Turning Surfers into Subscribers

The slumping ad market has sites looking to charge for content. It didn't work early in the Internet Age -- and for most, it won't work now

On May 1, the Rochester Post Bulletin, a Minnesota evening newspaper with a circulation of 43,000, will begin charging nonsubscribers $60 a year for access to its Web site. Jay Furst, the paper's managing editor, says the decision came from the realization that posting all the content online was hurting circulation. And with the ad market in a slump, charging for access seemed logical. "We have a hunch that we can ultimately build interest in our site and build a loyal following," Furst says.

Is it a hunch that is sweeping the online content world these days -- or a desperate bid for profitability? Yahoo! hopes to charge $9.95 a month for real-time stock news and quotes. Variety.com, the online version of the film and music industry magazine, is asking customers to pony up $59.95 per year. Beleaguered business news site TheStreet.com has reversed course again and is charging $199.95 for access to portions of its site.

But most of these subscription initiatives are doomed to failure. "Ultimately, people are willing to pay for content only if it makes them money, saves them money, or it ties into their career or some other passionate, personal interest," says Rich Gordon, a professor of New Media at Northwestern University's Medill School of Journalism. Worse, charging for content could reduce site traffic dramatically and undercut advertising revenues.


 This isn't the first time online content players have wrestled with subscription fees. In the mid-1990s, many sites believed users would pay for the convenience of viewing information on their desktops. When USA Today launched its electronic version in June, 1995, the paper initially charged $13.95 per year. By October, 1995, it moved to a free model. "It didn't take long to realize that paying for content wasn't going to work," says Steve Klein, who edited the site's sports section and is now a principal at New Media consultancy Advanced Interactive Media Group.

But free content hasn't worked, either. Few if any online content sites have made money, either as adjuncts to print publications or stand-alones. Witness the recent demise of sports content site Quokka.com, the 116 layoffs at The New York Times' digital arm, and 90 layoffs at troubled CBS Sportline. In fact, online content appears stuck between a rock and a hard place. While no one is making money on the advertising-only model, the public remains adamantly unwilling to pay.

A December study from Forrester Research shows that online consumers remain skeptical about paying for content. Only 4% said they would be likely or very likely to pay for news or financial information. Only 7% would pay for music or movies and just 9% for books or shopping. Worse, even consumers who said they would pay aren't willing to fork over very much. On average, online consumers would pay only $3.75 for a monthly subscription to a content site -- and not more than $6 per month for any kind of content.

Furthermore, many industry analysts assert that charging for content will undercut a successful ad strategy when the market rebounds. With the tech slowdown, Internet advertising growth has ground to a halt. But analysts insist future growth will be strong. Forrester Research predicts ad revenues for sites other than AOL, Yahoo!, and MSN will total $12.5 billion in 2004, up from about $3 billion in 2000.


 Rather than worry about charging, industry experts say content sites should dedicate resources to developing their customer databases so they can offer advertisers a more compelling reason to buy. Consumers might not pay, but they probably will register for special content such as an e-mail newsletter. With a sophisticated customer database, sites can offer more targeted ads. "Sites will realize that one good, targeted ad per page will be more effective than all the little ones they've worked so hard to pull in up until now," says Medill's Gordon.

One thing seems clear, however. There will be no one-size-fits-all model. Some companies seem to be doing well by charging fees. Take WSJ.com, which has 574,000 subscribers paying either $59 annually to visit the Wall Street Journal site or $29 to add Web access to their print subscription.

For the 2001 season, Major League Baseball is offering a service called GameDay Audio that charges $19.95 for live streaming audio of all 30 teams' games plus real-time stats. That means a Kansas City Royals fan living in the Big Apple can always listen to Royals games. "People have always been willing to pay for things they value," says WSJ.com editor and publisher Neil Budde. But even the Journal understands that eyeballs and advertising alone might work in some cases. That's why WSJ.com also offers a small network of free sites targeted at lucrative niches, such as entrepreneurs and job seekers.


 To be sure, even following these rules is no guarantee that paying for content online will ever be a home run. Operating income for the WSJ.com for the first quarter was only $7.8 million, excluding restructuring charges, down 21% from a year earlier. And while getting access to every baseball game is convenient, savvy Web surfers might be able to find a free online radio broadcast themselves with a few clicks of a mouse.

For now, though, most content sites are looking for survival tactics, not a new business model. "Sites just need enough revenues to make it profitable in the interim until we can figure out how to make the Internet pay," says consultant Klein. With revenues plunging at parent publications and advertising spending in a tailspin, many may not survive. That could leave greener pastures where the strong get what they demand, be it from advertisers starved for online outlets or for readers starved for something good to read.

By Jane Black in New York

Edited by Alex Salkever

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