Web Publishers Divided Over Value of Charging

Publishers who implement some sort of paid content model in the near future may find themselves in the daunting financial position of being surrounded by those who don’t. Even as newspaper coalitions form to implement firewalls, prominent executives like News Corp chairman Rupert Murdoch tout paid models and frenemy Google weighs building a micro-payment system, several of the biggest players on the Web, either publicly or privately, have already said no to charging for content. “It’s not in our DNA,” declared Yahoo Media Group head Jimmy Pitaro.Besides Yahoo, neither MSNBC.com, CBSNews.com, nor CNET are likely to implement any paid structure. CNN.com has made no moves in this direction. Even ESPN.com, which has long maintained a small paid subscription service with its ESPN Insider product, isn’t likely to change its online approach. “We are not contemplating going totally paid,” said John Kosner, ESPN’s senior vp, general manager of digital media. “I don’t think it makes a difference to us what others do. “I have yet to see a concept that sounds like a winner,” added Charlie Tillinghast, MSNBC.com president. One of the key reasons for this hesitancy is that sites with big traffic fear entry barriers. “You go behind a firewall, and you take an audience haircut immediately,” said Joe Gillespie, executive vp, CBS Interactive Technology & News. “You can really hurt” search engine optimization. According to Gillespie, about 35 percent to 40 percent of CNET’s traffic derives from search, and for sibling CBSNews.com, it’s 60 percent.Another pervasive fear is that users—after being conditioned for years to believe that the Web is a free-for-all environment—will simply go elsewhere rather than paying.“There has to be something about your content that you can’t get free elsewhere,” Tillinghast said. “If Obama has a speech, are we going to charge when half a dozen other providers are giving it away for free? There is no way we can corner the market on something like that.”But Steve Brill, co-founder of the startup Journalism Online, argued that many Web publishers have major misconceptions about how a pay model would work. Most sites, he argues, would be foolish to put all of their content behind a pay wall. Instead, Brill believes, they should focus on charging only for hyper-local, exclusive content. The rationale: make more money on your most engaged users, while perhaps losing a handful of those less clicked in. “You’re not going to lose a significant amount of page views,” Brill said. “If you put in a flat pay wall, you might as well not have a Web site…This is just like controlled circulation in print.”Brill said that his company is focused on building a product that is highly flexible, allowing participants to test any range of paid models. So far, it has recruited over 500 Web publishers large and small. Regarding the biggest sites on the Web, he said, “we are talking to them, but we don’t need them.”One of the biggest selling points of the Journalism Online model, said Brill, is shared cost. The company plans to take 20 percent of its members’ paid revenue—but promises to save them “several million dollars” in implementation fees were they were to go it alone. Many in the industry dispute that. In fact, according to Sanjiv Gupta, CEO of electronic publishing software firm Pressmart, a Web publisher could implement a paid model in a “few hours” and costs could be as low as $500 per month.The Manhattan Mercury newspaper in Manhattan, Kan., recently implemented a paid subscription model on its own. “It was not terribly difficult to do,” said Mercury general manager Ned Seaton, though the site will eventually require some restructuring. While traffic is expected to dip, Seaton said the move was necessitated by the weak display market, one he doesn’t see coming back strong enough to cover the paper’s costs. “What really has changed is the realization of this notion of infinite supply,” he said. “We are competing against every Web site across the globe on price. You can’t charge anything for those ads.”While they’ve also felt the effects of a weak ad market, the bigger news sites are far more confident in the future of online advertising. Of course, they don’t have the fixed costs that print companies do. That’s what’s really driving the push toward paid content, rather than a consumer need, argued Bill Wilson, president of AOL Media. “You don’t want your business model to drive this decision,” said Wilson. “For us, we benefit from having variable cost structure that papers don’t.”But papers also have the advantage offering local expertise, per Brill’s point. That close connection to users’ lives makes them distinct and valued in a way that most national news sites can’t replicate. You might pay a site sub fee to get information impacting your home life, home team and other hyper-local content, but not so much for a national news feed. Yet that could change as well. Yahoo and CNN.com already syndicate local news from newspapers and TV stations. AOL and MSNBC have recently acquired startups that specialize in hyper-local news. Plus, in this environment, “you have to be sure that some enterprising young unemployed journalist won’t cover local news,” said MSNBC.com’s Tillinghast.Nontraditional local media could also end up siphoning some audience. “We’re praying for the day that [daily newspapers] go behind a pay wall,” said BIll Jensen. Director of new media at Village Voice Media. “That’s good for us. We’ve always been free and we know free. We’re not complaining about it.”In spite of their overall reluctance, some Web publishers are mulling some forms of paid content, at least on a smaller scale. For example, CBSNews.com has launched several live Web video series, which they say have attracted loyal, valuable audiences, including the politics-themed Washington Unplugged. Gillespie said that he could envision some sort of premium video product down the road. “It’s very hypothetical,” he said. “But do we come up with a paid model for shows that we know will never get more than 50,000 streams?”AOL’s Wilson said that as the company expands its commitment to original content, it may explore launching a new category of sites and services that it charges a fee to access. But the company is not itching to go first. “Are we going to lead the market on that? Probably not,” he said. “Right now we are taking share in a lot of categories. The last thing we want to do is slow that down.”

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Web Publishers Divided Over Value of Charging

Mike Shields

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