an exerpt from The Free Versus Paid Debate
Previous research on the question of charging for Web site content has not been encouraging for publishers.
In a Spring 2001 survey, Lyra Research found that only 10% of online respondents acknowledged paying for "premium music and news sites." Beyond behavior, consumer attitudes augur strongly against the prospects for pay-for-access success. More pointedly, Lyra reported an overwhelming reluctance among online users to pay for newspaper site content: Almost eight of ten respondents "strongly disagreed that newspapers should charge for site access."
For publishers of newspaper-affiliated Web sites, what's still missing from existing research is greater detail on the attitudes and behavior of the current market for newspapers' Web content. After all, the online audience for newspaper sites comprised just over one in four Web users in September 2000, according to measurement service Nielsen/NetRatings. That equates to more than 28 million Web users from whom newspapers stand to profit—or lose—immediately. In conducting our research, Borrell & Associates sought to answer two basic yet unaddressed questions about newspapers' existing audiences on the Web:
* Will visitors to local newspaper sites pay for access to general content—and if so, how much will they pay?
* What are the key drivers of Web audiences' willingness to pay?
Key Findings: Resistance to paid access; tolerance for registration
The market for paid access to local news content is undeveloped and will required substantial marketing efforts to meet goals. Consumers haven't paid for content because:
1. They're conditioned to expect news for free.
2. They don't perceive incremental value in online news—either as a standalone product or as a value-add to the print edition.
3. The newspaper franchise is strong enough to lure a core audience online, but not strong enough to make them pay.
4. The logistics of making payments and securing credit card information reinforce attitudes against payment.
5. Consumer acceptance of registration has grown; in fact, they're willing to provide substantial personal data in exchange for access.
The survey on which this report is based was fielded September 23-29, 2001. Respondents were members of an opt-in panel of nearly 16,000 visitors to 12 newspaper-affiliated Web sites, recruited during Waves 1 and 2 of Belden Associates' Sales and Site Survey (February-June 2001). Initial and follow-up email solicitations to the entire panel resulted in 1,895 completed surveys. After "cleaning," this represents a 13.3% response rate based on an adjusted total of 14,300 valid email addresses.
The sample yields an overall margin of error no greater than 2.3 percentage points at the 95% confidence level. Margins of error on subsamples are larger.
Overall, respondents were demographically upscale and from large metropolitan areas. Use of multiple local news media was strong among this sample, which comprised relatively heavy Internet users. More than 40% visited the tested newspaper Web sites five or more of the past seven days. There was little evidence of print cannibalization; to the contrary, frequency of use of the newspapers' sites was positively related to readership of print editions. Penetration of high-speed and mobile Internet access was assessed at one-third and one-quarter of respondents, respectively.
The Case for Paid Access Hasn't Been Made
The key predictors of consumers' willingness to pay for products and services are (1) past purchase behavior, and (2) attitudes toward the offering.
Publishers do not appear lucky in either regard.
Roughly one in four respondents in this study indicated payment for some form of online news and information content during the past 12 months. Payment for content was in addition to any fees charged for Internet access. As might be expected, respondents were more likely to have paid for content for business use than for personal use.
At first glance, the 25% figure seems somewhat high when compared to other studies' findings. Payment for news and information content, of course, is a broadly defined activity: It could mean paying for access to local newspaper archives, a subscription to The Wall Street Journal online, a Real.com GoldPass account, or access to the rumor and comment search at FuckedCompany.com.
For business use, the top three categories of paid content were:
1. National and world news
2. Financial listings or reports
3. The catchall category "other"
4. The top paid content categories for personal use were:
1. National and world news
2. Local news
Table VIII lists the proportion of respondents indicating that they paid for content during the past 12 months, by content type and business or personal use.
Respondents' payment for content was more than twice as likely to be for a subscription fee as a pay-per-use charge (72% versus 29%), based on the last/most recent payment made. This is due to both the preponderance of subscription versus per-use models in news and information. Pricing schemes that give discounts for longer-term commitments versus one-off sales also contribute to the difference.
With this in mind, it's not surprising that more than half of those who paid for content (54%) shelled out $10 or more for their last/most recent charge. Fourteen percent of those who paid for news paid less than $1; 12% paid between $1 and $2.99; 8% paid between $3 and $4.99; and 12% paid between $5 and $9.99.
Payment by credit or debit card was the most popular way of dealing with charges, with almost six of ten respondents choosing that method. One in six respondents (17%) had their charges paid by another party (e.g., employer). A variety of additional payment options, from direct bank debits, invoices for purchase the use of PayPal or Clickshare, and "other," accounted for the remainder.
Reasons For Not Paying For Content
The key obstacle for Web publishers, of course, is convincing consumers that site content is unique and worth paying for. In general, though, respondents view most online news content as parity offerings, each substitutable for another. When asking respondents why they hadn't paid for news, nearly all (96%) agreed that "there are so many free sources of news and information available online, it doesn't make sense to pay."
