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Reuters Internet Report

Charging for Online Content Still Hard to Do

By Reshma Kapadia

NEW YORK (Reuters) - How do you get people to pay for things they once were getting for free? Internet media companies struggle with that question and probably will still be dealing with the issue two years from now.

Jupiter Research, an Internet research company, said in a report released on Monday that consumers will spend $2 billion on paid content in 2003, up 30 percent from last year, but online advertising remains the best way for most Internet media companies to make money.

While online advertising spending is expected to reach nearly $14 billion in 2007 from $6.2 billion in 2003, revenue from paid content is expected to reach one-third of that at $5.4 billion by 2007, Jupiter said in its report.

"Consumers are slowly opening their pocketbooks for paid content," said Jupiter Research Director David Card. "However, for at least the next 18 to 24 months, most online media companies should generate 60 percent to 70 percent of their revenues from advertising."

The $2 billion forecasted for paid content spending this year is also split up over a dozen categories, from news and sports to health and adult content, making it difficult for any one company to collect a significant share of that spending, Jupiter said in the report.

At a conference hosted by Jupiter in New York, some online media executives said technological advances were needed before people would spend more for paid online news.

TOO MUCH AVAILABLE FOR FREE

"There is too much free stuff out there. We have to wait until it all clears up. Let the weaker fall and we will aggregate the audience and then will charge," said Michael Rogers, editor and general manager of Newsweek Interactive. "The technology is too primitive for the kind of services we would like to charge for."

He said a paid online service from Newsweek magazine was not in the near future. The development of new reading devices and wireless broadband content would pave the way for paid contact so that readers could read refreshed news away from the computer --- some of these changes may not come for four to five years, Rodgers added.

Jacob Weisberg, editor of online magazine Slate, said a free model was working well for the company, which was "very close" to turning a profit. Slate's audience grew exponentially when Slate switched back to free after charging for content.

"If we go back to a paid model, it won't be paid content but paid delivery," Weisberg said.

Debora Wilson, chief executive of the Weather Channel Interactive, thinks the best way to offer paid content is to find a niche segment of the audience that may be interested in premium programming, such as weather alerts delivered to mobile phones. Wilson said she expects about 20 percent of total revenue to come from paid content over the next couple years.

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