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End of the free ride

Can sites charge for content?

For several years, the business model for Net companies has been, “Get people to come to the site–we’ll figure out how to make money later.” Well, later is now. Dot-coms need new business models–ones that actually make money.

With a slowed stock market and dot-coms going under, many are considering what was once a Net heresy: charging consumers for Internet content. But the burning question is whether consumers will actually open their wallets.

In January, Yahoo! started charging for listing items in its auctions. This isn’t a radical step when you consider eBay, but it’s a major departure for the House That Free Built. If Yahoo! considers its experiment with charging a success, you can bet it’ll find other “free” services that they can charge for. And Yahoo! is a Net leader–others in the industry are watching it closely, checking which way the wind is blowing. I fully expect to see many previously free services considerably more expensive by year’s end.

But the question of whether people will pay for Internet content is actually the wrong one to ask. The thing to wonder about is what kinds of content people will find valuable enough to pay for.

If consumers have shown a reluctance to pay for Internet content, it’s usually with good reason. Let’s face it–most of the content available on the Web isn’t worth paying for. It’s tough to justify paying for news when you can be reasonably assured that you can get the same news from a different source. And many of the entertainment-style programming is just, well, bad.

But this doesn’t mean that charging for content–even on the Internet–is a bad idea.

Taking a stroll down memory lane, in the 1980s a few folks had another crazy idea about charging people for content. They thought people would pay a monthly fee for access to movies, up-to-the-moment news, and leather-clad rock stars bopping in front of cameramen who seemed to be having epileptic episodes.

And so cable TV was born. At the time, few believed you could get people to subscribe and pay for something they could otherwise get for free–namely broadcast TV.

Initial cable coverage was spotty at best. But people did pay for everything from movies on HBO to news on CNN to music videos on MTV, because they could see the value right away. People understood the idea of paying to get access to their favorite movies, especially back before films made it to VHS tape in a matter of months. Kids were hungry to see their favorite pop stars–I know I sure was at the time.

Consider also that in the heady days before Netscape made the Internet a household word, America Online was essentially a subscription service for content. You paid your fee and got access to message boards, chats, and original content. If people can understand what they’re paying for and think it’s worth it, they’ll pay.

But is this all just ancient history? The prevailing view is, once people have gotten a taste for free, they won’t pay. You can’t turn back the clock or unring the bell.

There are already plenty of examples of people paying for content. The Wall Street Journal is the golden child of publishing, its online venture having made more than $14 million from subscriptions last year. People see enough value in the archived reviews of a Consumer Reports or Cooks Illustrated to subscribe to their databases. Nonpublishers like eBay aren’t giving away their services for free. While the Net isn’t technically mature enough for TV-like entertainment to have taken off, consider the current state of the art in Net entertainment.

Online gaming is big business, with 300,000 subscribers to Sony’s EverQuest online game shelling out $10 a month. Do the math on that one. Electronic Art’s Ultima Online and Microsoft’s Asheron’s Call also have loyal followers spending a similar amount per month.

I don’t expect free content to dry up; there’ll always be plenty. But to stay healthy, many dot-coms will have to consider charging consumers.

Net denizens will pay for content, they just won’t pay for bad content, or content they can get somewhere else for free. If it’s good–if they can see the value–they’ll open their wallets.

Sean M. Dugan [email protected] is a contributing editor for ComputerUser and InfoWorld magazines.

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