Two-thirds of non-payers said online newspaper content has little value. Most said it was too expensive, compared to other news sources. "The information is already there, and they don't have printing and distribution charges online," is a sentiment often heard.
Publishers should find it troubling that currently half the site visitors in our survey believe the newspaper information available online simply "isn't worth paying for." It's clear that perceived value is the major obstacle for Web news publishers seeking to sell content. As additional data indicate, however, it's not the only obstacle.
Security of transactions is a second major reason for reluctance to pay for news online. More than seven of ten in our survey indicated that "concern about my privacy online" was a reason they had not paid for content. Slightly more than half (51%) agreed that "I don't feel comfortable giving out my credit card or other payment information."
Finally, there's some evidence that those who do not ask shall not receive. More than half of non-payers (54%) agreed that "I have never been asked to pay for news and information online." Is the solution as straightforward as simply asking for payment? That's unlikely, but until Web audiences grow accustomed to being asked to open their wallets, publishers should expect continued resistance.
If past behavior remains a guide to future behavior, the market for paid news content online is likely to remain small. What about attitudes toward payment?
Note: Percentages for all price points other than "$10.00 or more" are based on cell size between 30 and 50 respondents and may therefore be relatively unstable.
Attitudes Toward Paying For Content
Publishers hope that users accustomed to paying for content in print be willing to pay for content online. But users' valuation of content is dynamic, not constant: What's worth paying for can change depending on situational factors.
In attempting to gauge willingness to pay, we tried a multitiered approach. First, we asked respondents what their preferred payment arrangement would be, with the option to not pay at all for content. But rather than stopping there, we also looked at their attitudes under the three scenarios most popular in planning sessions throughout the industry:
SCENARIO 1: Requiring a subscription to the print edition to access online content. Here, access to newspaper Web sites is seen as value added to the print subscription—a reward or bonus to subscribers—and a tool to increase retention. Implicitly, the Web site is positioned as secondary to the print edition.
SCENARIO 2: Requiring a print subscription for continued free access, or separate charges for nonsubscriber access. While still rewarding print subscribers for their business, this model positions the Web site more as a partner with the print edition. Publishers considering this option recognize that some in the Web audience will never subscribe to the paper, because they're single-copy purchasers, they're out-of-market, or simply don't want the print version. But revenue may still be gained by allowing Web audiences to pay for what they use. Pay-per-use fees may include both online-only "subscriptions" or actual per-article or per-access charges.
SCENARIO 3: Requiring all site visitors to register for access. The biggest payoff publishers may receive isn't money, but rather information. Instead of requiring either a print subscription or direct payment for online access, site users—print subscribers and nonsubscribers alike—are required to register. Registration typically entails choosing a user ID and password, furnishing a valid email address and, less frequently, providing demographic or other personal information. Under this model, finely honed audience targeting provides the value, sometimes in concert with the print side. Again, the Web site is positioned less as a secondary offering and more as a product capable of standing on its own.
In analyzing reactions to each of the three payment scenarios, we separated respondents into groups based on whether they subscribed to the print edition of the local newspaper, for two reasons:
1. With the exception of the registration scenario, each model treats current print subscribers differently than nonsubscribers.
2. Positioning the Web site as a value-add to a print subscription is likely to generate different perceptions among those who currently see value in the newspaper (i.e., subscribers) and those who do not.
Paid Access As A Subscriber-Rentention Tool
The most tangible return publishers will receive from current subscribers under the first or second models is increased use or print retention. Here, we judge that restricting access print subscribers has a measurable, but not overwhelming, effect on users' perceived value.
On average, 49% of respondents who currently subscribe to the paper agreed that "a subscription to the printed edition of the newspaper would be more valuable to me than it is now." A similar proportion (52%) indicated that they would be "less likely to end my subscription to the printed edition of the newspaper."
Additionally, slightly more than one-third agreed that such a move would "show that the newspaper really values its subscribers."
In our data, many subscribers were suspicious of any change from free access. Instinctively, many were repelled by even the concept of paid access: Depending on the scenario, between 38% and 48% indicated that a paid access model would cause them to "stop using the local newspaper's Web site and find another online source for the news and information I want." This is surprising, given that these respondents were already print subscribers and, therefore, would not be affected by the change.
Write Off Nonsubscribers?
Our data show that nonsubscribers are highly unlikely to pay for online newspaper content. Requiring nonsubscribers to either subscribe to the paper or pay to access the site may have strongly negative consequences, increasing likelihood of addition revenue (either through subscription or direct payment) by only a small amount, while potentially costing sites a large proportion of their nonsubscribing online visitors.
Only 28% of nonsubscribers agreed that a print subscription "would be more valuable to me than it is now" under either Scenario 1 or Scenario 2. A similar proportion indicated that they "would be more likely to subscribe to the printed edition of the newspaper." Note that the phrase is "more likely," not "definitely would."
Only one in eight nonsubscribers agreed that restricting free access to print subscribers makes a print subscription more valuable. Coupled with similar attitudes among subscribers, it would seem a tough sell for publishers to convince their online audiences that raising the toll gate is an attempt to "add value" to the print subscription.
