Charging Toward Paid Content
BY NIKI SCEVAK

More than four in ten consumers acknowledged that content can't remain free forever in a recent Jupiter Research survey. When will publishers start charging for content? And what types of content will they charge for?

The early attempts of publishers to charge for content were marred by the wide array of free alternatives. TheStreet.com, Microsoft's Slate.com and Inside.com were three high profile ventures that fought and lost the battle to implement a subscription only service.

Now that the harsh economic climate has eliminated many of the alternatives across the content categories, will we see publishers experiment with paid subscriptions?

One of the barriers to a paid subscription is that the structure of consumer payments on the Internet is fundamentally different to other mediums. Consumers of other media - such as PayTV and print - outlay the single cost of subscription to the publisher. However with the Internet, consumers pay a monthly access fee to their ISP and then additional subscription fees to various content sites. This extra layer of expense is key in understanding the largely free nature of content on the Internet to date.

In a sense, the allure of wireless services is largely to do with the single layer of payment the consumer makes. NTT DoCoMo's iMode service, for instance, manages a central billing relationship with the customer and distributes consumer payments to each of the content providers.

AOL had a similar policy in place when the online service began. It charged by the hour and passed on a percentage of the consumers access fee to its content partners, with the amount to each site dependent on how often the user visited that partner. The move to a flat monthly access charge however prevented expansion of the programme.

In an executive survey, Jupiter Research found that 82% of respondents expected to offer paid-content offerings in the short term. Clearly, subscription revenue must become a viable revenue stream for online publishers to survive. In terms of other media, Pay TV gets around 80% of its revenue from subscription fees and magazines rely on about 40% from readers.

In the near term Robert Hertzberg (Analyst, Jupiter Research) believes that content helping to build wealth, further careers or enrich people's personal lives will have the greatest chance of success. A chance doesn't necessarily translate into success however, with The Wall Street Journal recently revealing that the online arm was not turning a profit on a subscriber base of over 500,000.

A factor looming on the horizon is broadband. With a platform for delivery, paying for entertainment based content - such as music and video - becomes a reality. Indeed, early guidance can be taken from the pornography industry, where many premium offerings are based around video.

The decision to implement a paid-content initiative ultimately comes down to a trade off with potential advertising revenue. The greater the size of an audience, the greater the potential for advertising - assuming that quality is constant. And with a depressed advertising market at the moment, the trade off is increasingly attractive.