At SIIA Industry Summit 2009 [link broken, 2016-03-10], Pearson CEO Marjorie Scardino [link broken, 2016-03-10] described the framework for Financial Times’ digital and pricing strategy. Financial Times is published by Pearson.

Sardino, referring to print content, stressed the difference between generic content such as news and the value Financial Times provides by quality analysis. Apart from the brand value, it is in particular the supplier generated extra content which defines the product’s market value.

But where is Ralph Lauren?

The newspaper’s price has been increased which led to an increase in number of readers too. Now this is what Scardino calls „The Ralph Lauren Effect”, in marketing more commonly known as snob effect.

Certain target audiences have a need to “feel” quality and identity of a product by price. Customers expect exclusiveness and social prestige in buying. You might compare it to car enthusiasts buying a Porsche’s sound, or like the fact a vacuum cleaner has to be noisy to be efficient. It is about feeling the product and consumer’s identification with it. Lower the price or reduce the noise – sales figures will go down.

This phenomenon works well with exclusive goods. The price indicates the quality of product.

Print vs. music media

So can digital distribution in print media be compared to music in terms of pricing and product structure? Is it possible to transfer the Ralph Lauren model?

Let us start with one premise: The basic situation to be analysed here differs in print and media. Scardino refers to standing the competition within several print outlets. The core issue in music business is not based on rivalry. It is about 1) Upon which sources do I generate revenue? and 2) Is there a way to beat piracy?

The music file is the generic content equivalent to news in print. Just as you can not strip down the newspapers’ product to anything less than bare news, it is the music file you have on the other hand. Unfortunately, this already includes songwriting, performing, engineering and mastering. The manufacturing costs of basic digital music product are easily higher than those for digital news.

Now we have brilliant journalists adding value to articles by analysis of news. Which is the equivalent that renders a music file to an exclusive good? Is there anything that allows for exclusiveness?

What is so exclusive about music?

Several options come to mind. Added value is one of them, such as lyrics and additional information (meta tags & digital booklets). More importantly I am supposed to mention high quality resolution formats without DRM: WAV, FLAC, or even 96/24 FLAC. Yet, I am sorry to disappoint you but none of them will work to eliminate piracy. Most of the afore mentioned additions are available for any artist and – for free. These are the essentials to be provided.

What exactly is this icing on the cake that divides the original from the copy? USP: Unique Selling Propositions. Which is the labels’ core expertise? Service, marketing, and manufacturing. This translates to…

  • Service: Highly interactive information systems providing anything a fan needs. Most suitably subscription based, including limited offerings as well as update options. CRM and regular fees serve as the basic source for revenue streams.
  • Marketing: Bundling, merchandise and extensive licensing to sponsors allows for more free content attracting more listeners.
  • Manufacturing: Yes, I guess we have to stick to some hard copies even in the digital age. Hardcore fans are a specific target audience which has to be adressed. Limited packages or product variants at high price levels foster the consumer’s social prestige due to exclusiveness. Moreover, high quality manufacturing might be one core expertise not to be reproduced elsewhere. Even high cost of individual production can be absorbed by prices at one hundred Euros and beyond.

Be social.

The consumer has to be a part of the action by social networking & social media to promote his social status. That is why he is willing to pay a few quite steep prices on one end of the tail. On the other hand, there is the really long end of the tail paying small and regular fees. Providing a comprehensive 360° licensing model, most basic content should go for “free”.

The difference to an internet service provider’s fee is:

  • No centralised data collection.
  • Improved service options and customer proximity.
  • Space for individualism and flexible strategies and business models.

However, the majority of artists and creative people is not well-known. Is there anything comparable to the approach above which works? I guess I will leave that one for another entry…

This text has been published under a Creative Commons BY-NC-SA 3.0 Unported licence. If you would like to make use of the text or parts of it in a way that goes beyond the scope please get in touch with me.