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Are You Willing to Reach for Your Wallet?

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Flawed Study & The Way Forward

3/21/2002 2:02:27 PM
Posted By: Christopher Graves

The whole idea of a poll seeking a scientific answer to what people would pay for on the internet is flawed from the outset. An oft repeated example of this kind of mistaken polling were the surveys asking consumers if they would by a computer in the days before there were home PC's and more importantly before any applications were created for consumers. If a survey had been taken 3 years ago about whether you pay money to send or receive text messages on your phone that are limited to 160 characters and give your thumbs a new form of repetitive stress realted musculature that make you end up looking like Sissy Hankshaw ("Even Cowgirls Get The Blues") I wonder what response you might have received. Yet this year we will generate more than 60 billion SMS messages which now make up more than 12% of many mobile operators' revenues in Europe. If you had polled Americans in 1975 about whether they would ever pay for television you would likely get a similar response to the question today about paying for content online. Yet today you have about three-quarters of Americans or more paying for cable and satellite TV. The big difference with online content was the free content cart came before the subscription horse, and the distribution was ubiquitous rather than rolled out slowly over decades. If cable TV had penetrated 50% of the market in a couple of years and had given away all the channels for free for 8 years, then perhaps it would have caused a bit of resentment when they started charging. But you never had more than a hobson's choice with cable-- you either paid or didn't get it (okay apart from some cable signal pirates). The Wall Street Journal set expectations from the outset that customers would have to pay for it. Those news sites who have spent 8 years giving away content for free now have to pull consumers over a high psychological hurdle telling them that the same content that was worth nothing is now "premium." There are experiments in Sweden and Denmark with micropayments and bundling of as many as 50 major sites and portals. Then, as mentioned the new RealAudio bundle. This has to be the way forward; the web has to adopt the successful marketing platform used by cable and satellite TV of bundling a critical mass of key providers for a small sum and to bill via an accepted mechanism such as an ISP or telephone company. Most people do not have a clue what their cable bill is. That's because they perceive it to be of good value or at least not out of balance coupled with the fact they cannot get the same bundle of channels free anywhere. So if the key 20% of the sites that own 80% of the traffic (the critical mass) followed such a model, there may be a hue and cry, but eventually having no other alternative, consumers will pay. The problem is the mindset now is similar to when western companies rushed to do business in China in the 80's and 90's; no one wanted to be left out of the billion person market and no one wanted to let their competitors get there before they did, so everyone rushed in to see how much money they could lose. Today everyone is afraid if they start charging their competitor will not and thus charging will only send all their traffic to their free competitor. This is why the platform is important and the mutual decision to jump is important to moving forward. You do not put together a cable TV platform by giving the consumer a box and telling them "there's your access now go sign up a bunch of channels and negotiate a fee for each one." While only 6%would pay for content such as sports, kids, etc., he JMM survey said 29% said they would pay their ISP. That's part of the problem: the consumer is separating the cost of content from the cost of distribution. In cable or satellite TV they are largely bundled and opaque to the customer except for pay-per view or premium channels.

No, people will not want to sign up, site-by-site. No they will not want to use 5 different billing systems. But make it affordable and put in on the ISP or phone bill and give them no other choice and watch what happens.

Reach for your wallet ?

3/21/2002 4:21:40 AM
Posted By: Jameson Campaigne

Have a look at the new full-newspaper -- 10 megs per issue, with all advertising -- offer from the NEW YORK TIMES, which works on a micropayment basis ... with the additional very clever addition of requring a $10 deposit to start the account, reduced by 65� every time a complete issue of the paper is downloaded.

It has long seemed to me that sellingf content for less than a dollar is the way to go for (at least serious content) publications and the $10 deposit solves the transaction cost problem with the credit card companies (and provides a very nice working capital source at the same time, the float earning interest if banked).

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