Online subscriptions herald the end of Web freedom

By Michael Liedtke, The Associated Press
Monday March 18, 2002

SAN FRANCISCO – Surfing the Web these days requires two hands – one to click the mouse, the other to dig into your pocket to pay fees demanded by sites that used to be free. 

Every day, it seems, another desperate dot-com concludes it’s better to charge a smaller congregation of visitors than to lose money on a mass audience looking to get something for nothing. 

“The presumption has always been you would have free access to almost everything for one basic price of admission. That’s probably not going to be the case any longer,” said Lee Rainie, director of the Pew Internet & American Life Project, which studies online trends. 

Free online content hasn’t disappeared. Most fee-based Web sites still give away some of their wares. 

But the freebies are becoming the online equivalent of a supermarket’s food samples – tantalizing morsels designed to coax sales of more satisfying amounts. 

“The stuff that really has some value is going to have to be paid for,” said Charlie Fink, president of AmericanGreetings.com, which began charging at the end of last year. 

With online advertising in a funk and venture capitalists no longer willing to subsidize losses, Web sites of all shapes and sizes are asking users to ante up. 

They range from online powerhouses like Yahoo!, which now has 25 different subscription services, to one-man operations like Thepaperboy.com, an Australian news portal that hoped to attract 50 subscribers a month when its owner Ian Duckworth introduced a $2.95 monthly fee in September. 

Although he wouldn’t provide specifics, Duckworth said the subscriber response has exceeded expectations. 

“Things should get easier as users start to come to terms with the ’user pays’ principle,” Duckworth said in an e-mail interview. 

It took American Greetings just three months to build the Web’s largest paid subscription base. The Cleveland-based company has signed up nearly 1 million subscribers since December, when it began charging $11.95 to visit its most popular card sites – AmericanGreetings.com, BlueMountain.com and eGreetings.com. 

American Greetings still offers free cards at two other company-controlled sites, BeatGreets.com and PassItAround.com, neither of which offer the same quality. 

American Greetings is one of six online networks boasting at least 500,000 subscribers – something only two Web sites, ConsumerReports.org and the Wall Street Journal’s online edition, claimed a year ago. 

Since unveiling its fees, traffic at American Greetings’ sites is down by about 30 percent, as surfers turn to free cards offered by Yahoo and Hallmark.com, Fink said. 

The company “has no regrets,” Fink said. “This is the way the industry and the audience is moving. We decided to take the plunge, knowing if we succeed others will follow.” By year’s end, American Greetings expects to have at least 3 million subscribers. 

Kathy Harris of Chicago swears she won’t be among them, although she once sent cards from BlueMountain.com and eGreetings.com. She is among the legion of Web surfers who avoid fees at almost any cost. 

“I figure there is so much on the Internet that you can always find something similar for free,” said Harris, 24. 

Other Web surfers are more sanguine about the shift. 

“A lot of people on the Internet want to pay because they figure the site might be around longer and the service might get better,” said San Francisco’s Evan Williams, whose site, www.theendoffree.com, tracks online subscriptions. “It’s tough to complain about something if you don’t pay for it.” 

The trick to getting people to pay for online content and services is to offer something unique, said Larry Gerbrandt, an analyst with Kagen World Media. 

After building one of the Web’s biggest audiences with mostly free features, Yahoo is banking on a fee bonanza. By 2004, the Sunnyvale, Calif.-based company hopes subscriptions account for half its revenue. Yahoo’s revenue totaled $717 million last year. 

For inspiration, Yahoo can look to ConsumerReports.org, which counts more than 800,000 subscribers, most of whom pay $24 a year to view the online edition of the consumer watchdog magazine. 

RealNetworks, too, is selling a burgeoning number of $9.95-a-month subscriptions to its online video service. Outside providers – including CNN – are using the company’s RealOne SuperPass to sell content. 

Media companies “are thrilled to see signs of life in the online subscription model,” said Larry Jacobson, RealNetworks’ president and chief operating officer. 

Two other Web sites – MyFamily.com and Netflix.com – also claim at least 500,000 subscribers. 

For some cash-strapped sites, even a few paying subscribers go a long way. 

During the first year it charged a fee, online magazine Salon.com signed up 33,000 subscribers who pay $30 annually or $6 monthly. 

This year, subscriptions will bring in more than $1 million, estimated Salon vice president Patrick Hurley. 

Homestead.com CEO Justin Kitch likens his site’s free-to-fee transition to a child’s passage into puberty. 

“It can be a painful thing,” he said, “but at least you can see this thing has a chance of growing up to be an adult.”