Events | Previous Events
April 11, 2001 Event
The Rise of Subscription-Based Business Models: Money for Nothing or the Net for Fee?
It's been a grand seven years for the Internet consumer. Everything from e-mail (Hotmail) to access (Juno) to software (Linux) to shipping (Outpost) to computers (FreePC) to storage (iDrive) to music (Napster), to most notably - content - has been free free free. But times are changing, particularly on the content side. Feeling the pinch of slumping ad revenue and unsustainable business models, media companies are experimenting with subscription-based business models. If they are successful, the viability of online media businesses will be broadly re-examined. If not, even deep-pocketed publishers may find themselves folding up shop. Ultimately, subscription-based content will be the definitive litmus test of consumer value, separating the wheat from the chaff in a dramatic exposé of media companies newly positioned for success versus those destined for failure.
In traditional publishing, subscriptions account for as much as half of a company's revenue. Yet for most websites, subscription revenue is nonexistent. The multimillion-dollar question is whether or not consumers will in fact pay for content. The experiences of pioneers in the space suggest that the answer is a resounding no. TheStreet.com and Slate are cited as early subscription model failures: neither site has shown profits and both have reverted to free-content models. In addition, countless surveys illustrate consumer distaste in forking over cash for content: Forrester stated that the majority of consumers are not at all likely to pay for content online; and Jupiter Media Metrix found that 69% of consumers are unwilling to pay for Internet content. The only faint glimmer of hope comes from rare success stories such as The Wall Street Journal and Consumer Reports.
What is behind the Internet consumer's fascination with all things free? Perhaps the mentality is born from the medium's history of underwriters: first the government, then universities, then venture capitalists, and most recently, the capital markets. If so, it may just be time for users finally to pick up the tab. Some believe that consumers will pay for content once the transaction infrastructure for services such as micro payments become ubiquitous. Yet the most substantial hurdle to subscription-based business models may be a psychological one: how can people be expected to pay for content they historically received at no cost? There is no choice: the short but sweet era of the free Internet is almost over. Still, if content does becomes the subject of commercial transactions - after consumers have long enjoyed it for free - it will mark a fitting end to a glorious but naïve Internet era.
The Net Plays "Reading for Dollars"
If You Post It, Will They Pay?
