Are apps the future of media?

For more than 15 years, we've been trying to get people to pay for content via the Internet. Companies have tried to sell subscriptions to newspapers, magazines, music and video, pay-per-view services and the like, and with a few exceptions, they've failed. Consumers equate the Internet with "free"; they pay once a month for Internet access, but everything else is included. If someone does try to charge for media, consumers will almost always find an alternate source that's free.

Cable television in the U.S. is in a similar situation. Cable operators have figured out how to get consumers to pay (grudgingly)  for tiers of service that contain multiple channels. The premium channels that are sold on a monthly basis, like HBO, Showtime and Starz, have themselves evolved over time into packages of channels to keep viewer interest (for example, HBO East/West, HBO2, Signature, Family, Comedy, Zone and Latino.) Service providers have to offer discounted packages in order to obtain subscribers, and cancellations rise when the discounts expire.

Video service providers outside the U.S. have experimented with a la carte pricing for individual channels, but the results have usually been disappointing; the operators find that they can make more money by offering pre-packaged tiers of programming, and consumers rarely protest the lack of choice.

Perhaps apps, rather than the Internet, are the future of media. Consumers have shown a great willingness to buy apps, if they're inexpensive. The micropayment schemes that failed so miserably on the Internet work beautifully for Apple's App Store, which takes all the friction out of transactions.

Consumers will pay for eBooks, magazines and newspapers in the form of apps. They've made the Apple iTunes store the world's largest retailer of music. They're willing to pay for content, if it's an app, works on a mobile device and is cheap. In this model, the Internet is (sometimes) the channel of distribution and the app is the medium.

As much as many of us have been railing against "old media" companies for bringing their business models to the app world, it seems to be working a lot better than anything they've tried on the Internet. I don't think that we're ever going to be able to erase the perception that "everything's free on the Internet." By comparison, consumers aren't just willing to buy apps, they eagerly buy. If we want to sell content, the most likely way to do it is as apps.

New Media Financing, Part 2: Who pays the bill?

At the dawn of the commercial radio era in the U.S., radio stations were established to sell radio receivers. Pittsburgh's KDKA, generally accepted to be the first commercial radio station in the U.S., was an experiment funded by Westinghouse in order to sell radios: People bought more radios if they had more things to listen to. NBC was established by RCA primarily in order to sell radios. The equipment sales-network relationship survived well into the television era; the reason that NBC's symbol is a peacock is that RCA used the network to sell its color television sets. People bought more color TVs if there were more shows to watch in color.

That concludes our history lesson for today, with the point being that business models evolve over time. Advertising wasn't the first, or the only, business model for broadcasters. The Internet is at a stage of commercial development similar to that of radio in the late 1920s and early 1930s, with a bunch of models but no clear path to profitability.

Companies and individuals are pursuing a variety of business models, alone or in a myriad of combinations:

• Subsidized: The content is provided by an Internet Service provider at no additional charge. Comcast's Fancast service is a good example of this model. Fancast is available only to Comcast subscribers, and is a part of the company's high-speed Internet service.
  
• Advertising: The content distributor sells advertising, and the content is usually (but not always) made available to consumers for free, in return for exposing them to the advertising. This is today's dominant business model.
  
• Subscription: Consumers pay a monthly or annual fee for access to content. The Wall Street Journal and Financial Times are examples of subscription-based content providers.
  
• Pay-per-View: Consumers pay a one-time fee to access content, usually for a single viewing or for a limited amount of time. This model is often used for high-value content such as movies, concerts and other special events.
  
• In-Game Transactions: Consumers get access to the basic game (or other content) for free, but to take full advantage, they have to buy virtual property and services within the game (everything from clothing and livestock to spacecraft and weapons.)
  
• Carriage Fees: I'm not aware of anyone using this on the Internet, but it's very common in cable television. Typically, well-established cable networks charge a per-subscriber fee to cable operators for the right to make their channels available to their subscribers. Those fees are then passed on as part of subscribers' monthly charges. There are also reverse carriage fees, which are paid by new cable networks in order to get carriage on cable operators' systems. As those networks grow and succeed, they can move from paying for to being paid for carriage.

There are other models, such as the "tip jar" approach where consumers pay whatever they want to a content producer, but these models are rarely sustainable.

The fact that none of these business models has clearly established itself (with the exception of search advertising, which is a special case) could indicate that we haven't yet found the right model, no such model exists, or we're following the right models but implementing them in the wrong ways.