Charge of the online brigade

In the good old days just about everything on the internet was free: software, music, news, email, movies ... almost everything.

But this has created a problem for site owners. We've become so used to paying nothing for online content that now we're up in arms about the possibility that we might actually have to hand over some cash.

But, as the saying goes, there's no such thing as a free lunch and the internet is finally starting to wise up to that fact. Content sites have realised that they can't live on the revenue generated from ad sales alone.

The times are changing and the sad news is that we're probably going to have to get used to paying for at least some of our online content.

But surfers can be a tight lot and, after years of freeloading, websites are going to have to work hard to persuade us to hand over cash for information we're used to getting for free.

While the vast majority of content sites have plans to start charging for at least some of their content next year, a recent survey from Jupiter Media found that only 10 per cent of Europeans had ever paid for any kind of online content. And what's the betting that most of that 10 per cent was for porn!

Website bean counters can take some comfort in the fact that US internet users seem more willing to stump up real cash.

A recent survey by the Online Publishers Association discovered a big increase in US spending on online content.

Consumers in the US spent $300m (£200m) on online content during the first quarter of 2002, that's an increase of 155 per cent on the same quarter in 2001.

On this side of the Atlantic, however, the story is very different. A 2002 Jupiter Media survey found that 40 per cent of Europeans wouldn't even consider paying for online content. So just how are they going to win us over?

What will we pay for?
First we need to know what kinds of things web users are prepared to pay for online. Recent Jupiter Media research offers a few clues.

Of the 60 per cent of Europeans that were willing to pay for online content, 23 per cent said they would pay for music, 17 per cent for video content and 16 per cent for news and archives.

Tucked away in the same research is the interesting fact that over half of 2002 European online revenue will come from pornography.

It could be more, as we can assume that many of the survey respondents will have been too embarrassed to list porn as one of the types of online content they'd be willing to pay for.

So sex still sells, but how about music? With the demise of Napster and all the anti-piracy pressure from the music industry you'd think we'd have resigned ourselves to having to pay for our music.

But no, unauthorised music swapping is still going on and it's the file swapping site Kazaa that's the most popular music site on the web, not EMI or Sony.

In fact music industry analysts believe that none of the industry-backed subscription sites - such as Musicnet.com, Listen.com and Pressplay.com - have managed to attract more than 100,000 paying customers. Aside from the charges, the biggest problem for these services seems to be the lack of choice of artists.

Of the big guys Pressplay.com - a joint venture between Sony and Vivendi Universal - probably has the best chance of pulling in the subscribers.

The company recently loosened the rules on how its service can be used and this has boosted membership numbers.

For $9.95 a month, Pressplay gives its subscribers unlimited access to its music archives, allowing members to download or stream as many tunes as they want and burn the tracks onto a CD or download them to a portable music player.

This is the first time one of the label-backed services has given its members such freedom and it could pave the way for a more flexible approach to music downloads from the other record companies.

And the change in the rules seems to have worked. Pressplay's chief executive Michael Bebel revealed that "since we launched version 2 in August, we've more than doubled our user base".

Will we pay to get the news?
Getting money in return for news content can be a tall order on the web as there are so many free news sources.

Scott Moore, former publisher of the online current affairs magazine Slate, explained the quandary many news sites find themselves in.

"The main question a site needs to answer before charging for content is whether there's a ready substitute available for free or at a cheaper price," he said.

"If the answer is no, a company may be able to go to a fee-based model with some success. But as with any other free site that begins charging, it needs to resign itself to reaching a smaller audience, since many freeloaders will simply leave."

The website of the Wall Street Journal led the way in the US and began to charge for its news content way back in 1996.

Founder Neil Budde explained the thinking behind the decision. "We felt from the beginning that the audience we were targeting would be willing to pay, so in a way it was easier for us to do it from the start. I don't know that everyone could, or would charge," he explained.

A yearly subscription to WSJ.com will set you back $79 (£50) and the site now has over 650,000 paying customers. And here's a rarity in the internet sphere: WSJ.com recently reported that it's profitable.

Undoubtedly spurred on by the success of the Wall Street Journal, the Financial Times began to charge for some of its services earlier this year.

Visitors to the site continue to get the weekly news for free but additional services - including email updates, industry-specific news and access to the huge FT archive - are all now chargeable. Prices start at £65 a year and go up to £150 a year for unlimited access.

The FT managed to pull in 17,000 paid subscribers in the first two months after the introduction of subscriptions. That might not sound too impressive but its management seem happy.

Marjorie Scardino, chief executive of FT owners Pearson, commented: "The revenue is outstripping what we expected and more people are taking the more expensive service."

Scardino also claims that 78 per cent of those who signed up for the free trial had gone on to subscribe.

But WSJ.com and FT.com do have a built-in advantage: they're both primarily business services. The subscriber's company is probably paying for the subscription in most instances.

The key question is, are we willing to put our hands into our own pockets to pay for more mainstream news services?

