Just a year ago, most media companies believed the formula for Internet success was to offer free content, build an audience and rake in advertising dollars. Now, with the recession battering advertising online, in print and on television, media executives are contemplating a tougher trick: making the consumer pay.
Publishers such as Hearst Newspapers, The New York Times Co. and Time Inc. are drawing up plans for possible Internet fees. Jeffrey L. Bewkes, Time Warner’s chief executive, is promoting a plan called TV Everywhere, to offer consumers a vast array of television online, provided they are paying cable TV customers. And Rupert Murdoch, who once vowed to make The Wall Street Journal’s website free, is now an evangelist for charging readers.
Change in strategy: Rupert Murdoch, who once vowed to make The Wall Street Journal’s website free, now believes readers must be charged.
“People reading news for free on the Web, that’s got to change,” Murdoch said last week at a cable industry conference in Washington.
AP said on Monday that it intended to police the use of news articles linked on countless websites, where many consumers read them free, to make sure the sites shared advertising revenue with those who created the material.
But from networks selling downloads of TV shows to music companies trying to curb file-sharing, to struggling newspapers and magazines, the make-or-break question is this: How do you get consumers to pay for something they have grown used to getting free?
Some industries have pulled it off. Coca-Cola took tap water, filtered it and called it Dasani, and makes millions of dollars a year. People who used to ask why anyone would pay for television now subscribe to cable and TiVo. Airlines charge for luggage, meals, even pillows. And some music fans who have downloaded pirated songs are also patrons of iTunes.
All these success stories offered the consumer something extra, even if it was just convenience.
“With bottled water, it’s a kind of snobbery and the perception of healthiness that they have marketed,” said Priya Raghubir, professor of marketing at the Stern School of Business at New York University. “With downloads, the benefit is that the paying services allow you to sample many songs free, and you know it’s legal, and the TV shows have no commercials.
“With newspapers and magazines, there have to be features you can’t get anywhere else, and maybe part of what you would pay for is the privilege of helping the business survive, but that is more of a difficult sell.”
Major publishers say they have not yet decided how to proceed, but that some changes are coming soon.
“We’re looking, of course, at ways to extract payments from the consumers of our news—micro-payments, subscriptions, memberships, licensing, even voluntary donations,” Bill Keller, executive editor of The New York Times, said last week in a speech at Stanford University. “In the coming months, I fully expect that the NYT will begin laying down some bets based on our best forecasts of how the relationship between journalists and their audience will evolve.”
Only a few publishers have tried such a transition, with mixed results. The Los Angeles Times and The New York Times each tried charging for access to some content online, then dropped the requirement because it cost them audience and advertising revenue.
Most publications have moved in the other direction, trying to draw the biggest audience for advertisers by offering content free. The Associated Press’ new approach straddles the usual reliance on ads, and the new move to charge someone—though not the consumer—for the content.
By adding free features such as email alerts, blogs, discussion forums and video, news organizations are trying to persuade readers that they provide something more valuable than the aggregators and blogs attracting news readers online. In 2006, The Washington Post became the first newspaper to win an Emmy for its video.
Eric J. Johnson, a professor at Columbia Business School, said he had been amazed by media companies repeatedly adding free online services, like on-demand video. “Before you add something to your site, you should say that if consumers really want it, that should be part of a package that you could charge for,” he said.
That is an alien concept to many media veterans.
Before the recession, media executives saw their future in online advertising, which was growing 25-35% annually.
But last year, overall Internet ad spending rose 10.6%, and only 3.5% for television networks, according to a report by the Interactive Advertising Bureau and PricewaterhouseCoopers.
©2009/THE NEW YORK TIMES