Through excruciating mathematical calculation, voodoo, and other highly questionable scientific methodology, I have arrived at a formula for determining precisely how much people will pay for 99.9 percent of the content offered online: Exactly $0.00.
This will come as a grave disappointment to many Web execs, who have recently decided to start charging for stuff on their sites—now that "giving everything away for free while hemorrhaging money" has been deemed a Bad Business Plan.
A dramatic slowdown in advertising revenues coupled with a dearth of investment capital has prompted industry watchers to predict that many of our beloved Web freebies will vanish before the end of the year. Already, sites including Variety.com and Britannica.com have announced plans to charge for content that used to be free. Other companies are testing subscription schemes in hopes of establishing a predictable revenue stream:
Sassy online magazine Salon, still smarting from layoffs and salary reductions, has begun offering a "premium" (read: advertising-free) version of its site for $30 a year.
MP3.com has started charging unsigned bands and musicians $19.95 a month to post their tunes and participate in its "Payback for Playback" program.
RealNetworks has begun offering audio broadcasts of Major League Baseball games for a monthly fee of $4.95, or $9.95 a month for Real's GoldPass. The Seattle company also started a media blitz about subscription services for music last week, which led to similar announcements from Microsoft, MTV, and others.
Embattled song-swap service Napster intends to switch from a free trading center to subscriptions in July, with fees ranging between $4.95 and $9.95.
This trend toward charging Net users for content is a risky—and desperate—U-turn for Web publishers who long ago discovered that the majority of us would sooner eat sand than pay for stuff online. Early in their histories, The New York Times, the San Jose Mercury News, and Microsoft's Slate all tried to charge fees and met with embarrassing failure. Slate's efforts, in particular, read like a cautionary tale: Launched in June 1996 as a free service, it began demanding that visitors buy subscriptions in March 1998. It switched back less than a year later after convincing only 27,000 people to pay $20 a year. Today the free site has roughly 2 million readers a month—a 75-fold increase—and is "almost at break-even" from ad revenues, according to publisher Scott Moore.
Heck, even the best-known example of paid online information, The Wall Street Journal's WSJ.com—which charges $59 a year ($29 for print subscribers) to about 535,000 online customers—is not yet profitable. Oh, and last month, the company announced layoffs.
Somebody's Gotta Pay (But It Sure Ain't Gonna Be Me)
The culture of the Internet from the very beginning has been a free exchange of information. Results of a recent survey by Jupiter Media Metrix indicate that the mentality has not budged: Sixty-nine percent of consumers say they will refuse to pay for online content.
Despite such feedback, Net publishers are determined to carry on the troubling industry tradition of completely disregarding customer behavior patterns when formulating key business strategy. (Remember Pets.com?) Three out of four Net publishing executives surveyed said they planned to sell some subscription content by 2003, and 40 percent expected to add fee-based content this year.
James Cramer, director of TheStreet.com, says the collapse of the online ad market justifies his company's subscription fees. But he and other Web execs have got it backward. NEWS FLASH TO NET PUBLISHERS: Our desire to pay for your content has absolutely nothing to do with your desire to extract dough from us. We don't care how much you beg, how indispensable you believe your data to be, or how empty you think our lives will be without you. It does not take a brain surgeon to figure out why we won't pay.
We feel like we are already paying, Part 1: We are already paying with the most valuable commodity we have: our time. Web publishers who demand our money as well price themselves out of the market.
We feel like we are already paying, Part 2: I know that exactly 0 percent of my $100-a-month DSL bill goes to subsidize the content I access on the Web. But I still feel like I am paying through the nose for the privilege of visiting my favorite sites. Go pick on somebody else.
We feel like we are already paying, Part 3: OK, so maybe all that money we lost on Net stocks has nothing to do with this, but we are still pissed off at Net firms for losing our money. So we will be damned before we will give them more money.
This is not to minimize the pain Web publishers are feeling. They are coming to the realization that they have to turn a profit. And dusting off the fee-based content idea is, for some, a last-ditch effort to make their businesses work.
In fairness, people will pay for certain kinds of content, such as content offered by high-profile brands; time-sensitive information that benefits from instant delivery; and information that helps us save or make money. Oh, and sex—sometimes.
But beyond that, it looks grim. Hell, most Web users have demonstrated they won't even pay for real, tangible items over the Net.
Furthermore, somewhere out there is a person who bought Salon (SALN) stock at $15 a share. If s/he bought 100 shares for roughly $1,500 and is still holding it, s/he could make 30 bucks back by selling today—just enough to cover a year's "premium" subscription.
No manner of excruciating calculation can bring back that lost cash. Likewise, no amount of voodoo is going to convince that person to waste the money s/he has left on content s/he never needed in the first place.
Annette Hamilton is an Internet industry consultant, and a former columnist for Yahoo! Internet Life magazine and ZDNet.