company or business a gift, you begin to develop trust. The better you
fulfill that promise, the more you win trust.
The music industry is catching on; Universal, the largest publisher
of music, recently lowered the prices on all their CDs from about $19 to
about $13. They have a long way to go to rebuild trust, with the RIAA
suing their customers for sharing music.
Downward pressure on pricing is nearly impossible for the software
industry because they've invested so much marketing convincing people
that their products really cost that much. They've even committed to
subscription pricing models that force customers into regular payments.
However, they could begin to restore trust simply by trying to add value
back to their packages.
Some of this software now costs around a thousand dollars. Wouldn't
it be great if instead of an incomplete manual, you got a full set;
instead of searching help you could get training DVDs; rather than a 900
number for support you got 24-hour free support (from humans). All those
rewards for just being honest might even make you loyal. You shouldn't
have to bribe your customers to be loyal, but a little gift never hurts.
Top »
Ignore
What's Behind the Curtain
In The Wizard of Oz, when the Wizard is revealed as human, he
clings to his cover and tries vainly to get Dorothy to ignore him. Once
that veil drops, there's nothing to conceal the truth and there's no
going back.
Magazine publishers face a similar quandary. They want to use digital
publishing media to reduce production costs and to give more value to
their readers, but they're not sure they're ready for the curtain to
drop on their metrics.
For media buyers, digital magazines offer great advertising
opportunities. They can track open, click-through, and response rates
for all their creative. Using this information, they can build more
targeted advertising. They can also pressure publishers to perform.
Readers like the convenience of digital media. They can access the
content from their computers and PDAs. They don't have to carry around
tons of paper – especially if they receive many B2B trade magazines.
They receive information faster, and they can skip right to the
editorial content they care about.
That last point is what frightens publishers and media buyers alike.
In "Will Advertisers Kill the Goose before It Lays a Golden
Egg" in Circulation
Management magazine, Michael Hiatt, VP of Media Services at
Blaine/Olsen/White/Gurr lays out the concerns:
These are the things media buyers are salivating over,
and you have to decide as circulators and publishers how are we going
to do this - open up some of your dirty old secrets and let us get
involved with numbers like that. You're probably terrified. I know I
would be. (Sept. '03, p. 33)
The dirty secret he's referring to is that many publishers are
concerned with the open rates their magazines earn. Right now, media
buyers rely on polls and surveys to determine who really sees the ads
they place. Much of this comes from the publishers themselves. Hard data
from digital magazines might undercut ad sales for their print versions.
For consumer publications, newsstand sales and subscriptions
translate directly to open rates. For trade publications, it's much more
difficult to predict. Many of these subscriptions are not paid, so the
incentive to read is not as high. At the same time, executives often
share these magazines in the office, which increases visibility.
Once publishers start advertising open and click-through rates on
their advertising, media buyers will use that as leverage in
negotiations. However, keep in mind that the digital and print
experiences are not the same. You simply can't draw inferences across
the two.
Here's why. Print is a browse media. Sure, you have a table of
contents, but you have to flip through advertising to find it. Digital
readers won't accept that experience. Any delays or roadblocks will
consume computing resources. They want to go right to their content.
In fact, even when the same person receives both media, that person
will behave differently based on the experience. They may feel more
inclined to browse when online than when holding a magazine.
Additionally, when reading at work they may feel more pressed for time
than when reading from home, or on the bus.
Digital metrics, therefore, only tell you about the digital
experience. Still, they might pressure publishers to do more research to
prove it.
The real opportunity missed is the chance to do what digital media
does best, which is serve up content in dynamic context. Digital
publishing won't take off until they abandon the idea of duplicating
their printed content in PDF and become flexible. Digital content would
work best with advertising targeted to both the content and what is
known about the audience.
I see a time when buyers purchase a target group and content keywords
rather than page placement and size. That would be a pay-per-serve model
rather than a pay-per-click. Media buyers would have stronger ROI
metrics and publishers would be able to sell more than one advertiser on
the same editorial content.
A sponsorship model is a good fit as well. When an advertiser
sponsors the content, they get the chance to associate their value with
the editorial value. With digital media, it's not good enough anymore
simply to be in the neighborhood.
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Kind regards,
Kevin Troy Darling
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