The paid-content model made a comeback of sorts in 2010 as newspapers, broadcasters and other types of media companies started or resumed charging fees for access to their Internet and mobile offerings. The New York Times in January will begin charging for unlimited use of its site for readers who don't have a paper subscription.
A big question before any company puts up a pay wall online is just how many users -- conditioned to free, ad-supported material on the Internet -- will end up as paid customers. And how much will they be willing to pay? A new study from the Pew Internet & Life Project offers new insight on the topic, showing that nearly two-thirds (65%) of U.S. Internet users have paid for some form of online content.
Among the 15 categories the study asked about, music and software were the most commonly purchased types of content, with one-third of users having paid to download or access each online. Those were followed by mobile apps (21%), digital games (19%), newspapers, magazines or articles (18%), videos, movies, or TV shows (16%) and ringtones (15%).
E-books, which have gained popularity with the emergence of Amazon's Kindle and other e-reading devices, have been bought by one in ten Web users to date. A quarter of Web users have bought only one type of content and a majority (61%), three or less.
Because Pew has not surveyed people on paying for online media before, it doesn't have prior data to compare the findings to. But the two-thirds of content buyers roughly matches the proportion that pay for tangible goods online like books, CDs or clothing. It also equates with the roughly 66% of American adults who have broadband connections at home.
"For publishers and other media makers, the good news is that the size of the crowd that is willing to pay for at least some digital online content is quite large," said Lee Rainie, director of the Pew Internet Project. "The big question hanging over all these businesses in 2011 is going to be which combination of revenue streams generate the income they need."
He added that the rise of apps, the arrival of "metered" online access for top publications, and spread of mobile connectivity will make next year a pivotal period for sorting out winners and losers in the new media ecosystem.
The Pew study found that among those who have paid for content, most are spending about $10 a month. (Maybe that explains why Cablevision's $20-a-month subscription fee for Newday.com bombed and Netflix priced its new online-only service at $8 a month?) In any case, the majority are paying for subscription services (23%), compared to downloading an individual file (16%), or accessing streaming content (8%).
Not surprisingly, there's a correlation between income level and paying for digital media. With wealthier consumers, many more are likely to be purchasers. But there was little difference between men and women and among whites and non-whites when it came to buying online content. The only glaring difference was that men tended to be bigger software buyers than women -- 40% to 26%.
In terms of age, people 30 to 49 were the most likely online content buyers, followed by those 18 to 29. While people in the younger age bracket are typically the most active digital consumers, they're also more accustomed to not paying for anything online. The results of the Pew study were based on a survey of 755 Internet users interviewed by telephone and cell phone between October 28 and November 1, 2010.
COMMENTARY: What web consumers are willing to pay for content depends on the value of that content to each consumer. With so much news, information and entertainment content still being offered for free, any wholesale attempt to adopt a pay wall, could be met with resistance.
For paid content to work the business model must incorporate an increasing returns element. Example: HP doesn't make a lot of money off its printers, but makes a huge profit off the toner cartridge refills. No toner, no printing.
At the other extreme is Apple. Steve Jobs has created the ultimate business model. The model is driven by legions of Apple loyalists or evangelists who will pay the price of admittance. They are technology geeks, who want the latest and greatest in electronic gadgetry, and are willing to pay the price of admittance. Apple's iMac and MacBook computers generate margins up to three times higher than competitors. The same is true for the iPod, iPhone and iPad. What makes the Apple business model unique, is that you have to buy the software for its products, and you can only buy it from Apple through a network of Apple stores or through their apps online store. You want music and video content for you iPod, iPhone and iPad, you have very little choice than to buy it through iTunes.
Personally, I would rather not pay, and I go out of my way to find free content, that is as good as what I have to pay for. Call me a tightwad, guilty as charged.
Courtesy of an article dated December 30,2010 appearing in MediaPost Publications Online Media Daily
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