Quote:
Originally Posted by Paul Markham
If a site lost all traffic costs it could sell memberships at $10 a month no problem. The ratios would be better and the profit margin the same. I know this from the $5 sites you guys take the piss out of all the time. I can see why because if the business moved to this model it would be worse for you than Tubes. But the ratios are great on little traffic.
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I have to say that Paul could easily be right about this. Let's use the music business as a parallel. We're going to see more and more artists (program owners) going independent from the studios (affiliates) because they can make so much more money per unit (membership) by selling a far fewer number of units that THEY get all the profit on. The Internet allows them to do this, they can now market on their own vs. relying on the studios to do the work.
For most artists, the money comes from live performances. Many even LOSE money on studio releases because of all the upfront advances and costs the artist is saddled with (PPS model?). But once they're established, by going independent, they can continue making that same live performance dollar AND make money off their CD and digital releases.
Ask Prince how much money he made from his big-selling studio releases vs. how much money he made from the weird 2 and 3 CD sets he sold cheaply under his own name while independent. Those things weren't chart blockbusters, but he CLEANED UP.
Risk vs. reward. Having affiliates lowers your risk but you have to share the reward. If you can take on the risk of generating your own traffic, you can keep that portion. It all depends on how much risk a site owner is willing to take on, so the answer to the original question is "it depends."