By: Steve Outing
Since the NASDAQ plunged last spring and investor money largely dried up for online content related enterprises, I’ve attended a few content- and news-related conferences. The atmosphere tends to be one of serious contemplation about defining business models that can sustain online news and content – rather than continuing to spend investor money where the main goal is to establish a huge audience and market share quickly.
The business model of offering free content and supporting that expense largely by advertising and e-commerce revenues is clearly suspect these days. Publishers are looking for alternatives – and one that’s looking good to a growing number is to charge for content.
Wait a minute, you say. Some news publishers tried charging users for their content in the early days of the Web – and their attempts failed miserably. True. But now the focus is different.
Show us the money
What many online publishers are thinking today is along the lines of what David Talbot, editor-in-chief of Salon.com, expressed in a speech at the Internet Content East conference in New York last month. Salon will continue to be primarily a free site long term, but what Talbot says he hopes to do is develop more “premium” content that online users will find worth paying for. Nothing will be taken away from those who freely read Salon, but new content will be created that’s worth a cash price.
You can see this concept in action at news sites like TheStreet.com – another of those content companies that’s trying desperately to become profitable and satisfy its investors (which in TheStreet’s case is Wall Street). While content of TheStreet.com is free, there are three other companion sites that charge a fee:
Realmoney.com, an “inside Wall Street” site that charges $19.95 per month or $199 a year for a subscription. ipoPros.com, an independent source of IPO research which is part of TheStreet.com network. It charges $25 a month or $225 a year. And TheStreetPros.com, a stock markets site for financial professionals and active traders. Price: $40 a month or $400 a year.
Another good example is a just-launched vertical site by LasVegas.com, the Las Vegas “portal” and city guide operated by Las Vegas Review-Journal parent Donrey Media. Called the Gaming Wire, this $150 a month and up subscription site serves the gaming industry with inside coverage from Nevada and all U.S. states where gambling is permitted by law.
LasVegas.com assembled a team of journalists and correspondents who are experts in the specialized gaming and casino beat – including an editor and three reporters in Nevada; a journalist to cover gaming issues in Washington, D.C., and the East Coast; and correspondents in other important gaming jurisdictions. They will produce 10-15 stories and 2-3 features a week for the e-mail specialty-news service.
As those enterprises demonstrate, the key to charging for content is to focus on a niche and assemble editorial coverage that can’t be found elsewhere – so people will pay for this content.
Those examples are of fairly high-priced content, but there are many people in the field of digital content who believe that lowball pricing is where online publishers can make decent money. Mark McNeely, one of the founders of Qpass, the leading transactions vendor in the online content space, says of pricing on the Internet today: “There are two prices: free and too expensive.”
There needs to be more content that’s more expensive than free but priced at “what the hell” rates, says Qpass’ director of publisher alliances, Andrew Elston. A mistake that many news publishers have made is that when they have put a price tag on some of their content – say downloaded articles from a newspaper archive – they charge rates where many consumers decide after seeing the price, “I can live without that.”
An article download that costs $2.95 (a common Web newspaper archive rate) will turn off lots of potential buyers, whereas a rate of $1 will have many of those price-sensitive users muttering, “what the hell,” and paying for the article. Elston thinks that $1.50 is a “what the hell” price point, and that there’s no reason to go below $1.
Beyond archive downloads, which are obvious chargeable items, news sites may have other premium content that’s worth more than free. The key is to keep the price low, so consumers will pay the amount without thinking much about it.
For example, NHL.com, the consumer Web site of the National Hockey League, has a premium service aimed at die-hard hockey fans called NHL Plus. It has various subscription rates (up to $19.95 a year), but its lowest rate is only 95 cents for a 48-hour pass to the site’s full content. That’s “what the hell” pricing – and a model that many news sites could mimic.
