The two biggest questions in the Internet industry are "When are people going to buy Web advertising again?" and "Will people ever pay for Web content the way they have been accustomed to paying for magazine and newspaper content for years?"
Pick your medium: Everyone is in an ad slump, one that is magnified by a decade of living off the fat of the land. And as the youngest medium, the Net is the one most easily shunned.
As for subscription models, sports sites - among the most popular destinations on the Web - are starting to slowly consider making fans pay for play.
Until now, the largest sports properties in the land have been as guilty as anyone else of giving Web content away. That may be the reason league sites like NFL.com, MLB.com, NBA.com and NHL.com are among the most-trafficked sports sites.
"Our strategy has been to build an audience and generate revenue from ad sales, e-commerce and rights fees," says NFL New Media senior VP Chris Russo. Russo is currently negotiating a new Internet rights deal for the NFL that's expected to generate more than US$100 million in cash and marketing fees. "Now the ad market is difficult and so is e-commerce, so everyone is searching for new models."
With that in mind, Major League Baseball introduced two for-pay services this week. It's hoping that its fans will pay $10 for audio broadcasts that it had been offering free through Yahoo, as well as for a leaguewide searchable video archive that would be a rotisserie-league fan's delight.
Although team highlights will be available for free on MLB team sites, a customizable search - which promises pitch-by-pitch searchable archives of every game this season - will be a pay-for-play feature. And here's a clue as to how well the MLB understands the territory it's entering: The service is due to roll out May 1, and pricing hasn't even been set.
Bob Bowman, who was brought in last November as president and chief executive officer (CEO) of MLB Advanced Media, says he expects "tens of thousands of subscribers," and figures his unit is already ahead of the game. After all, MLB Advanced Media has already inked a deal with RealNetworks that guarantees MLB a minimum of $20 million over the next three years for exclusive audio and video Web rights. The quid pro quo is that the MLB audio and video will be streamed on Real's player.
"The notion that everything should be free on the Web is really being tested now," says Bowman. "It isn't free to stream audio or video."
MLB has taken some shots this week from people saying that it's charging people for what used to be free. Do the math, though: 10 bucks for a package that includes all of the league's 2,400 games. Moreover, if fans sign up for the service on MLB.com, they earn a $10 coupon for an MLB tchotchke from the site's store. Bowman says the video subscription service will cost less than $10 per month; MLB's regular season lasts from April through early October.
For those who own desirable content, the question now is what they can charge for on the Web and what they can't. It's the proverbial fine line.
"It's like art or pornography," says MLB Advanced Media Chairman Bob DuPuy, chuckling. "You know it when you see it. I'd say anything that's costly to provide and appeals only to really serious fans, we'll charge for."
That MLB is first to market with a premium-priced Web-based highlight service, or first to market with anything at all, is remarkable. Baseball has never been accused of being a leader in sports marketing. Its business decisions take so long, in fact, that observers have fairly described it as the only team sport that lacks a clock both on and off the field.
Now MLB's soft treading has caught the attention of other leagues. Balancing compelling content that attracts millions of monthly visitors against a profit imperative is a high-wire act. There's no unanimity of opinion among league marketers that there's a business yet - especially given the low penetration of high-speed Internet connections.
"The key is finding a package that has value - and it's not clear whether that exists, pre-broadband," says the NFL's Russo.
"Between ESPN, ESPN2, ESPN News, Fox, CNN/SI and the rest, we are swamped with highlights, so I don't think there's a business there yet," says Steve Hellmuth, senior VP of operations and technology at NBA Entertainment.
But with more than a third of NBA.com's traffic coming from outside the U.S., there is probably some opportunity for pay packages overseas featuring favorite local heroes. The NBA has been offering a free customizable highlights package for roughly a year. Its audio broadcasts cost $30, but they draw very few subscribers.
NHL.com charges $20 per season for deeper content on its site. Keith Ritter, president of NHL Interactive Cyber Enterprises, isn't convinced that there's room for much more right now. "The subscription model isn't the same for each league, any more than you would play football in a hockey helmet," he says. "We're in the business of building a fan base and removing barriers. Unless you hit on a subscription service that is going to generate $20 million - to pick a number out of the hat - I'm not sure it is worth putting those barriers up."
Bowman insists the pay model will stick. "Sports helped establish the cable industry as a viable business, and sports will do the same thing for the Internet industry," he says.
But there's no margin for error. Says the NBA's Hellmuth, "If you ask fans to pay and you don't deliver what they expect, it will be very difficult to go back and do another subscription model."