ESPN Bets Sports Fanatics Will Pay for Online

ESPN The Magazine, the decade-old print offshoot of Walt Disney (DIS)'s wildly successful cable sports network, is about to begin charging for access to its Web site. As of June 5, the company shuttered its site and is merging almost all of the magazine's Web content—which includes articles and ongoing Web video series‐into its ESPN Insider service, which costs $6.95 a month, or $39.95 a year.

At a time when many media companies are merely jawboning about demanding fees from online users, this magazine is doubling down on it. More broadly, such a move by a well-known name will plumb whether a paying customer equals a more enthralled customer—the term in the trade is "engaged"—and a more valuable target for advertisers as well.

ESPN The Magazine is well placed to test these waters. Rabid sports fans have bottomless appetites for sports info and the universe of data, jargon, and inside jokes surrounding it. (I write this as one sufficiently removed from sports to find much of ESPN's lingua franca to be decipherable only by native speakers.) The Insider has 350,000 paying subscribers, say executives familiar with the figures, and its parent site remains free. "There is an audience that just loves games" and flits on and off sports sites only to grab scores, says Editor-in-Chief Rob King. But others "love the in-between stuff—the predictive stuff that helps them be smarter fans." They're the people the company is banking on. It also helps that many like to wager on sports, though ESPN doesn't say so: When information can be translated into currency, people pay for it. Insider's most popular features include data, tools, and deep-dig analyses geared to fantasy-league players and other stat geeks, and "Rumor Central," which gathers and comments on sports tidbits from other media, such as newspapers and local call-in radio shows.

The magazine's move comes as paper-based media reel from both a brutal print-ad environment and an increasingly disappointing online ad environment, factors that made the first three months of this year the worst quarter since . . . well, pretty much ever. Time Inc., the largest U.S. magazine company, notched a 30% ad revenue decline in the first three months of '08. (Ad pages at ESPN The Magazine fell 31.8% in the same time frame.) Key media chieftains, including News Corp. (NWS) Chairman Rupert Murdoch and Time Warner (TWX) CEO Jeffrey Bewkes, both publicly discussed in May the need to extract some fees from online users. Newspaper executives quietly met in Chicago in late May to brainstorm such strategies as well.

Still, ESPN Publishing's general manager, Gary Hoenig, is frustrated by what he sees as other executives' tentativeness. "Why is it, in this business, we are apologetic when asking [consumers] to pay for what we give them online?" he asks. "It's not like people in the milk business who think 'we should give it away for free—we can make money on the cartons.'" (Disclosures: I worked for Hoenig, who remains a friend, at my first real job. My brother is an editor at ESPN The Magazine, but I have not discussed any aspect of this column with him.)

Many details of the revamped Insider service remain undecided or under wraps. The changes will include testing features to see which work best in compelling visitors to pay. It's also uncertain how the move will affect ad rates on the site. Hoenig does make clear that the key driver of the strategy is a desire to reduce the 2.1 million-circulation magazine's dependence on ads. But he also outlines a case that a subscribing customer is more valuable to marketers than one who hops from one free site to another. "There is too much content" for advertisers to monetize, he says. "But there is an audience that is staying here and going to stay engaged."

How will this play with advertisers? Uncertain. Something like ESPN Insider is "an attractive environment for advertisers," says Michael Hayes, executive vice-president for digital at media-buying agency Initiative, which buys ads for the likes of MillerCoors and Home Depot (HD). But, he warns, it's not a sure thing that an obsessive fan's focus on ESPN Insider also means "there is more engagement with advertising." That's a debate that ESPN will presumably take up later, should it persuade more readers to pay up online.

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