Debra Goldman's Consumer Republic

For all the emphasis on innovation in our business culture, shrewd entrepreneurs know that the key to successfully introducing something to the marketplace is not being first, but being second. More often than not, the real pioneer is too far ahead of consumer expectation and adaptability, while the second to market hits just as consumers begin to catch up. When it comes to marketplace acceptance, timing is everything. More and more online publishers are figuring the time is right to start charging consumers for content. We all know how the online magazine Slate and its mighty owner, Micro soft, tried a few years ago to pry a $19.95 annual subscription fee out of its readers, only to retreat before the wrath of Netizens who insisted that online information should be free. Only a very narrow range of Web sites dealing in stocks, sex and sports could get consumers to cough up. But in the last year, Web sites run by ABC News, Consumer Reports, the Northwest Florida Daily News and others have been charging for content in whole or in part, betting that consumer resistance is weakening. Not that a lot of Web sites have much choice but to try. The advertising dollars used as VC bait in many a misbegotten business plan have not materialized, thanks to the meager effectiveness of Internet ads and the broad slowdown in ad spending. And if the advertisers won't pay, the customers must. Increasingly, they do. The Online Publishers Association raised many eyebrows with a report showing spending on digital content almost doubling from 2000 to 2001, to $675 million. True, a lot of that money is still going to stocks, sex and sports. Nevertheless, if consumers keep spending as they did during the first quarter of this year, the 2002 figure could reach $1.2 billion. Free-to-fee is nothing new in the publishing industry. It's standard practice for trade magazines, which often start out as controlled-circulation freebies and convert readers over time to paid circulation. Moreover, this bait-and-switch technique is the heart and soul of new-technology marketing, since users feel they need such technologies only after they use them. Thus, Internet users, having sampled the resources of the Net for nothing, presumably now need them enough to pay real money. Still, considering how vital the concept of free information has been to the Internet's cultural identity, Netizens' relative lack of resistance to the free-to-fee trend is surprising. Information was free on the Web in two senses: It could be had at no cost, and it could be freely shared. These two freedoms formed the basis of the Net's utopian promise as a force that would level hierarchies, cut out the middlemen, collapse pricing power, create communities, supersede nation-states and em power individuals. Free is what made the Internet cool. But the collapse of the Nasdaq and the cratering of the ad market threatened free Internet in the first sense, while the outlawing of Napster marked the beginning of the end in the second sense. On the day the free music died, it became clear that the Internet was just a medium like all the others. And in losing its cachet, it has become safe for business as usual. It's worth noting what a shrunken entity this new Internet is, compared with the free Internet, now on its way to joining the Pets.com sock puppet and other relics of our digital past. Compare the old utopian vision of the Net to the one embodied in the recent AOL cable deal. Those deal makers see the Web of the future as nothing more than a super cable channel, supported in classic cable fashion by dual revenue streams, which in turn delivers lots of other cable channels, supported in the same way. Of course, consumers' willingness to pay for digital goods is self-fulfilling. As more sites charge for content, more consumers reconcile themselves to paying, which encourages more enterprises to impose fees, which breeds yet more fatalism about the end of the free Internet, and so on until at last the famous tipping point is reached and paid content becomes the norm rather than the exception. Just how "fee" can the Internet get? The sky is the limit. The entertainment conglomerates are working Congress to make sure the Internet is made safe for their property rights, even if it means disabling our computers and rendering obsolete the fair-use rights we take for granted with tangible information such as books and CDs. Talk about bait-and-switch: By the time the Internet counter-revolution is over, we will not only be paying for content, we'll be paying for using it in ways that used to be free.

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Debra Goldman's Consumer Republic

Debra Goldman

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Debra Goldman