FULL THROTTLE

Although the importance of content has received a lot of press in recent years, it has been hard to place a value on it until now. The very appeal of the internet, and the reason governments across the world are so keen to get everyone connected, is the extensive resources it offers - a wealth of information and services, available at the click of a button no matter where you are, and completely for free.

Had this information all been chargeable, along the lines of premium-rate telephone services, it is unlikely the internet would ever have become more that a niche phenomenon.

It is for this reason that internet content providers now stand at a crossroads. Having won the hearts and minds of the world to the cyber cause, is it now conceivable that they can persuade customers to start paying for the content they've been used to receiving for free?

As the internet has entered subsequent generations, the nature of its content has become richer. While some sites remain disappointingly flat and text-based, others are exploiting the latest in rich media -- from streamed video to audio and animation -- to increase their impact. Instead of merely reproducing existing information and promotional materials online, they are adding genuine value and providing new services to their audiences - commercial services designed to bring in new revenue. This has moved the internet on to a different level. Suddenly it is more than an information medium; it has become an entertainment and education platform to rival television.

While many industry commentators argue that charging for internet content will prove impossible, because the public has come to expect to access it for free (that's if you don't count the cost of the equipment, phone charges and internet service provision), there may not be much choice. It may come to a straightforward choice between pay for a service or wave it goodbye.

Providing up-to-date, high-quality content is an expensive and time-consuming business, with no guarantee of a return on investment. Brand-building and marketing is one thing, but it is now widely accepted that, with a few exceptions, advertising and sponsorship does not bring in adequate funding to enable firms to profit from content provision. Advertisers simply don't believe that online activities work. Audiences are too fickle and there are too many sites to distract them.

Now that the initial bubble has burst and the hard commercial reality of internet business has dawned, many content providers are being forced to reassess their future. The poor state of the economy is compounding this.

UK company TeamTalk is a provider of sports content and digital entertainment and, although it provides this over a range of media, including radio, satellite, fixed-line telephones and mobiles (via SMS messaging), it sees the internet becoming its biggest revenue generator in due course. Yet this depends entirely on being able to charge for the content in future.

TeamTalk's website, which has been going since 1997 and includes online radio (and video in due course), attracts 3.4 unique users each month. Yet CEO and chairman Bill Wilson says he'd prefer to have 300,000 paying customers. 'We've informed investors that we'll introduce subscriptions in the new year, and free access will end,' he says. 'We're thinking along the lines of £2 a month or 50 pence a week, so it won't be much, and we hope this will generate significant revenues in due course, though time will tell whether people are prepared to pay for our content.'

Wilson notes that it costs an organisation such as his around £10 million a year to gather and continually update content. 'If you weren't charging for that, you'd soon go out of business,' he notes. Ad revenue, meanwhile, only brings in between £1-1.5 million, 'so it's not viable,' he adds. While this didn't matter too much in the early days, since the bulk of TeamTalk's revenues come from premium-rate telephone transmissions to consumers, and satellite-based transmissions to the maritime industry, it would be unwise to continue running the internet operation at a loss.

Wilson is reasonably confident of persuading online customers to pay, since the service's current visitors are loyal, with many of them returning to the site daily. TeamTalk would only need 10% of them to agree to pay, to make the venture profitable, he claims.

Having a captive, loyal audience is certainly one step to getting tangible buy-in, especially in the consumer market. It is for this reason that many in the online content industry are watching and waiting the fan-based music sites run on behalf of Posh Spice and Westlife. Both have recently introduced paid-for, 'platinum' sections of their websites for truly loyal fans that don't mind parting with a bit of pocket money in return for immediate and privileged access to exclusive, behind-the-scenes footage of their idols. Posh Spice's fans pay something like £2.50-3.00 a month for this; Westlife uses a slightly different model, charging £14.95 a year. The ethics of charging young fans for online content is something that's yet to be contested.

Graphico New Media is the production company behind Westlife's website. Says sales and marketing director Graham Darracott, 'At the moment, it's a bit of a toe in the water, since e-commerce and ads haven't worked as successful sources of online revenue. Everyone's trying to find a business model that works, but we're still at the testing stage.'

To be worth paying for, content has to be (1) of value to the user, (2) fresh and (3) exclusive, he notes. Which is why porn sites are enjoying such success. One thing that can be learnt from porn, certainly, is the success of content teasing - show the content briefly, then charge the viewer to continue viewing.

Innovation is essential. For customers - and indeed advertisers (where advertising has been shown to work) -- to really want to pay for web content, they have to be sure it's offering them something they can't get elsewhere.

