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WHAT'S HOLDING BACK THE DRIVE FOR SUBSCRIBERS: ANALYSTS PREDICT IT WILL BE YEARS BEFORE FEES WILL ADD UP TO MUCH

By Published on .

Where were 600,000 registrants on The Wall Street Journal's Web site just before Labor Day. Just two weeks later, that number had dropped like a rock, to 30,000.

That's because the Dow Jones & Co. newspaper began charging an annual subscription fee.

The Journal expects only 10% to 30% of users will pay, said Tom Baker, business director for the site.

"I wouldn't expect it to be profitable in less than three years," he said.

6% OF REVENUE

His predictions match analysts' belief that subscription revenue still won't add much to media company coffers this year.

Forrester Research claims few Web sites will break even by 2000. Among those that do, 90% of revenue will come from advertising and only 6% from subscriptions.

"The resistance on the part of consumers is going to be high," said Mary Modahl, director of the Media & Technology Strategies practice at Forrester. "Some sites have unique propositions, like The Wall Street Journal. People overseas can't get it physically and so may be very willing to pay."

Analysts cite several reasons for the lag: Subscription prices will be hard to launch in a largely free medium; the online audience is still too small; and technology expenses will keep pace with subscription growth.

TIERED PRICING

To break even over the next two years, the annual subscription price would have to rise to $77, Forrester said. That's a price few consumers would be willing to pay.

Instead of jumping in feet-first, sites are experimenting with tiered subscription pricing.

ESPN's SportsZone (http://

espnet.sportszone.com) was one of the first to charge subscription fees for deeper content, rolling out an area in August 1995 for $4.95 per month. Premium content now comprises about 20% of editorial.

ESPN declined to comment on subscription revenues or the number of subscribers the site has.

Quote.com, Santa Clara, Calif., built a model that began with subscriptions and added advertising later. The two-year-old company launched its stock quotation service (http://www.quote.com) in early 1995 with prices ranging from $9.95 to $42.95 per month.

`USED TO PAYING'

The revenue stream, as of October, breaks down to 40% advertising, 40% subscriptions and 20% licensing deals.

"We see this as the mix for the time being," said Karen Steele, director of marketing communications. "The reason we were successful is that we sell information people rely on every minute, and they're already used to paying for it."

The next entrant could be Time Inc.'s Pathfinder (http://pathfinder.

com), which on Nov. 18 introduces Pathfinder Personal Edition, a tiered subscription service.

Others waiting in the wings include Rodale Press' Men's Health Daily (http://www.menshealth.com) and Prevention's Women's Edge (http://www.prevention.com); and Mecklermedia Corp.'s iWorld (http://www.iworld.com).

While subscription pricing

hasn't been finalized for many sites, conventional wisdom suggests that a fee of less than $5 monthly is reasonable.

"That's a fair price for that kind of content," said Gerard Van der Leun, a senior editor at General Media's Penthouse, which last year initiated a $14.95 monthly area (http://www.penthouse.com).

Entrepreneur (http://www.entrepreneur.com) has started taking registrations for a premium area of its site but postponed the launch of a $2.95 monthly fee until March.

Entrepreneur's paid area will have a daily edition of the magazine, financial data, a 3,000-article database and other timely information for small-business owners.

"Our main concern is building out the site right now," said Chuck Fuller, manager of new media. "We're building our community for that [paid] area right now," he said.

TESTING PRICES

The magazine tested $5.95, $3.95 and $1.95 monthly rates.

"Of course we got the most response for the $1.95 rate, but at the $3.95 rate the margins were better," Mr. Fuller said. "To encourage volume and keep some of the margin, we chose $2.95 as a happy medium."

The site gets 10,000 unique visitors per week, he said, but only 5% are registered for the premium area.

Agency executives say they're happy to sponsor subscription-based sites but they have mixed opinions about what the revenue model will do for them.

"Everyone who's done it hasn't succeeded," said Tim Reisen, VP-research and new media at Young & Rubicam, Detroit, which handles marketing for Ford Motor Co.'s Lincoln-Mercury Division.

Other executives said they would want to get more data from a paid area, which in some cases is more expensive to sponsor.

STILL WAITING

Despite the efforts of some, not all publishing company executives think the time is right to start charging consumers.

"I still hold the belief that people aren't going to pay for content on the Web," said Paul DeBenedictis, who until last month was president of Hachette Filipacchi New Media, which manages 21 magazine brands on America Online as well as the Web.

Instead, Mr. DeBenedictis, who is now heading up Digital City, said Hachette next year will continue to rely on advertising. A late 1996 redesign will double the current marketing inventory for the publisher's sites.

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