Online Strategies for Paid Content Peter Krasilovsky, VP

Online Strategies for Online Strategies for Paid Content Paid Content

Peter Krasilovsky, VPPeter Krasilovsky, VP

May 20, 2003 UC BerkeleyMay 20, 2003 UC Berkeley

BORRELL ASSOCIATES INC.Executive Strategies for Local Media


Borrell Associates’ research focus: How The Internet Impacts Local Media

Disruptive Technologies and Newspapers Real Estate Classifieds Transition Local Online Audience Measurement Attitudes of Local Online Advertisers


Today’s Discussion:

Online Strategies for Paid Content

• Review, analysis and strategies • Strategy insights• User survey• Follow-up of our 2001 report on “Free vs.

Paid” for NAA


What Does Paid/Premium Mean

For Local News Companies?

(It Depends)

• Paid Represents Net New Revenue From Subscription and a la Carte products

"

Origin of Disruptive

Business Outside of

Established Market

Disruptive

Business

Area of DisplacementArea of Net Growth


Established

Business


The Opportunities in Paid Content:

Strategic and Financial

• 10% of online users pay for some kind of content

• Total content sales reaching $1.3 billion in 2003

• 63% of spending is for Personals, Business/Investment and Entertainment Source: Online Publishers Association/Comscore


WHY PAID ENVIRONMENT

IS STILL INCUBATING*

1- Too much free stuff

2- Payment technology too primitive for charging

a la carte

3- Need better reading devices, more intuitive wireless services

4- Offline products much more profitable. Publishers need to use online to support offline.

*adapted from Michael Rogers


A Delicate Balance between Advertising and Circulation

• Rule of Thumb-- 3 Ad Dollars for every Circulation Dollar.

• ABC Rules dictate that alternative methods must be at least 25 percent of the home circulation price


“Paid content is real and growing but there is still an enormous

opportunity in advertising and marketing.”

Barry Briggs, COO, CNET


New York Times Digital Value Pyramid 11 million Active registered users

3.7 million

Daily e-mail subs

1.5 million

Loyal users

500,000 Pay product users


‘All-You-Can-Eat’ Annual Subs are Norm Today

• 59% of online content sales are annual subscriptions

• 27% are monthly• 14% are a la carte

• Source: Online Publishers Association/Comscore


Est. Value of Premium Content Types, Circa 2003 (in order)

1.Tollgates for Full Site Access2.Wireless Products 3.Broadband Products/Aggregations 4.Archives5.Special Features (crossword puzzles)6.PDFs (Newsstand, Olive)7.News Tracking/Push (Infogate)8.Paid Email Newsletters


Delivery, Not Content, Key to Paid?

‘If we (again) have paid dimension in future, it won’t be paid content,it will be paid delivery. Our biggest competitive advantage is speed and immediacy. ‘

Jacob Weisberg, Editor, Slate


Borrell Research Into Tollgates:

Two Dozen Newspaper Sites Are Behind Tollgate– No site gets more than 2.6% of print circulation base to pay

– Maximum registration sign-ups total 12.1% of print base

• Potential retention value not as strong as anticipated

• Generally a mistake in strategy*

*except in remote places like Albuquerque and Winnipeg


Effect on Operating Costs of Tollgate

is Potentially High

Site ExpenseEffect of limiting traffic

Reasoning

Content acquisition

Increases Paying users have higher content expectations

Hosting/Disk SpaceBandwidth

IncreasesDecreases

More quality content is

addedFewer users, less

throughputSite

management

Content/designTech support

No changeIncreases

Resources are simply redirected

New system, real “customers”

Hardware/Software

Increases Payment or registration system will cost $ whether

built internally or outsourced


Tollgate Chases Non-Subs Away

• Does not add value to print sub• Drives audiences away:

85% would not subscribe to print77% would not pay for online

• Makes it difficult to induce demand through improvements


Not Even Worth a Buck a Month? • 71% would go elsewhere if charges were imposed• High Pricing Sensitivity Among Nonsubscribers

$0$1

$5

$7

Too Inexpensive Bargain Expensive ButWorth Considering

Too Expensive


Beyond Tollgates, Niche Content Represents ‘New Value’

• Audiences may pay – monetarily or with information – for:– Niche content, information of particular

relevance– Content unavailable through other

channels– Differentiation


Niche Sites and E-Newsletters Have Had ‘Mixed Success’

1.Circulation of Belo’s sports newsletters collapsed from 98,000 to 800 after $9.95 fee imposed.

2.But Milwaukee Journal Sentinel has 17,500 subscribers to Packer Insider w/ Season Pass of $19.95 . 72% of subs from out-of-state


SIGN OF THINGS TO COME: An ADHOC PREMIUM E-NEWSLETTER NETWORK

• The Journal-Review exchanges premium content with a premium Minnesota Vikings site run by The Star Tribune.

• Whether subscribers got the content from the Minnesota site or the Green Bay site, “they need to pay either way.”


Broadband opens door to Aggregation “Cable TV” Model

• 2.2 million of Yahoo's 215 million users pay for a fee-based service

• 1 million subscribers to RealOne video service @$9.95 each.

• Jupiter forecasts Audio/ Video will bring in $750 million+ by 2007 due to Broadband


“They Pay for Sports, But they Mostly use News”

Merrill Brown, SVP, Real Networks’ Real One


Positioning For Premium Content….Registration Is Better

‘Intermediate’ Path

– Vast majority –print subs and non-print subs -- will register, depending on information requested


Borrell View: Registration Best Entry Point for Next Gen Premium Content

• Get better data for site development

• Generate lists for email marketing

• Target onscreen advertising


Summary

1. “Paid” Content is potentially lucrative2. Value for Services such as video is clear3. Value of paid newspaper services is not4. Registration achieves many of same goals

as paid content...and acts as gateway to new premium environment.


Thanks…Let’s Talk About This Stuff!

Peter KrasilovskyPartner, Borrell Associates

[email protected]

mailto:[email protected]

Documents

Online Strategies for Paid Content Peter Krasilovsky, VP