Kenneth Nwagbogu is a media analyst at international media business research company Screen Digest. He believes future consumer-based content revenue opportunities will revolve around online gaming, and music, since - online - they are both offering something new. He includes interactive, user-generated content. 'Examples of this type of highly interactive content would be Sony Screenblast and Oddcast,' he says, 'as well as individual offerings on streaming content sites like AtomFilms (such as 'DJ Fu' in which the viewer controls the title character, a wacky, skateboarding disk-jockey, and enables the creation of new dance-tune remixes which he can then save and send to friends).'

Nwagbogu also points to Cartoon Network, which has successfully integrated its existing TV broadcasting activities with its Web site, directing TV viewers to Nintendo-sponsored content and games on CartoonNetwork.com (see Toonami.com).

Where the originator of the content is also the online producer, the ability to generate additional revenues is clearer than when the publisher is independent. In the music industry, there has been something of a furore over royalties with Web companies such as Napster providing free, downloadable music online. Record companies, understandably, went up in arms, and now Napster has had to stop trading.

In response to this, online music service Wippit has recently launched one of the first subscription-based music download services, which it claims will offer consumers access to their favourite music for next to nothing, but within the parameters of the law. Each subscriber pays £20 a year for unlimited use, but for every MP3 file downloaded the artists are reimbursed for their material. Founder and CEO Paul Myers claims around 1,000 subscribers signed up within the first month and says the venture will be 'lucrative and profitable' within six months.

In the corporate market, which is where many streaming companies have turned their attention following disillusionment with the slow development of commercial opportunities in the consumer sector, the revenue opportunities are less obvious. Applications here have more to do with saving the corporate customer money, than earning a content provider any money. The businesses that are cashing in here, are the production companies and content delivery networks.

Content streaming is doing relatively well in the corporate market for a couple of reasons. Firstly, corporate users are generally more likely to have access to broadband communications, so can experience video and audio at their full potential. Secondly, there are at least two killer applications in the business sphere.

One is media-rich conferencing or online training. These take the concept of videoconferencing a stage further, offering the ability to share text files and interactive messaging alongside audio-visual communications. Distance learning, for example, can provide a successful balance between classroom-based training and e-learning - the trainee can attend a 'live' training session, but without the expense of travel, and the footage can be replayed after the event. The decline in the economy coupled with the general fear of air travel after September 11th has led to increased demand for these types of services.

The second major application area is corporate communications and promotions -- using media-rich communications to communicate complex messages to staff, customers and business partners, using IP networks, whether public or private.

Swedish bank Nordea has been making use of such services for the last two years. In 2000, it initiated weekly webcasts targeted at private investors to explain complex investment proposals to them. Recent surveys have shown that almost 40% of viewers of these webcasts have based their entire investment decisions on the information being transmitted during these sessions. Normally, these same people would consult up to 50 different sources of advice and information before making a purchasing decision.

'It's much more effective than text-based web content, which can get quite long and complex,' says Ninni Franceschi, head of internet development for Nordea Longterm Savings. 'The trouble then is that people tend to print out the information, logging off in the process.' In this case, only 15-20% of visitors to the site would finish the article and base their investment decision on its content.

'With the webcast, they stay online, and can adjust their portfolio or adjust their equity order at the same time,' Franceschi notes. They can also steer the content of the webcast, by emailing Nordea and saying 'please can you advise me a bit more on X'.

Although Nordea hasn't yet worked out how much these webcasts are costing the company compared with the return on investment, Franceschi is certain she is onto a winner, claiming the costs are negligible (Nordea outsources the webcasting production work to a company called Kamera), especially compared to printed media costs, while the ROI on streamed content versus static content are substantial.

So what does the future hold? Of course it's very early days for media-rich internet content provision, partly because broadband internet access has yet to make the mainstream, hampering transmission quality, and partly due to the lack of innovation and business sense applied to content-based ventures to date. Yet no-one seems to doubt the long-term potential.

While PC users wait for broadband to be rolled out to the desktop, some analysts are predicting that it will be the non-PC market that will help drive content-based business, especially in the consumer market. Says Screen Digest's Nwagbogu, 'We estimate that there will be 155 million mobile users by 2005, which is a lot. By this time - in fact, within 18 months - 3G will be commonplace. Although there is a healthy scepticism about mobile Internet, many of the problems to date have been infrastructure and network based, not content issues. I-mode has proved beyond doubt that content can work on mobile devices.'