Free Content Still the King Online

Revenues from paid online content will only grow to $5.8 billion by 2006 – up from $1.4 billion in 2002, according to Jupiter Media Metrix, which also found consumer attitudes toward paid content is getting worse.

Revenues for general content will reach $2.3 billion in 2006 (up from $700 million in 2001), while revenues from online games and digital music will equate to $1.8 billion and $1.7 billion by 2006 (up from $260 million and $30 million in 2001), according to Jupiter. But the worst news for publishers that plan on entering the paid content arena is consumer attitudes toward paying for content. According to a Jupiter Consumer Survey, 70 percent of online adults cannot understand why anyone would pay for content online.

“While there is money to be made in the online content business, Jupiter’s latest survey and market forecast numbers indicate that the mass market still largely shuns anything that smells like a subscription online,” said David Card, Jupiter vice president and senior analyst. “However, in the near term, media companies will create subscription services via packaging, exclusivity and added interactive features. Over time, they must use the gradual U.S. broadband transition to reset industry ground rules and recondition consumer expectations.”

According to the Jupiter Consumer Survey, 42 percent of online adults expect over time that people will have to pay for content on the Internet. In a Jupiter survey from August 2000, 45 percent of respondents answered the question the same way. Despite consumer reluctance, Jupiter analysts believe that major media properties are in a better position than they were four or five years ago because they no longer face well-financed start-ups giving away quality programming in an effort to lure new users.

“The online future is beginning to look a lot like cable TV. Established portals will emerge as networks that aggregate premium content and services in packages – both those that portals determine and those that users customize. This will pave the way for content providers to resell premium content through numerous partners,” Card said.

Within the general content category, Jupiter expects the highest revenue generating genres in 2006 will be audio/video entertainment ($600 million), adult entertainment ($400 million) and financial and business news content ($350 million). Genres expected to generate the least revenue in 2006 include: consumer/shopping aids ($85 million), content for kids ($95 million) and sports content ($95 million). According to the survey, fewer than 6 percent of online consumers would be willing to pay for kids, sports, video or shopping aid content.

Interestingly, the survey found that, among those online users who would pay for content, 29 percent would likely pay their ISP. But experienced online users – those who have been online for five years or more – are more likely to pay publishers than ISPs or portals. Jupiter analysts believe that online cross-genre, cross-brand packages will lead the way into a cable TV-like tiered services future.

A study of the effects of the dot-com meltdown done by the Pew Internet & American Life Project in November of 2001 found that 17 percent of Internet users had been asked to pay for access to a Web site or service that they once accessed for free. Half of these users found a free alternative, 36 percent completely stopped getting that information or service online and 12 percent paid for the content or service.

While Jupiter predicts digital music content to bring in $1.7 billion by 2006, an Ipsos-Reid study found that fewer than 10 percent of Americans over the age of 12 who have downloaded music off the Internet have ever paid for it, and most of them are unlikely to begin paying anytime soon (see Subscriptions Not Music to Consumers’ Ears).

Using the 2000 U.S. census figures, the 8 percent of Americans over 12 who downloaded and paid for music comes to only 4 million people – not good news for online music ventures. In addition, 84 percent of those who have downloaded music without paying said they would be unlikely to pay for streaming or downloading music off of the Internet, even if there was no free music available.