RealTime IT News

Free-to-Fee With Content Can Be Risky Business

By Erin Joyce

That giant clicking sound you hear? That's the heretofore free, advertiser-supported content getting pushed farther behind a paid firewall -- or at least some of it.

As free Web sites devise ways to fill the crater in their balance sheets where advertising revenues once were, the rush to charge for content is on.

But some sites are stuck in "hurry-up-and-wait" mode on the decision as they debate the "right" pricing levels and what the market will bear.

Free, ad-supported content providers are walking a fine line with their paid come-ons, analysts say. If too many readers decide not to pony up, the sites could lose some of their audience and what they can charge advertisers for reaching them.

"That leads me to believe that putting everything behind a wall is risky," said David Card, an analyst with Jupiter Media Metrix. That's why the current wisdom among content providers is to offer a tiered approach in order to hedge the risks: along with the fee, keep the free.

The Financial Times' Web site, http://www.ft.com, for example, is planning to unveil two-tiered paid sections sometime this month when it takes the wraps off its redesigned site.

But the Web site, a division of London-based Pearson PLC, said the majority of FT.com will remain free to its monthly visitors, which it pegs at 2.7 million. This includes selections from the week's news analysis and comment, including one peek per day at the widely read Lex column.

From there, readers have two choices on subscriptions. The first tier, at around 75 pounds a year, (US $109.80) will include full access to the Lex column, access to FT news articles going back five years, a look at the next day's newspaper the night before, new search features, industry briefings, survey results and even a "personal office organizing system."

The next level, at 200 pounds per year ($US 292.81), includes all the above plus even more extensive financial data on 18,000 companies and access to 12 million articles from over 500 media sources.

Zach Leonard, the chief operating officer at FT.com, summed up the approach in a statement about the plans: "The business model for online news and data used to be built around either advertising or subscription revenues. Our business model combines the best of both approaches."

Jupiter's Card called FT.com's approach "the business model du jour." As the Web took hold a few years back, for example, media companies were going to sell everything they put online, as is the case with the Wall Street Journal Interactive, which counts about 640,000 paying subscribers. Then advertising-supported, free content was in. Now it's out.

"Then everyone thought wireless (content) would be the next thing, which is premature, then broadband was going to save" the ad-supported ideals, said Card. "People are grasping" at what works. "It's a tough environment."

Even TheDeal, the daily newspaper and Web site about the M&A industry, is hedging on whether to go with the WSJ.com approach, saying it hasn't determined at this point whether to make all of its content available by subscription only.

For the time being, TheDeal.com is asking its 125,000 monthly unique visitors (or about a million page views per month) to pay an $89 introductory annual fee. When TheDeal.com becomes "predominantly" a subscription-based Web site sometime in the coming weeks, the annual subscription will go to $189.

Among the geegaws that paying subscribers will get: sophisticated database products about the players involved in deals, more extensive company information and a range of columns such as Industry Insight and Media Maneuvers, plus special reports.

One common trend in the offerings, of course, are snazzy database products, which are increasingly tapped as a source of steady revenue for media companies.

Pearson PLC, the owner of the Financial Times newspaper and FT.com, saw double-digit growth with its interactive database products during 2001. Meanwhile, its advertising revenues dropped by about 29 percent, noted new media banker M&A banker and analyst Ken Marlin of Marlin & Associates.

As a result, Pearson should be pleased with its acquisition of FT Interactive Data, said Marlin. "I expect the shift within the FT Group towards subscription-based on-line businesses to accelerate. Not only are the data base businesses less cyclical, they are also faster growing, more profitable businesses," he said recently.

As far as finding the "right" price points on charging readers for columns and analysis beyond free "commodity" news, Card said it's a case-by-case basis on these calls.

"We're at a stage where people are trying to experiment, and there's still tremendous resistance about paying when people have been trained to expect stuff for free."

Although the WSJ.com was able to pull off going all paid from the start ($59 a year online, or $29 with a newspaper subscription), Card noted that many employers also pay for their employees' subscriptions to The Wall Street Journal newspaper as well as the site.

"Not all of the sites can pull that off. That's why people are getting into a mix of advertising, paid, syndication" and other kinds of revenue streams.