Introduction to revenue mode for media consumption

One of the most important aspects of media is the fact that the media industry is just that: an industry. Most media producers and outlets are commercial in nature, with the main objective of making money. There are several methods or “revenue models” that media companies use to make money. The four most common revenue models are discussed below.

Advertising

Advertising is the most common of all revenue models in traditional media and online. TV shows, newspapers, and websites offer their content (programming, news stories, etc.) at no charge (or at a low price) in order to attract a large audience. Advertisers wanting to promote the products they’re selling pay the media outlets, who in turn place ads in between their content for the audience to experience.

Advertising is most commonly used in media outlets that 1) can’t cover their entire costs just by selling their content (like newspapers and magazines), and 2) would have little to no audience if they charged (or charged more) for their product. For example, a newspaper would never sell at $5 per copy, and you wouldn’t pay $30 for a movie ticket, so advertising is there to subsidize the cost.

Subscription

Subscriptions are great for media types that are continually being updated – think a newspaper, a magazine, or cable TV – or have some kind of ongoing value – think websites like LinkedIn or informational databases. Subscriptions are popular with media companies because they provide steady revenues over time. This revenue model doesn’t work with media considered a commodity – something you can get elsewhere for little to no cost. An example of a media commodity is news – you can get it all over the web, so paying for a subscription to a news website means that site should provide significant value beyond the common news found elsewhere. The Economist and the Wall Street Journal are examples of news websites that offer significant value beyond what you might find for free on Google News.

Pay-per-item

The pay-per-item model works for media types that come in an individual package, offer no ongoing value, and are sustained through sales alone. An example of this is a pay per view movie on cable, a movie ticket at your local theater, or a CD or DVD.

Merchandising

Media companies use merchandising as a secondary, or ancillary, income. This is popular with recognizable media franchises whose fan base would want to purchase related items. An example might be the merchandising efforts of a company like Disney, which produces and sells merchandise for all of it’s big-budget movies and TV shows. Many times, merchandising efforts earn more income than the media product it references. For example, the original Star Wars movies earned more income through merchandising than through ticket sales.