Go even lower
Now may be the right time to go to even lower prices for online content, says Bill Densmore, founder and vice president of Clickshare Services Corp., a digital content transactions company that seeks to work with publishers. (Clickshare supports low-cost, one-click purchases that are made across a network of participating sites. Consumers get a single bill for digital content purchases made at a variety of sites.)
The state of Internet content – when many content sites are weak and an increasing number of them are dying as funding has dried up – is such that publishers need to think more seriously than ever about finding or developing content that they can charge money for, he says. The failure of the advertising/e-commerce model to adequately support online
content could be what forces online publishers to start selling content, when in the past they’ve settled for giving it away free and hoping that other revenue sources would support them.
Densmore has been championing the Clickshare concept for several years, but the idea hasn’t caught on in a big way yet. (A recently appointed CEO and a new funding round gives the company new hope.) He’s now optimistic that the sorry state of the Internet content industry may provide the impetus to carry Clickshare forward. Now online publishers have to think seriously about selling some of their content.
Over the last several years, Densmore says that whenever he’s gotten on an airplane he’ll ask his fellow passengers if they would pay for content on the Internet. “Very few ‘average’ people say that they’ll pay more than $1.” So in the case of article downloads from newspaper archives, the typical prices charged of between $1.50 and $2.95 are too high. Likewise with new types of content that publishers wish to sell, keeping the price below a dollar is your best bet for enticing buyers.
Densmore offers an interesting analogy about the need to charge for some content. Imagine, he says, that gas stations gave away gasoline, making their money from other sources – say, exposing customers to advertising while filling up and charging extra for candy bars. Eventually, the gas stations would start failing with this business model, and those that wanted to survive would have to adjust.
Suddenly starting to charge for gas is unlikely to work (especially if competitors are still giving it away free), because customers would not pay. The key to survival might be to continue giving “regular” gas away, but start charging for premium grades.
That’s the online content business today, and that’s how content publishers need to get out of the give-it-away-free trap, Densmore says. It’s what Salon’s Talbot was getting at in his recent speech: Give the core content away free, but add on goodies that will shake loose some money from users.
Then there’s wireless
One other area worth noting is the potential market for wireless paid content. According to the president of another digital content transactions company, Israeli-based Trivnet, wireless telcos and wireless portal developers are expressing a great deal of interest in acquiring content – including paid content that can be an additional revenue stream for them.
Moti Dogin says his company has begun putting its focus largely on wireless paid content – focusing on Europe and Asia rather than the U.S. for now, since development of wireless services still lags in the U.S. While this remains mostly a future opportunity, it shouldn’t be long before wireless paid content is a significant industry.
What’s especially interesting about the wireless space is that very small digital content transactions are simpler to pull off than on the Internet. Because of high transaction fees charged by credit card companies, most Web content sales have to be high enough to cover that. (The lowest price you’ll find on a piece of content supported by a Qpass partner is 25 cents for some song downloads, for instance.) But purchases of digital content via mobile phones can get down to 10 cents, which just gets tacked on to a mobile phone bill – no credit card transaction involved.
Dogin says music is likely to be the first paid digital content to hit it big. (Download songs to your mobile phone, then listen on headphones attached to the phone or transfer them to an MP3 audio player.) Beyond that, highly targeted information and news content should be second.
Exactly what will wireless paid content be? Dogin can’t be specific – and no one really knows for sure what type of content consumers will buy via their phones. But he does emphasize that pricing for wireless content – just as for wired Internet content – must be low enough that people won’t think twice about pushing the Buy It button.
It’s that “what the hell” pricing model again. I think we’ve got a trend brewing. You can sell content on the Internet, but keep it cheap.
Other recent columns
In case you missed recent Stop The Presses!, here are links to the last few columns: The Hows and Whys of E-mail Publication Advertising, Wednesday, October 18 Are Days of Innovation Waning For Online News?, Wednesday, October 11 The Reporter as Researcher: The Time Is Now, Wednesday, October 4 Archive of columns
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