Optimizing Your Industry to the Point of Suicide

A trend is starting to form. A trend of revolt by the audience, who are annoyed that they are being reduced to an exploitable asset.

What if I gave you a choice between doing the right thing, and doing the wrong thing. Which one would you choose?

You would probably tell me that it is a silly question and that you would obviously choose to do the right thing. Who wouldn't?

Okay, fine. But what if I then told you that by doing the wrong thing, your revenue would go up by 25% and your costs would drop by 50% (doubling the profit), now what would you do? Would you choose to do the wrong thing and go for the money, despite the fact that it is still the wrong thing to do?

This is actually the exact dilemma we are faced with in the media industry today. The right solution requires you to focus on creating value and creating a product that mixes carefully selected and relevant advertising with other income streams like subscriptions.

But there is a much simpler way to earn money. Just dump down your editorial standards, fire your talented journalists (who are also the most expensive ones), and spend all your time monitoring the web for popular topics and then copy/pasting them to your site. Buzzfeed, for instance, is a perfect example of that model.

It's not limited to newspapers, it's even worse in the gaming industry.

Last night, I wanted to just relax with a game for a few moments, so I downloaded Asphalt 7 for my Nexus. But, upon starting the game, it immediately became apparent that this game was yet another one of those "we will annoy you until you pay us more money" kind of things. Every single event involved something that you had to pay for to be the best. At the beginning of the game, you can play with the free options, but later, you simply cannot compete unless you pay up.

We all remember what John Riccitiello, the CEO of Electronic Arts, said at a stockholder's meeting last year:

[...] The second thing and this is a point that I think might be lost on many, is a big and substantial portion of digital revenues are microtransactions. When you are 6 hours into playing Battlefield, and you run out of ammo in your clip, and we ask you for a dollar to reload, you're really not very price sensitive at that point in time. And for what it's worth the COGS on the clip are really low, and so, essentially what ends up happening and the reason the play first pay later model works so nicely, is a consumer gets engaged in a property they might spend 10, 20, 30, 50 hours on the game, and then when they're deep into the game they're well invested in it, we're not gouging, but we're charging, and at that point in time the commitment can be pretty high. As a personal anecdote I spent about $5000 calendar year to date on doing just this thing, this type of thing, on our products and others, I can readily attest to how well it works. But it is, it's a great model and I think it represents a substantially better future for the industry.

This is like a heroin dealer giving you a free weeks supply, and just when you are hooked that's when he will force you to pay. And John is apparently an addict himself, having spent $5,000 in microtransactions in games himself.

The problem is that, in order to optimize the bottom-line, they are completely decimating the relationship they have with their customers. This is exploitation 101 ...something that used to be in the realm of criminals and scammers, but has today become 'normal business practice'.

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