Experts say free content debate is dead

Is free Internet content dead? That debate is over, according to New York Times digital chief executive officer (CEO) Martin Nisenholtz, who urged attendees of Jupiter Media Metrix Inc.’s Media Forum in New York Monday to follow his company’s success in moving users from free content to fee content.

“We shouldn’t be talking about free versus paid content. It’s over, end of debate,” Nisenholtz said, emphasizing that New York Times Digital, which unlike many of its competitors reported operating profit for the last two quarters, depends upon a diversified revenue stream including key pay services.

And new consumer research released Monday by Jupiter reflects the projected growth of paid online content. According to results from a March 2002 survey, paid online content will generate US$5.8 billion in revenues by 2006, up from the $1.4 billion projected for 2002, the researcher said.

Online games and digital music will lead the online spending spree, accounting for $1.8 billion and $1.7 billion, respectively, in revenues in 2006. In comparison, online games pulled in $260 million in revenue in 2001, while digital music accounted for $30 million last year.

Despite the projected growth in revenues from paid online content, Jupiter reported that 70 per cent of the online adults it surveyed did not understand why anyone would pay for online content. This represents a challenge for content providers that could possibly only be resolved by taking away the free content, according to Jupiter vice-president and senior analyst David Card

“The logical answer is to take it (free content) all away,” Card said.

Perhaps consumers are privy to this line of thought, because, according to the Jupiter survey, 42 per cent of online adults polled said that they expect to have to pay for digital content over time.

The researchers suggest, however, that the wide availability of online content that now exists makes it more difficult for content providers to switch to a completely subscription service.

New York Times Digital took this factor into account when it decided in 1995 to offer the contents of its newspaper online for free, Nisenholtz said.

“When free online news is just a click away, charging doesn’t make sense,” he said.

Instead, New York Times Digital relies on a highly diversified revenue stream that includes advertising, paid-for classifieds, crossword puzzles, archive searches, and packaged news services, although the daily news remains free.

“I strongly believe that this (free content) debate is a total red herring,” Nisenholtz said. “For us, what is important is pursuing a diversity of revenue streams.”

Jupiter’s ninth annual Media Forum runs through Tuesday.