Specialized content may justifiably cost surfers a fee
"Most people on the Internet are looking for information, and media outlets are used to providing it."
James Cramer, the quite visible founder of TheStreet.com, recently wrote a column in which he castigated an analyst who had said that by charging a subscription, TheStreet.com was chasing the wrong business model.
Cramer took offense at that, which got me thinking about my Internet usage habits. I pay for the two newspapers that arrive on my doorstep daily, as well as the third I get at the newsstand in town. I willingly kick out serious money for a wide range of magazines.
Yet I balk at paying for news and research I get over the 'Net. It's not just because I'm cheap, it's that when I first started using the Internet, everything was free. It was enough trouble getting connected, and there weren't that many commercial sites out there anyway.
When newspapers first went on-line, quite a few tried to charge for their product. After all, they charged for the print version. The Journal and Constitution of Atlanta and the Tampa Tribune in Florida were on Prodigy and charged extra for access. The St. Louis Post-Dispatch was on a BBS and it charged, too. So did most papers that were on the original on-line services.
But the Web changed things. The experimental nature of the Web, combined with a lack of a commerce infrastructure, prompted many papers to go with the free distribution model, although some -- notably the Knight Ridder papers -- initially tried to charge. Those days have ended.
Media outlets are beneficiaries of one interesting aspect of the Internet: Most people on the Internet are looking for information, and media outlets are used to providing it.
In deciding whether to charge or not to charge for Internet subscriptions, the big dailies have chosen not to charge. They appear to be after higher readership numbers so they can charge advertisers more money.
The specialized information providers, however, have chosen to charge for access. Today, some of these niches are quite large. The Wall Street Journal charges for access to its site and deems itself quite successful, with well in excess of 250,000 subscribers. The New York Times, with a similar print circulation, does not charge for its web site. It now has more than five million registered subscribers.
I don't know how many of those registered Times users visit regularly, nor do I know how many of those 250,000 or so Journal subscribers visit, but I'd be willing to make two assumptions: A higher percentage of the Journal subscribers visit regularly, but more people see the Times site daily.
Is one way better than the other? I don't know. But I do know that I will routinely look at the Times, Newsday and The Star-Ledger web sites, ads and all, on a regular basis. And I'm a Journal reader, so I look there daily. The good financial sites all seem to charge, and since I've already kicked out money to the Journal I tend to ignore the others.
TheStreet.com is a site for investors, professional or not. I'm not much of an investor, so I'm not willing to part with $100 for a year-long subscription. The $49 I pay the folks at the Journal covers me fine. I don't pay Hoovers or any of the other financial sites, either.
Cramer's point was that some sites are worth paying for and that a specialized financial site like his was one of those sites. The New York Times tried to have it both ways for a while. All subscribers to the Times on the Web had to register, but only those outside the United States had to pay. The fee wasn't much, but it was a fee. After two years, the Times dropped it.
"We found that with a business based on distribution of news and information, the system would scale more readily without need to charge," says Christopher Neimeth, vice president and director of sales and marketing for the Electronic Media Group of the Times. As with a print product, advertising is seen as the way to foot the bill, both for traditional print media and the new folks.
The number of international subscribers jumped when the fee was dropped, Neimeth says. "This helps us get more advertising and makes more people available to funnel to fee-based services," he says. "Media businesses require scale, and free services help build that scale."
Dave Kansas, editor-in-chief of TheStreet.com, says charging subscribers has its benefits.
"A decent part of our business is coming from advertising revenue," Kansas says. "With a paid subscriber base, we can track the demographics. And the fact that every subscriber is willing to pay for something on the Internet, well, advertisers find that very attractive."
Apparently both sides are right. TheStreet.com has 18,000 paid subscribers (with another 40,000 on 30-day free trials), it has advertisers and it has some serious people investing in it. The Times is going after scale and apparently is getting it.
And me? I guess I'm just cheap.
-- Steven E. Brier
From NEWSINC. Copyright © 1998, All Rights Reserved.
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