Who’s Going to Pay for Online Content? A) A Few of You B) Barely Anyone C) You’re Already Paying
by Peter Kafka
Posted on November 16, 2009 at 7:05 AM PT
The new conventional wisdom is that sooner or later, consumers will have to start paying for some of the stuff they currently get for free on the Web.
But will they actually pay up? Here, the conventional wisdom is not so helpful. Nor are studies predicting consumer behavior. To wit:
- Nearly 50 percent of U.S. Web users are willing to pay for online news, says the Boston Consulting Group.
- Not a chance, says Forrester (FORR): Try 20 percent.
For what it’s worth, my money’s on the Forrester number, or one that’s even lower. My gut says people love consuming news, but only in the broadest sense–Obama doesn’t really Twitter! What was Belichick thinking?–and that sort of stuff, which appeals to a very large audience, will always be free, and you’ll get it from Google (GOOG) or something like Yahoo (YHOO). Which leaves you with a small audience willing to pay for everything else.
But! We should note that people are indeed paying for “content” right now. In fact, they’re paying for a lot of it: $115 a month, up seven percent from last year, says NPD Group. The breakdown:
As of August 2009, 81 percent of U.S. households subscribed to a television service (satellite TV, basic/premium cable, or fiber-optic television service). A similar percentage of households (76 percent) paid for Internet subscriptions. Seventeen percent subscribed to an online music service or satellite radio; and 14 percent subscribed to online gaming subscription services.
More traditional forms of entertainment subscriptions, however, did not fare so well. The number of people subscribing to newspapers fell by 2 percentage points to reach 29 percent in August 2009. Forty-one percent of consumers subscribed to magazines this year, compared to 43 percent who did so last year.
According to NPD, an influx of new smartphone owners has led to an increase in mobile data-plan subscriptions: 9 percent of U.S. consumers had mobile data subscriptions this year, versus just 6 percent last year. Fourteen percent of consumers subscribed to a home-video subscription service, like Netflix, this year, which is 2 percentage points higher than last year.
Ah, see? Problem solved: If you want Americans to pony up for stuff on the Web, just link it to something they’re already paying for, like their cable or Internet subscription.
This is what smart guys like John Malone have been talking about for a while, and it’s also the core of the strategy behind the Time Warner (TWX)/Comcast (CMCSA)/everyone else “TV Everywhere” gambit. But it’s also what many people have been trying to do for a very long time–ask the music industry–with limited success.
Comments
People will pay for information services, not information. At TheLadders, or the dating sites, or sites providing differentiated research (travel, finances, etc.), internet users show a willingness to pay if the information is hard to collect, collate, or curate.
They won’t pay, however, for commodity news (celebrity, financial headlines, etc.) that can be found anywhere. In some ways, blogs and other sites trying to attract attention to themselves use the production of commodity content as a loss leader to draw eyeballs.
Interestingly, consumers also show a willingness to pay “by platform”. So while they expect everything to be free on the PC, they will pay for delivery to mobile, Kindle, etc.
Posted by marc cenedella at November 16th, 2009 at 7:26 amI worked for newspapers for 15 years. We all knew that the cost of a subscription was for printing and delivery. The ads paid for content. So what’s stopping them from working out a revenue system where advertisers pay just like they did in the dead-tree days?
This pay wall thing is like an Albuquerque Trial Balloon Festival. Unfortunately, consumers keep shooting them down as unreasonably greedy attempts to make money where it was not made before.
Give us content worth reading, and we’ll visit. Advertisers will eventually figure out that it’s worth it.
Keep trying to Wall Street us, and you can forget it. (Not referring to the WSJ, but the attitude that there’s always more blood to squeeze from the consumer turnip.)
Posted by Eric Welch at November 16th, 2009 at 8:07 amMy own view is that the core problem is not that people won’t pay. They will pay.
But when you add up all the digital pennies you end up with a top line that is a fraction of what today’s top line subscription revenues look like. This is only due in part to the fact that we’ve trained consumers to expect stuff for free. The other more important fact is that so many people are willing to create and distribute quality content (and services) for free. Think of how much excellent news analysis is being created on top-quality blogs, for example. yes the authors would like to get some form of payment for the content but for them to do so would necessarily cut into their traffic and harm them on the advertising side. And we’ve reached the point where top bloggers can make a six-figure income from advertising alone.
This may be bad news for newspapers and for journalism as a profession (because many fewer of them will be able to make a living), but I’m not yet convinced it’s bad news for body politic.
Posted by alan miles at November 16th, 2009 at 9:40 pm