Subscription for content is new Net trend
Published: 30 Mar 2001 13:48 BST
Online publishers can't sell enough ads to make ends meet, so they're taking a stab at another way to make money that many had once rejected: subscriptions.
The trend is a risky u-turn for Internet publishers, which years ago decided that customers wouldn't pay to gain access to Web sites. But that hasn't stopped a growing number of sites from dusting off the strategy. Variety.com, Salon.com and Britannica.com are just a few publishers that have recently introduced plans to begin charging for access to content that had been previously available for free.
The experiment serves as a second major test of the viability of online media businesses. If it fails, and the ad market does not rebound, even deep-pocketed online publishers may find themselves with few options other than to fold shop.
"Subscriptions are part of the mix to figure out what the formula is for making money on providing content," said Emily Meehan, senior analyst at The Yankee Group. "In some ways, it's a last-ditch effort to make this business work."
If history is any indicator, the outlook is grim for most publishers seeking to sell content subscriptions online. When the San Jose Mercury News launched online years ago, it tried to get money from visitors but then retreated. Microsoft-backed online magazine Slate started free, then charged, and is now free again.
That picture may be misleading. According to some online publishers making the switch from free to paid content, much of the back-and-forth on subscriptions stems from misconceptions from the early days of the Web, when creating an audience was considered more important than making money.
James Cramer, a director at TheStreet.com and an outspoken proponent of paid content on the Web, says the collapse in the online ad market has justified his company's early subscription efforts.
"We were up against a head wind where our investment bankers were urging us not to charge. Had we listened to them, there would be a dial tone at the other end of this line," he said. "They ain't talking now."
Cramer said that early on, the venture capitalists invented the idea that Web sites would get paid by the number of viewers, or eyeballs, they attracted. "But you don't get paid by eyeballs unless you're an ophthalmologist," he quipped.
Whether Web sites can expect to get paid by subscribers, however, remains largely unproven.
"The cult of the Internet is that information is free," said Paul Grabowicz, director of the New Media Program at the University of California at Berkeley. "People are already paying for access through their ISP, and the idea that they'll have to pay something more is something they're opposed to."
In a recent report from the Consumer Electronics Association, 49 percent of consumers surveyed said they generally oppose paying to download digital content such as pictures, games, e-books, or information and reports. Of those consumers, 76 percent were against paying for information or reports.
Jupiter Media Metrix also reported that 69 percent of consumers are unwilling to pay for content on the Internet. Despite this, by 2003, 78 percent of publishing executives surveyed said they plan to sell some subscription content, versus the 40 percent that expect to add fee-based content in 2001, Jupiter found.
Competition among publishers is stifling. Free access to news and information is simply a click away. The Los Angeles Times, The New York Times and the Washington Post are just a few of the major newspapers publishing up-to-the-minute news on their Web sites.
Analysts say that subscriptions can work for those with a well-recognised brand, which many Internet-only publications lack.
Steven Vonder Haar, an analyst at The Yankee Group, said that for publishers to succeed at adopting a subscription model, their publications must meet three criteria: They must be upheld as must-have, high-profile brands, offer time-sensitive information that benefits from instant delivery, and help consumers be more productive or make money. Examples that stack up include WSJ.com and Consumer Reports.
Even WSJ.com has publicly stated that it is not yet profitable and has not said when it will be. Neil Budde, the editor of WSJ.com, said that during the last year, the division has invested in marketing, editorial and technical developments to build readership and improve its site. The company's subscriber base was up 54 percent to 535,000 at the end of 2000.
Still, the company announced Thursday that it would lay off some of its staff in an effort to cut costs.
"Unless you have something that's really different, it's going to be really hard to charge," Grabowicz said.
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