Why won't you pay for Net content?

Content providers are questioning why the majority of Internet users do not want to pay for online content. But they should ask a more obvious question: Do they really have anything to sell?

COMMENTARY--During the past few years, content has emerged as one of the most important concepts in the connected world. Everybody wants to be a content provider, and a flurry of complex content management systems has been conceived to make it ever easier for companies to create, convert, adapt, repurpose and distribute content of all sorts through an ever-increasing number of channels.

Lately, a preoccupying realization has edged its way into the minds of all those eager content providers: the majority of Internet users do not want to pay for content. Sure, I may go to your Web site if it is interesting enough -- but pay? I don't think so.

In other words, when you combine those two observations, you get to an alarming (and by now widely publicized) point: what should have been a future El Dorado--one of the center points of the new economy--is actually simply bad business. Production costs for online content are high, and revenues are minimal. Not a good situation.

So, what is wrong? Well, perhaps we have all been a bit simplistic. Perhaps, before we ask ourselves why people don't want to pay, we should ask ourselves a more stringent question: Do we have anything to sell?

Let's start to look at the problem in a pragmatic way. Generally, most of us do not seem to have a problem with paying for goods and services -- provided there is perceived value. That's where the problem with online content lies: it is not in the willingness to pay, or lack thereof, but rather in what we receive. Unless we really understand what we are selling, and its true value, we cannot hope to make money.

Generally, we are not used to paying for pure content. Sure, we pay for our movie tickets, but if the bar around the corner tried to charge us for watching a soccer game on their TV screen while having a drink most of us would probably not like it. When we buy a book or a magazine, we do not buy the right to access content, we acquire a physical object. We may not read it immediately (or not at all for that matter), and yet we do not feel ripped off by the publisher.

But when the Internet came around, we started using a very limited analysis of the new medium and its limitations to build online projects, and business-models. It took us years to understand that there is more to a newspaper than just text and pictures, and that immediate access to information has its good points, but is not a major selling point for online content.

There are some analogies to be made with television here. Most of us consider TV to be basically free, since its cost is completely engrained in the general household expenditure. And cable TV, which does have a price tag, delivers a LOT of content AND entertainment for a comparatively small price. Let's face it, most people who watch news networks such as CNN on a daily basis would probably hesitate to pay if they had to subscribe to it individually.

It is common to analyze this problem in terms of the business model. Industry analysts are pointing out that over time, paying for content will become the norm as more and more publishers intend to charge for their content. However, this is a relatively shortsighted view. You can charge as much as you like -- if nobody is ready to pay you still have a problem. If Internet users do not perceive the value of the content they are offered, the fact that the publisher charges for it will not change this perception.

So what is the answer? The first step is to gain a better understanding of the buying impulse: What are we really buying when we purchase a book, magazine, newspaper or movie ticket? What makes an object or service indispensable to the buyer? And what does it take to make an online offer indispensable to the user?

The next step is to see what forms of content we can offer which brings real value to the customer. The online space has one particularly strong feature that is usually not taken into account: it is ephemeral. That's part of its attraction, but it is also very problematic when we try to generate a buying impulse: customers don't like to pay for that they cannot really grasp. For content-based Web sites that would mean that there are basically two ways out of this dilemma. Adding value to the content (and there are numbers of ways of doing that) or changing the subscription model significantly, by adopting either micro-payment systems which would be closer to the way cable TV channels are bundled.

In either case, one thing is certain: in order to move out of the current slump, content providers need to accept a simple idea: Perceived value generally sells. If something doesn't sell, then there may be a problem with the value potential customers see or with the way in which it is sold.

Obviously it is currently difficult to charge for content, given the amount of freely available information on the Web. However, even if tomorrow all high-profile Web sites started charging for their content, we have absolutely no guarantee that the majority of current users would open their wallets.

In the meantime, it may be a good idea to challenge our preconceived ideas about all this. Perhaps the much-hyped content is not enough on its own. Perhaps we are just not ready to pay for pure information, unless it is vital for our business. Currently, online content is neither a publication, nor, in most cases, a requested service. Until content providers find ways of turning it into either one of these, revenues will remain disappointing.

Andreas Pfeiffer is an industry analyst and editor in chief of the Pfeiffer Report on Emerging Trends and Technologies.