An overwhelming majority (85%) of nonsubscribing respondents indicated that restricting access to print subscribers only (Scenario 1) would cause them to "stop using the local newspaper's Web site." Offering free access to print subscribers and pay-per-use access to nonsubscribers (Scenario 2) drew almost the same response: More than three of four nonsubscribers (77%) indicated that they would stop using the site under this scenario.
Nonsubscribers had trouble envisioning that newspapers could add extra value to their sites. Fewer than one in five agreed that inducements such as improvements to the site or personalized news and information would lead them to pay.
Reaction To Specific Pricing
We also sought to assess nonsubscribers' receptivity toward a relatively low, but more concrete, monthly fee of $3 for complete site access. Once again, nearly three of four nonsubscribers indicated that they would not pay. Only 20% indicated that they would pay the either the $3 fee or a lesser amount.
Using an adaptation of the van Westendorp Price Sensitivity Meter, we also queried respondents—both print subscribers and nonsubscribers—on their perceptions of appropriate pricing for access to local newspaper sites. Although this question may appear moot in light of the reluctance to pay for content, it's important to establish directly what users perceive as reasonable, bargain and excessive charges for content. Results of this question appear in Table IX.
The van Westendorp technique measures pricing perceptions in four categories— "too expensive"; "expensive but worth considering"; "a bargain"; and, "too inexpensive to be of quality"—to help pinpoint appropriate pricing levels.
As might be expected, the "reasonable" median price for newspaper Web content is quite low: $1 per month. The higher, "expensive but worth considering" price, at $5 per month, is more promising, but quite close to the $7 median monthly fee at which respondents indicated access was too expensive to consider. The "too cheap" price, intended to measure the point at which consumers believe they begin to sacrifice quality, was zero—essentially, maintaining the free site model.
There are three key considerations in interpreting these figures:
1. The responses obtained here yield lower figures than Lyra Research found using the same type of measure. This may be due to subtle differences in question wording (i.e., asking about "your local newspaper's Web site" versus newspaper sites overall) or to differences in respondent populations (i.e., only visitors to local newspaper sites versus online users overall).
2. Responses from both print subscribers and nonsubscribers were virtually identical, indicating that little flexibility exists for publishers in trying to segment markets on the basis of pricing alone.
3. It's questionable whether the "too cheap to be of quality and accuracy" price—essential in calculating both penetration and revenue-maximizing prices via the van Westendorp model—is appropriate for news content in general and newspaper content in particular. Over the past seven years, users of newspaper sites have grown accustomed to the same quality of information online as they receive in print, for free. Respondents indicated a degree of doubt that content pricing and quality were related online. As many related, the only real "too good to be of quality" scheme under the free content paradigm is for users to be compensated for visiting the site.
What About Registration?
It's apparent that requiring either a print subscription or direct payment for Web access will be difficult. How, then, are publishers to increase income from their sites? We believe that the answer lies in required registration—provided that it is implemented in a way that clearly yields both benefits and protections to the audience.
Even though they're already paying for access to newspaper content via the print edition:
- Three-quarters of current print subscribers agreed that they might register, "depending on what information was requested."
- Six in ten agreed that they would "register to obtain access" without knowing any details of the registration process.
Only 20% of current print subscribers indicated that required registration would make them stop using the Web site. Actual availability of alternatives and potential switching costs (if any incentives for registration are offered) might drive this proportion down further.
Additionally, the promise of direct benefits of registration has appeal to a large segment of print subscribers. Many agreed that registration would be acceptable if:
- "I knew that it would help screen out advertising that did not fit my needs or interests." (61%)
- "The site offered news and information personalized to my interests." (56%)
- "If the site was improved in some [unspecified] way." (49%)
Requests for registration information will be more successful if accompanied by plain-English privacy policies and the strongest assurances—and perhaps even guarantees—of confidentiality. Eight of ten print subscribers indicated that registration would be "only if I was satisfied that the information would remain confidential," and 61% agreed that "I would register only if I was asked before I was contacted for sales purposes."
Nonsubscribers Will Register
Mirroring the attitudes of print subscribers, most nonsubscribers appear willing to register as a means of securing continued access to their local newspaper's Web site.
Three of four respondents (75%) who are not current print subscribers agreed that they might be induced to register, "depending on what information was requested." As with subscribers, six in ten nonsubscribers agreed that they would "register to obtain access" without knowing the details of the proposed registration process.
Nonsubscribers also echoed subscribers in their agreement that registration would be acceptable if:
- "I knew that it would help screen out advertising that did not fit my needs or interests." (57%)
- "If the site offered news and information personalized to my interests." (56%)
- "If the site was improved in some [unspecified] way." (47%)
Concerns regarding confidentiality of registration information and use of such information for sales contacts mirrored those of current print subscribers exactly.
What Information Will They Give?
Most respondents were willing to share information about themselves in exchange for continued free access. Specific details respondents would share included: