By Hsiang Iris Chyi, The Chinese University of Hong Kong, Hong Kong
Introduction: Since the birth of the online medium, Internet news publishers have been
experimenting with various revenue models for their online operations to achieve
profitability: the subscription model, the advertising model, the transactional model,
and the bundled model. However, recent market research shows that many newspapers generated less
than $5 in online revenue per unit of circulation. By 1999, a survey of 64 online newspapers serving California, Texas, New York,
and Florida empirically examined the application of these models in the online news
industry (Chyi & Sylvie, 2001). That study reported quite an unenthusiastic response
to the subscription model. Back then, online advertising served as a revenue source
for almost 80 percent of the sites. Fewer than 20 percent adopted e-commerce and
pay-per-use models. But only three percent of those online news providers were
utilizing the subscription model and most said it would be unlikely or very unlikely to
charge for online news access within the next two years -- i.e. between 1999-2001.
While the fee -based WSJ.com has long served as a classic example for adopting the
subscription model, most online publishers believed that general-interest news sites
would find it difficult to do the same.
The real market development was somewhat surprising. Following the economic
downturn, by 2001, the “free to fee” trend suddenly took off. (For a detailed account
of such practices in the industry, check the website The End of Free at
theendoffree.com). The subscription model re-entered the agenda , and many online
publishers seemed to believe it’s time to start charging for the valuable information
they offer (Outing, 2002).
However, market researchers found little evidence that suggests users are ready
to pay. According to the results of a March 2002 consumer survey, 70 percent of
online adults cannot understand why anyone would pay for content online (Jupiter
Media Metrix, 2002). Another market study revealed that 71 percent of news site
users would go somewhere else because there are so many free sites available. In
addition, the sign-up rate for newspapers that are charging for online access range
from 0.2 to 2.6 percent of the print circulation (Borrell & Associates, 2001).
Little academic research directly tapped into the economic viability of the
subscription model. Findings of an exploratory focus group study showed that while
most participants ranked the Internet their No. 1 information source and were able to
identify many of its strengths and weaknesses as a news medium, they showed no
intent to pay (Chyi, 2002). To further understand users’ response to paid content, this
study attempts to address the following questions:
RQ1: How many users are actually paying for online news access? Why?
RQ2: How many users will be willing to pay for online news access in the future?
Why?
RQ3: What is the relationship between income and the consumption of paid
content online?
RQ4: What other factors (demographics, usage) influence people’s paying intent?
RQ5: What is the general public’s preference for a particular format (online vs.
print)? Why?
RQ6: Is format preference related to paying intent?
Methodology
A random-sample telephone survey of 853 Hong Kong residents was conducted
during November 13-17, 2002 to investigate the general public’s response to online
news.
Hong Kong -- with the highest Internet penetration in Greater China -- is also
one of the most wired cities in Asia. As of 2002, 54% of people aged 10 or over had
used a personal computer and 48% had used Internet services during the previous 12
months (Hong Kong Census and Statistics Department, 2003). Hong Kong also has
the highest newspaper penetration in the region. About 20 daily newspapers remain
active in the market. At the end of 2002, 18 media websites provided online news
services -- 12 were operated by newspapers and six by TV or radio stations. Faced
with the economic viability issue, online publishers in Hong Kong seem relatively
radical when compared with their counterparts elsewhere in experimenting with the
subscription model. Six online news sites are charging (local or overseas) users for
access to at least some parts of the site.
Traditional & Online Media Use
Of all respondents, 97 percent watched TV on a daily basis. 1 On average, a TV
viewer spent more than 2.5 hours watching TV per day. (The median was 2 hours.)
About 89 percent of all respondents read the newspaper, and the average time for
newspaper reading was 57 minutes per day. (The median was 45 minutes.)
In terms of computer use, 63 percent of all respondents aged 15 or above used a
personal computer at home or work on a weekly basis. Computer users rated their
computer savvyness using an 11-point scale (with 0 being not familiar at all, and 10
being extremely familiar), and the mean was 5.6.
Future Paying Intent
Online news users who were not currently subscribing to paid content were
asked to estimate the possibility of subscribing to such content in the future (n=375).
The results also were not very promising. Some 43 percent said it was “unlikely” that
they would pay for online news in the future, while 38 percent said “very unlikely.”
Only 1.3 percent answered “very likely” and 21 percent said “likely.”
An open-ended question probed the reasons for the lack of paying intent:
Nearly 40 percent of those without future paying intent indicated that free alternative
news services exist -- 29 percent mentioned traditional news media and 10 percent
mentioned other online news services. A long the same line, 17 percent said they
would not need such services. Another 17 percent said price was a factor damping
their willingness to pay.
Among those who said they might be willing to pay in the future, the reasons
cited include: “if I have such needs” (21%) and “if the price is reasonable” (15%).
Results:
Overall, the study showed that most online users were not paying for online
news and did not show strong intent to pay in the future, suggesting that the
subscription model is not working and may not work well in the future. The results
correspond with the trend identified in U.S.-based studies using site-centric
approaches (Borrell & Associates, 2001). As the lack of paying intent looks like a
global phenomenon, online publishers worldwide should exert caution when
implementing the subscription model.
The analysis identified no relationship between paying intent and income, gender,
education, or computer knowledge but showed a slight correlation with age . In
addition, time spent online and format preference was also related to paying intent.
These findings carry a few implications.
First, although younger respondents and heavy Internet users were more likely to
pay for online news access, even among the youngest age group or the heaviest online
users, still more than 60 percent reported no intent to pay in the future. Online
publishers should bear this in mind when evaluating the viability of the subscription
model.
Second, regarding format preferences, compared with the print edition, the
online newspaper was clearly less preferred. Answers to the follow -up, open-ended
question also revealed why users preferred different formats. As format preference is
also related to payin g intent, how to change that format preference might imply the
possibility for increasing paying intent. However, while respondents who preferred
the print format seemed able to cite some diverse reasons for their preference for the
print format, those who preferred the online format failed to mention anything other
than “convenience.” It seems that Internet-specific features such as “timeliness,”
“interactivity,” and “searchable databases” were not perceived as important even in
those online lovers’ minds. One cannot rule out the possibility that the online newspaper simply cannot serve
as a profit center like its print counterpart on an equal basis -- by generating
subscription-based revenues from the local market. For the time being, online
advertising still seems like a relatively effective and low -risk revenue driver. However,
if the effectiveness of online advertising still remains questionable, in the longer term,
online publishers might need to reposition their online product accordingly -- as a
complimentary service for readers or as a showcase of its brand name.
Theoretically, this study serves as another step to examine the unique economic
nature of online news. While buying a copy of the print newspaper is not a big deal
for most consumers, what makes them so reluctant to pay for online content? As
results showed that income is not a factor determining paying intent, subjective or
attitudinal variables seem of great importance. Further investigation into the
economics of online news should take these variables into account. On the other hand,
the lack of relationship between income and paying intent provides preliminary
support for the “online news as inferior goods” hypothesis, which should be further
explored with more empirical evidence.
No comments:
Post a Comment