Online Strategies for Paid Content Peter Krasilovsky, VP

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Online Strategies for Paid Content Peter
Krasilovsky, VP
BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• May 20, 2003 UC Berkeley

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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

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• Todays 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

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• What Does Paid/Premium Mean
• For Local News Companies?
• (It Depends)
• Paid Represents Net New Revenue From Subscription
  and a la Carte products

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media
"
Area of Displacement
Area of Net Growth
Disruptive Business
Established Business
Origin of Disruptive Business Outside of
Established Market
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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• 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

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• 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

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• 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

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• Paid content is real and growing but there is
  still an enormous opportunity in advertising and
  marketing.
• Barry Briggs, COO, CNET

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• New York Times Digital Value Pyramid

500,000 Pay product users
1.5 million Loyal users
3.7 million Daily e-mail subs
11 million Active registered users
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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• 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

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• Est. Value of Premium Content Types,
• Circa 2003 (in order)
• Tollgates for Full Site Access
• Wireless Products
• Broadband Products/Aggregations
• Archives
• Special Features (crossword puzzles)
• PDFs (Newsstand, Olive)
• News Tracking/Push (Infogate)
• Paid Email Newsletters

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• Delivery, Not Content, Key to Paid?
• If we (again) have paid dimension in future, it
  wont be paid content,it will be paid delivery.
  Our biggest competitive advantage is speed and
  immediacy.
• Jacob Weisberg, Editor, Slate

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• 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

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• Effect on Operating Costs of Tollgate
• is Potentially High

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• Tollgate Chases Non-Subs Away
• Does not add value to print sub
• Drives audiences away 85 would not subscribe
  to print 77 would not pay for online
• Makes it difficult to induce demand through
  improvements

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

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

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• 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

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• Niche Sites and E-Newsletters Have Had Mixed
  Success
• Circulation of Belos sports newsletters
  collapsed from 98,000 to 800 after 9.95 fee
  imposed.
• But Milwaukee Journal Sentinel has 17,500
  subscribers to Packer Insider w/ Season Pass of
  19.95 . 72 of subs from out-of-state

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• 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.

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• 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
  _at_9.95 each.
• Jupiter forecasts Audio/ Video will bring in 750
  million by 2007 due to Broadband

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• They Pay for Sports, But they Mostly use News
• Merrill Brown, SVP, Real Networks Real One

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• Positioning For Premium Content.Registration Is
  Better
• Intermediate Path
• Vast majority print subs and non-print subs --
  will register, depending on information requested

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• 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

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• Summary
• Paid Content is potentially lucrative
• Value for Services such as video is clear
• Value of paid newspaper services is not
• Registration achieves many of same goals as
  paid content...and acts as gateway to new premium
  environment.

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BORRELL ASSOCIATES INC.Executive Strategies for
Local Media

• ThanksLets Talk About This Stuff!
• Peter Krasilovsky
• Partner, Borrell Associates
• pkras_at_borrellassociates.com
• 760-918-0450