Consumer surplus?

Inventing euphemisms for your dead business model

Last week I came across the term “consumer surplus”, the Boston Consulting Group claimed the gap between the cost of producing media content and what customers are prepared to pay creates a “consumer surplus”.

That consumers of media want it but aren’t prepared to pay for it is a basic truth; the 20th Century media model is based upon advertising subsiding journalism and entertainment.

For all forms of media this was true; from TV and radio stations being fully funded by advertising to newspapers and magazines’ cover prices barely covering distribution costs.

Take out advertising and all these models are dead. The only alternative is government funding.

Losing the advertising rivers of gold to web services is what’s killing the established business model. It appears that TV and radio will hang on, for now, but newspapers and magazines are in serious difficulties.

Simply put, there has rarely been a market for journalism; readers and viewers aren’t prepared to pay. Journalism’s golden years of the 20th Century were based upon having a relatively captive market for advertisers; now advertisers can go elsewhere, they have.

Putting a sophisticated  label on a basic concept is something consulting companies are very good at and Boston Consulting Group has done an excellent job with this report.

The fundamental truth is that it doesn’t matter how good your product is, if you can’t find a way to make someone pay you for it then you don’t have a market or a business.

Which is what the real challenge is for online content creators, finding the model that pays. The first person to do that becomes the 21st Century’s Randolph Hearst.

Similar posts:

Author: Paul Wallbank

Paul Wallbank is a speaker and writer charting how technology is changing society and business. Paul has four regular technology advice radio programs on ABC, a weekly column on the smartcompany.com.au website and has published seven books.

Leave a Reply