Subscription to Fee-Based Online Services: What Makes Consumer Pay for Online Content?

By Wang, Cheng Lu; Zhang, Yue et al. | Journal of Electronic Commerce Research, November 2005 | Go to article overview

Subscription to Fee-Based Online Services: What Makes Consumer Pay for Online Content?


Wang, Cheng Lu, Zhang, Yue, Ye, Li Richard, Nguyen, Dat-Dao, Journal of Electronic Commerce Research


ABSTRACT

Increasingly, Web-based content or service sites are turning to a subscription-based business model. This article examines factors that influence potential consumers' opinions about such paid services. A survey was conducted to examine the impact of several factors on consumers' willingness to access subscription-based Web content. The results indicated that respondents' intentions are significantly influenced by these factors. Specifically, their willingness to pay for online content or services is positively related to their perception of convenience, essentiality, added-value, and service quality, and to their usage rate of a given service. In addition, their willingness to pay is negatively related to their perceived unfairness in a subscription-based online service model. Managerial implications based on our findings are discussed.

Keywords: subscription-based online services, paid online content, willingness to pay, consumer survey

1. Introduction

During the Internet boom, a vast number of websites attracted Internet surfers by offering them with large amounts of free information ranging from news, business data to sports statistics. However, the once well-sold business model of offering free content to secure advertisement revenues yielded rather disappointing results for most of the e-service providers. Increasingly, advertising revenues alone are insufficient to meet the bottom-line needs of a company for survival [Addison 2001, Dewan et al. 2003, Turban et al. 2002]. Forced by the harsh business reality to seek alternative sources of revenue, many of these web operators have begun charging users a subscription fee for access to online information and/or services [Olsen 2001, Goldman 2001, Prasad et al. 2003, Taylor 2001]. For instance, when advertising rates plummeted, companies such as Encyclopedia Britannica and NetZero had to diversify their sources of revenue by moving into a pay-for-content model [DiCarlo 2001, Streitfeld & Cha 2001]. If this continues, the era of totally free content might eventually diminish. Instead, free content will be used primarily as a marketing ploy: a complementary trial period is strictly used for purposes of enticing customers to subscribe to a service or buy a product online. Alternatively, some sites attract customers by offering a limited amount of free content. They then hope to convince their customers to shift to a variety of "premium," fee-based content [Outing 2002].

Will consumers be willing to pay for online services or content after they have been so accustomed to receiving it for free? According to research conducted by the Online Publishers Association, consumer spending for online content in the U. S. grew from $1.31 billion in 2002 to $1.78 billion in 2004, for an annualized growth rate of 17% [OPA Research 2003, 2004, 2005]. The categories that experienced the most significant growth, however, appeared to concentrate on content that is of an entertainment nature, such as adult materials, music, gaming, and sports. Skepticism remains that consumers who once feasted on online content at no cost are now ready and willing to be charged for accessing the same content. For example, despite an increase in the number of sites that offer fee-based content, Jupiter Research reported that slightly fewer people seemed willing to pay for online content in 2002 (42 percent) than in 2000 (45 percent) [Crosbie 2002]. In a survey conducted by the Pew Internet & American Life Project in 2002, when asked to pay for access to a site that was previously free, only 12 percent of U. S. Internet users indicated they would pay, while 50 percent would find a free alternative, and 36 percent would simply stop accessing the online information or service altogether [Crosbie 2002]. With a few notable exceptions, such as those traditionally paid news or information services that are now also available online (e. g., The Wall Street Journal Online and Consumer Reports Online) and various gaming sites, subscription-based Web services have yet to make a significant financial contribution to their providers [Boumans 2004]. …

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