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Freebie Mentality Imperils Content Sites

I support Napster. And not, mind you, because I buy into the silly, self-serving notion that "all music should be free."

Rather, I view Napster and its music file-sharing variants as powerful catalysts that could eventually force welcome changes upon an industry that has made billions of dollars over many, many years through the exploitation of consumers and artists alike.

Anybody who has ever plunked down $17.99 for a CD because they love the single, only to discover that nearly every other song they paid for is unlistenable, knows exactly what I'm talking about. As do the artists, who too often are forced to meet contractual obligations by churning out sub-par material in order to fill up a disc.

Sure, you could argue that the musicians don't have to sign the contracts, and that consumers can opt not to buy the CDs. But that ignores the powerfully addictive allure of music (not to mention the impact of corporate marketing). Indeed, Napster's enormous popularity in large part is testament to that.

But Napster also is about people wanting stuff for free. While that's an understandable human motivation, it's a mindset that will not long support many industries. After all, it's hard to compete against free, and it's nearly impossible to make a profit if you're giving away the inventory.

That's why most Internet content sites are either already dead or on the critical list. The vast majority of Internet users simply aren't inclined to cough up cash for the pleasure of exploring a Web site. This has left Internet content providers with online advertising as their major source of revenue. And the online ad market - particularly for mass-audience sites - has tanked as competition continues to drive down rates and advertisers cut back on spending or go out of business themselves.

All of which leaves a company like Salon.com in a tough spot. This online provider of unique, mostly high-quality content has scrambled desperately in the past two years to develop a profitable business model - so far to no avail.

SALN's efforts primarily have focused on reducing expenses through layoffs. Last week Salon.com announced it was cutting employee salaries and postponing ambitious plans for a weekly radio program, which had been introduced as a potentially lucrative new revenue stream.

Now Salon.com says it will start using larger advertisements and also roll out a subscription-based service next month for readers who wish to avoid those ads.

While many other Web sites have been offering larger ads in an effort to win back disappointed advertisers, few have dared to charge readers. Those that have, such as Microsoft's Slate - a Salon.com rival founded by well-known political commentator Michael Kinsley - and financial information provider TheStreet.com - either have abandoned the subscription model altogether (Slate) or revised it so that some content is offered for free (TheStreet.com).

None of which bodes well for Salon.com or its stock, trading below $1 per share for most of this year and closing Tuesday at 44 cents.

The only glimmer of hope is that Internet users are maturing past the "all information should be free, dude" mentality. Slate's annual fee - a whopping $19.95! How dare they! - was greeted with open hostility when introduced in early 1998. But that was three years ago, when Internet companies and consumers were still in dreamland.

Unfortunately, old habits die hard, and a sea change may come too late for Salon.com, which is only months away from going broke.

I, for one, am willing to pay a small annual fee for the pleasure of reading Salon.com content. And if Napster goes to a subscription model later this year, as planned, I'll sign up for that too. Both companies are offering real value to me.

And real value should fetch a higher price than free, dude.