From: technews <technews@ou.edu>
To: "'it-fyi@listserv.ou.edu'" <it-fyi@lists.ou.edu>
Subject: Publishers Seek to Conquer Sales Resistance (NY Times on the Web)
Date: Mon, 4 Oct 1999 09:10:25 -0500
October 4, 1999
Publishers Seek to Conquer Readers' Sales Resistance
By BOB TEDESCHI
The Internet has not been kind to traditional businesses, which have had to
rethink their corporate philosophies, pour millions into technology budgets
and rush their products online before a garage full of 20-year-olds turns
them into Chapter 11 poster children.
And nowhere has the Web been harsher than in the publishing industry, which
was among the first to bring its products online, only to find that few
people were willing to pay for them.
Despite high-profile failures -- most notably, Slate magazine
(http://www.slate.com/) -- of those who have tried to charge users to read
information online, publishers appear determined to find a way to make the
business work. To do so, they must confront a lineup of obstacles --
including recalcitrant authors, the potential for piracy and the reluctance
of users to buy information they believe they can find elsewhere on the Web.
According to a recent survey by Jupiter Communications
(http://www.jup.com/), 46 percent of Internet users said they would not pay
to view a Web site's content. But consumers' resolve may be softening; last
year, 57 percent of Jupiter's respondents said they would not pay to view
editorial content.
The universe of those who do pay for information is dominated by business
and professional users, according to analysts and executives, because
companies are able and willing to pay for information they believe can help
employees do their jobs better. In pursuing that market, publishers are
maintaining a two-track pricing strategy: subscriptions and pay-for-view.
Neither has produced many success stories. Among subscription sites, the
highest achievers are Consumer Reports Online
(http://www.consumerreports.com/), which charges $24 for a one-year
subscription, or $3.95 a month, and The Wall Street Journal Interactive
(http://www.wsj.com/), which charges $59 a year. Each has generated more
than 300,000 subscribers, who type in a password at the site to gain access
to stories or reports.
According to Aram Sinnreich, a Jupiter analyst, those sites have succeeded
because they take advantage of the Web's ability to deliver current,
economically important information, which can be searched easily with
browser software. Those criteria, he said, could help explain the failure of
other online efforts that tried to sell paid subscriptions, like Microsoft's
Slate magazine, which in February abandoned a $19.95 annual subscription fee
and began offering content for free.
So far, pay-for-view efforts have fared no better. Publishers like The New
York Times and Forbes charge for archived stories obtained online, for
example, but analysts and executives said such features generated little
revenue. "It's been sluggish," said Cristian Edwards, vice president of
Times Company Digital, an independent business unit of The New York Times.
"I think the demand is there, but it's an area we really haven't gone after
aggressively," he said.
Sinnreich of Jupiter questioned the demand for such services, because the
pay-for-view approach "brings up the issue of repeated purchasing
decisions." He added: "The more times a customer is asked to pay for
something, the less inclined they are to pay. And the average transaction
for pay-per-view doesn't justify the transaction costs or the customer
acquisition costs."
Technology companies are trying to address those concerns. Seattle-based
QPass (http://www.qpass.com/), for example, allows consumers to sign up for
a network of sites that sell information a la carte. Users can buy reports
from various publishers without entering their personal data multiple times,
because their credit card is automatically charged by QPass. Since the
technology is new, analysts said it was not yet clear how much it will build
sales.
A far more troubling concern is the potential for illegally copying
digitally delivered information. That is "the great nightmare of book
publishers," according to Ted Nardin, vice president of McGraw-Hill's
professional book division (http://www.mcgraw-hill.com/).
But publishers are getting help on this front, too. Technologies developed
by companies like SoftLock (http://www.softlock.com/), Authentica
(http://www.authentica.com/) and Fatbrain (http://www.fatbrain.com/) allow
publishers to sell information online to one user, and have that information
encrypted on the hard drive of the user's computer. Software that the user
downloads with the document controls the information, so it cannot be
digitally reproduced, forwarded via e-mail or even, in some cases, printed.
Nardin said McGraw-Hill was already selling a limited number of titles in
digital download form, but planned to begin selling "hundreds" of
piracy-proof titles later this month through Fatbrain.com. Chris MacAskill,
Fatbrain's chief executive, said he expected to begin the new service,
called eMatter, with 20,000 works -- many from unpublished authors who will
be able to post documents for a nominal fee and receive 50 percent of each
sale.
MacAskill said Fatbrain would also offer works from William Ury, a
best-selling business author, and Richard Bach, author of the novel
"Jonathan Livingston Seagull," who will write a series of short stories for
the site.
Indeed, one of the problems of the online book-selling industry has been the
lack of high-profile authors willing to sell directly on the Web. While some
do not want to risk alienating publishers, others know that conventional
publishers add value to their works -- through packaging, design and
printing -- that cannot be matched by digital distribution.
"It's a chicken-or-the-egg problem," MacAskill said. "If you have more
selection, you'll attract more buyers, so more publishers will be
interested." So MacAskill said he would consider paying advances to
well-known writers, to attract more buyers to the site.
Notably, MacAskill also said he would cede the task of setting prices to the
authors themselves -- a prudent approach, given the difficulty publishers
have had in pricing online versions of their works.
Nancy Macagno is director of new media for the Consumers Union, which
publishes Consumer Reports Online. "When it came to pricing, we modeled this
and modeled that, and we knew we couldn't depend on any of them." she said.
"So we priced the site the same as the magazine."
In fact, most publishers tend to charge less for their online books than
their printed books, according to Nardin of McGraw-Hill. But, he added,
"It's still an emerging market and there are no established pricing models."
McGraw-Hill currently charges the same price for its books online and off
line -- a policy Nardin said had yielded "promising" sales. "The real issue
is marketing, and what segment will go for it first, and at what price," he
said. "It's almost like we're all waiting for one segment to break through
and establish this as a viable market."