Online pubs explore models for paid content

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Online publications looking for revenue beyond advertising are increasingly turning to paid subscription services. However, while specialty magazines are making headway, general interest magazines are still trying to figure out a model.

The experimentation with paid services began about 18 months ago with the launch of the Wall Street Journal Interactive Edition, followed in 1997 by Dow Jones & Co.'s SmartMoney Interactive and competing financial zines Money.com Plus and TheStreet.com.

Then came a mix of other specialty publications including Playboy, Variety and Disney's Daily Blast!

But in the general interest niche, none has yet to take off.

SLATE'S FAILED ATTEMPT AT PAID

Consider the experience of Slate, Microsoft's hip political and culture magazine run by Michael Kinsley, which gets about 140,000 unique visitors per month and projects about 60,000 regular readers, according to Associate Publisher Colene McBeth.

After a failed attempt last year to launch a paid service priced at $19.95 annually, Slate is planning to announce a new paid start date and pricing in two weeks.

But some in the industry are questioning whether it will succeed.

At an adtech:West conference two weeks ago, roughly one-third to one-half of audience members said they read Slate when asked by Ms. McBeth, who was speaking on a panel. When she asked who would pay for it, only one person raised his hand.

"I understand that it works for the financials being paid, because you can expense it to the company as part of your job. But who's going to be able to write off Slate?" said one publishing insider.

FINANCIAL SITES SUCCEEDING

Indeed, financial paid sites seem to be succeeding. The Wall Street Journal Interactive Edition has just more than 160,000 subscribers and plans to be profitable in three to five years, often cited as the average time frame needed for a print magazine to turn a profit. The Journal charges its print subscribers $29 annually for the online service, and $49 for online only.

Tom Baker, WSJ Interactive Edition business director, said paid circulation numbers are exceeding initial expectations, particularly since only about 10% of the subscribers are a result of bulk buys from companies, while two-thirds of the online readers are not regular WSJ readers.

The WSJ Interactive Edition also benefits from paid sister sites SmartMoney Interactive and Barron's by offering package deals for subscribers. Baker said the offering of Barron's, which is published on Saturday, has helped double weekend traffic rates.

Pointing to a key difference between the sites of established publications and online only sites, Jupiter Communications Group Director of Consumer Content Mark Mooradian said a problem with a magazine like Slate going paid is a lack of brand strength.

A MISTAKE TO CHARGE

"To Slate's credit, if you look at their competition's online presence--The New Republic, New Yorker and to some extent Vanity Fair, and [Steve Brill's] yet-to-be launched Content--Slate is doing a far better job," he said.

However, he added, "I think it's a mistake to start charging. They're throwing away a tremendous advantage. They have a window of opportunity to build a strong brand and loyal readers. To charge now will shut out a great deal of readers."

Another online subscription publication and service that is using its brand to thrive is Disney's Daily Blast!, targeted at young children and their parents who want to control Web content. It charges $5.95 per month for the service.

Jake Winebaum, president of Disney Online, said the Blast model relies on advertising for about 48% of its revenue, commerce for 12% and subscriptions for about 40%.

Mr. Mooradian said the two most successful online paid models are those that either leverage a brand with information that can't be gotten elsewhere, like the Economist and Wall Street Journal, or those that offer most of the site free, but charge for specialty information areas, like ESPN's Sportszone.

Playboy, which launched its paid area six months ago, follows the second model with most of its content free and a smaller area that is paid. It is one of the few and most prominent magazines working on a subscription-only model. And it's already breaking even with about 22,000 subscribers paying $6.95 per month, $18 quarterly, or $60 per year, said Eileen Kent, Playboy Enterprises VP of new media.

Mr. Mooradian said he sees a bigger trend developing in the online publishing business. He said he believes the large players like America Online and Yahoo! will begin aggregating content and bundling subscriptions.

"For instance, there might be a Yahoo! premium service where you subscribe for a certain price and then get to pick five or 10 paid sites," he said, illustrating a hypothetical situation.

Copyright January 1998, Crain Communications Inc.

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