Right now the answer seems to be no. The sites for BBC News, Daily Telegraph, The Guardian and hundreds of other news services all give away selected amounts of their content for free.

What is happening, however, is that newspapers are starting to charge for specific niche online services.

Take Times Online as an example. In March 2002 it started to charge visitors for access to its crosswords, news archives and law reports.

At the time Paul Hayes, general manager of Times Newspapers, announced: "The free ride is over and the days of free content have gone. Charging for content is not a new idea; newspaper publishers have been doing it for 200 years."

What else will we pay for?
We won't pay for news and we don't like paying for music so just what will we pay for? Steve Vonder Haar, an analyst at US research company the Yankee Group, has come up with what he reckons is the magic formula for publishers that want to make money from online subscriptions.

According to Vonder Haar, publications have to meet the following criteria: they must be seen as must-have, high-profile brands; they should offer time-sensitive information that benefits from instant delivery; and they should help consumers be more productive or make money.

Probably the best example of a website that helps consumers to be more productive is the phenomenally successful US site Consumerreports.org.

This online buyers' guide was the first website to hit the one million subscriber mark and was also one of the first to charge for content.

Vice president Joel Gurin is rightly proud of the achievement. "By reaching one million paid online subscribers, our site has proven that people will pay for truly unbiased, expert content," he said.

Anything else? Research company Ovum believes that another big market for paid-for content is information with "an emotional or psychological pull".

Take Friends Reunited, on which thousands of us are willing to pay the annual £5 membership fee to get in touch with old school friends or work mates.

The site offers something very powerful: the chance to find people who would otherwise be out of reach. Genealogy sites fall into the same category. Just look at the phenomenal number of people who accessed the 1901 Census site when it went live early in 2002. The demand brought the site crashing to the ground.

Many of us are willing to pay a small fee for easy access to information about our ancestors, as the success of sites like Ancestry prove.

The promise of finding our perfect partner is another compelling emotional draw and one that we are willing to pay for.

The dating site Match.com has over 160,000 UK subscribers who hand over £17 a month hoping to find true love.

True enough Match was always a paid-for service so it never had to go through that awkward free to fee transition, but international vice president Joe Cohen puts its success down to "the value proposition that consumers are willing to pay for. We give consumers something they can't get elsewhere for free."

And then, of course, there's sex - perhaps the most powerful psychological draw of them all. Lads' magazine FHM is currently pushing its FHM Honeys content as a paid-for service.

The honeys in question are 'Britain's hottest girls next door' and you can see their photos on the FHM site for just a quid - what red-blooded male could resist?

James Carter, FHM publishing director, said: "We are looking forward to launching High Street Honeys Uncut, which is a proposition I'm sure our readers will be happy to pay for."

How we want to pay
Currently we have two main choices as to how we pay for our online content. By far the most popular approach is the annual or monthly subscription fee, but one-off purchases using some kind of micro-payment scheme could be the way forward.

To date, the subscription model hasn't been widely embraced and industry analysts reckon that the typical conversion rate from free to fee is a paltry one per cent.

FT.com, for example, marketed its subscription service to 2.7 million users and had just 30,000 sign up. What's more, the subscription model is a slow one that sits rather uneasily in the fast-moving world of the internet.

It takes a long time to grow a subscriber base, and you have to be in it for the long haul.

An annual subscription fee just seems too much of a commitment for many of us to make. After all, how many of us resist subscribing to magazines even though we may buy the same title every month in the newsagents?

In fact recent research carried out by BT found that we were five or six times more willing to make a one-off payment than to buy a subscription online.

And that's where micro-payments come in. They let us buy one-off chunks of content for pence rather than pounds.

BT has a bit of a vested interest in this area. It recently developed a new micro-payment system called Click&buy and it could become the closest thing the UK has to a universal micro-payment service.

It works like this: you hand over your payment details to Click&buy, and a secure online account is set up for you which aggregates any purchases you make from sites taking part in the scheme.

Your account is then settled monthly just as you'd pay a normal bill by credit card, debit card or direct debit.

Rather cunningly from April you could choose to have your online content costs added to your BT home phone bill. Of course, BT will take a cut from each transaction for its pains.

So will we get our wallets out?
Phil Eames, managing director of new media consultancy Incepta Online, summed up the paid-for content conundrum.

"The digital industry has failed to communicate the value of online information, whether it's news, market data, sports, entertainment or travel information," he said.

"With the advent of the internet people have come to expect unlimited access to information for the cost of a phone call and asking users to pay for information now can seem like asking an Eskimo to pay for snow."

But the truth be told, some of us can't quite believe we've got away with not paying for anything for so long.

And we really are quite happy to pay for unique and useful online services that we can't get elsewhere, as the success of Friends Reunited, Match.com and Ancestry.co.uk shows.

What publishers need to do is give us more of this premium content that can't be found anywhere else and we reckon those moth-bitten old wallets could emerge from our pockets.