What Are the Differences Between Direct & Indirect Payments for Media Products?

Media products include items like books, newspapers, magazines, TV broadcasting, videos and online content. Businesses that offer media content typically generate revenue from direct payments, indirect payments or a combination. A direct payment comes from the purchaser of the media product, while an indirect payment involves sponsorship or advertiser support of the product.

A one-time direct payment occurs when a customer pays for a single item or a group of items at the time of purchase. Most bookstores, for instance, generate the majority of their revenue from direct customer payments. A direct customer payment for media typically takes place when the customer purchases a hard good without any commitment to an ongoing relationship with the media provider.

Many types of media companies receive ongoing direct payments from customers. Typically, these arrangements take the form of subscriptions. Newspapers and magazines usually have subscription fees where a customer agreements to make upfront or ongoing payments for continued delivery of new issues or volumes. Similarly, a customer of a video or audio streaming service may make direct monthly payments for continued access to the company's media products.

The biggest difference with indirect payments is that the customer using the media product doesn't make the payment. Instead, an advertiser piggybacks on the content in an effort to promote its goods or services to your target audience. While you can make revenue using both direct and indirect formats, this balance is delicate. Newspapers historically charge subscription fees to offset some administrative costs, but they need to maintain a large readership to entice indirect advertising dollars.

Indirect payments from advertisers typically vary from print to digital media products. In newspapers and magazines, advertisers usually pay a fee for one or more ad placements within the media publication. While advertisers may pay placement fees on the web, many online media content providers sell advertising on a pay-per-impression or pay-per-click basis. The advertising often is facilitated by a third-party that sells to advertisers and provides ad content for publishers. Advertisers essentially pay based on actual ad exposure or clicks.