MOVE TO PAID-FOR WEB CONTENT? IT’S COMING BUT BUT NOT VERY QUICKLY
Earlier this year Wallace & Gromit fans rushed online to buy a new series of short movie clips involving the bungling inventor and his long-suffering dog. Maker Aardman’s latest plasticine animations, called Cracking Contraptions, sold like hot cakes, writes David Shapshak in the Financial Mail and Guardian.
Meanwhile, about 600 000 subscribers pay to log on to the Wall Street Journal’s website and read its articles, analysis and opinion.
These two examples - from diametrically opposite poles of the online content spectrum, entertainment and business advice and analysis - represent a growing trend towards paying for content.
While traditional printed content, in newspapers and books, was always bought, the investor-fuelled madness of the Internet’s rise to fame saw a rush for virtual real estate.
Of the many things the Internet changed, one of the most dramatic was how information was shared. Developed as a collaborative online community for academics wishing to share their research and ideas, its essential ethos was that content, of this kind, should not only be freely available, but free.
It didn’t last long, as business discovered it was a cost-effective marketing technique. Entrepreneurs began posting "brochureware" websites, and later selling their products online.
Content producers and publishers rushed to replicate electronic versions of their publications online, giving away their content. But, on the back of the hollow online advertising market, they began to notice that the expected fortune was not materialising.
As Forrester Research puts it: "Most [media companies] online give away content that they charge for offline."
Martin Nisenenholtz, CEO of the New York Times Digital, goes even further: "We shouldn’t be talking about paid versus free any more. It’s all over. It’s the wrong debate. The right one is about focusing on profitable businesses that can actually scale in the marketplace as more consumers turn to digital in a variety of forms."
The Online Publishers Association is understandably bullish about the trend towards paid-for content.
"The year 2002 will go down as the year in which the conventional wisdom about paid online content changed. Whether or not consumers will pay for content is no longer a matter of debate. Clearly, they will. In fact, by the end of 2002, one in 10 online users in the United States was regularly paying for some form of content, and total content sales for the year reached $1,3-billion," wrote Michael Zimbalist, its executive director, in a report on online paid content in the US market released in March.
"This is the second consecutive year in which paid content revenues registered an annual growth rate of nearly 100%."
While there is an abundance of freely available information or news [daily news reports, weather and some financial information] there is also what is known as "premium" content - opinions and perspectives that are exclusively available on one site, such as the Wall Street Journal’s sought-after analysis.
One of the originators of this "premium" model is the news and magazine site Salon.com, which has been very successful with a $30-a-year fee. It has two faces: a general public face with daily news and information and a "premium" option with features, opinion pieces and more exclusive content.
Noting Salon.com’s achievements, Professor Christo Doherty, the chair of digital media at the University of the Witswatersrand, says: "In the absence of any other model, subscription is taking over."
Other examples include TheStreet.com, which also covers Wall Street, which is still free but launched RealMoney.com as a premium site ($19,95 monthly or $199,95 annually). While CNN.com and ABCnews.com have also opted for this two-tiered model using RealNetworks for their streaming.
Archives are another "premium" level that sites such as The New York Times and Time magazine, are charging for, while giving their current content away.
Another booming area is search results, although this is mostly behind what customers see and is a fee paid by the advertiser. The biggest players in this market are the two largest search portals Yahoo! and Google, and Overture, the largest seller of this paid-for online advertising, which recently bought search engine AltaVista.
Advertising is still an income generator. "Online news sites are becoming increasingly profitable, thanks to factors such as the growing availability of high-speed Net access and technology that allows ads to be imbedded in news stories," reports the Online Journalism Review. "For example, The New York Times site reported a loss of $7,5-million in 2001, but profited $8-million in 2002."
South Africa is slowly aligning itself with the global trend, although subscribers to the country’s largest Internet service provider (ISP), M-Web, have always paid for content as part of their access fees.
M-Web, like the world’s largest ISP, America Online (AOL), charges to connect its subscribers to the Internet, but also sweetens the deal with exclusive content.
M-Web recently launched a new authentication system, called "Sign Me In", which it says makes access to its sites for subscribers easier.
"We have long argued that the ‘free lunch’ model was unsustainable and that content and service toll-roads would become the norm. This is indeed what has happened.
"In the last year $1,3-billion in revenue was generated on the Web for a variety of premium services in the news and infotainment sectors, and this trend is set to increase significantly," says M-Web CEO Andrew Milne. He adds that current subscribers will not pay more for content.
Indeed, revenues from paid online content will only grow to $5,8-billion by 2006 - up from $1,4-billion in 2002, says research house Jupiter Media Metrix.
Revenues for general content will reach $2,3-billion in 2006, up from $700-million in 2001, while revenues from online games and digital music will total $1,8-billion and $1,7-billion by 2006, up from $260-million and $30-million in 2001.
"While there is money to be made in the online content business, our latest survey and market forecasts indicate that the mass market still largely shuns anything that smells like subscription online," said David Card, Jupiter vice-president.
"But in the near term, media companies will create subscription services via packaging, exclusivity and added interactive features."
According to a Jupiter consumer survey, 70% of online adults cannot understand why anyone would pay for content online - but 42% of online adults expect, over time, that people will have to pay.
Arthur Goldstuck, MD of South African research house World Wide Worx, emphasises that "there’s a misnomer in paid-for content, because you can’t sell people what they don’t want. Content is only going to be saleable when there is perceivable value in it."
"That value is usually based on how well that content is differentiated from all other content, and how much of a perceived need there is for a specific audience to have it."
The Wall Street Journal obviously has a distinct need and is "one of the biggest success stories in paid-for content in the world," he adds. Wallace & Gromit’s makers must be hoping for the same.