Research Points To Pay-For-Play's Dim Future

As Apple and Google stake their successes as Internet video-hubs on pay-to-play models, new data is emerging that suggests consumers are unwilling to pay up.

A report released Tuesday by Points North Group shows that consumers prefer ad-supported content over a fee change by a greater than three to one margin. When Points North researchers asked consumers if they missed their favorite TV show and could watch it online or order it through cable or satellite, 62 percent of respondents said they would prefer getting it for free with commercials, versus 17 percent who chose paying $1.99 without commercials. Twenty-one percent were undecided. For the report, Points North surveyed 800 people by telephone in November.

"I'm the last guy to advocate more advertising in the world, so it was surprising to see such strong support for advertising over fees," said Points North analyst Craig Leddy.

In the coveted demographic of consumers ages 18-34, the preference for free, ad-supported content was even higher: 68 percent compared to the 26 percent who favored pay. Just 5 percent within that group said they were undecided.

The report comes at a time when pay-per-view models are drawing a lot of attention online. Google founder Larry Page unveiled Google's pay-per-download video service last Friday at the Consumer Electronics Show in Las Vegas. The move places Google in direct competition with Apple's video store on iTunes, which began selling music videos, TV shows, and movies in October of last year.

Speaking Tuesday at company's annual Macworld show in San Francisco, Apple CEO Steve Jobs said iTunes has sold eight million videos since October.

While the announcements made headlines, some industry watchers (in addition to Points North) concurred that relatively few consumers would agree to pay for play. "All of our research shows tremendous consumer resistance to paying for video," said Jupiter Research analyst David Card.

Card was particularly critical of Apple's and Google's paid video strategy. "With eight million or so downloads, I don't think Apple's video store has been successful," he said, adding: "I was very surprised by Google's decision to charge for video."

But not all analysts condemned the pay-per-view. "I'd say it's very early to be making any definitive pronouncements regarding different models," said Gartner Research Director Mike McGuire. "There's a lot of experimenting going on, and there's a lot more that will need to be done in the future."

Indeed, Google's new paid video service is nothing if not flexible--content owners can charge as little as five cents for their offerings or simply give it away--and even Apple is experimenting with free content on the iTunes music store.

At the end of the year, Apple let NBC Universal put a free "Saturday Night Live" skit up on Apple's iTunes music store.

The skit--in which "Saturday Night Live" veteran Chris Parnell and freshman Andy Samberg stomp through the streets of New York rapping about cupcakes and things--was the second free piece of content that NBC has made available on iTunes since entering into a partnership with Apple in early December to distribute a wealth of new and archived shows through iTunes for $1.99 an episode.

Expanding upon that relationship, NBC announced on Tuesday that it would add bundles of "Saturday Night Live" skits to existing content for sale on iTunes. Offerings include a "Best of SNL" category with hour-long collections of sketches grouped by individual performers from Chevy Chase and Dan Aykroyd to Adam Sandler and Chris Farley.

Major content publishers are also knee-deep in experimentation with broadband video. CBS Digital President Larry Kramer told OnlineMediaDaily late last year that while CBS is the only remaining major network without an iTunes distribution deal, it is considering a number of models including subscription and ad-supported models--as well as selling content piecemeal via iTunes.

Some publishers, such as WashingtonPost.com, have begun uploading video through iTunes without an official partnership with Apple. In late October, Chet Rhodes, the Post's deputy multimedia editor, told OnlineMediaDaily that he aspires to a free ad-supported distribution model. Rhodes estimated that video clips would have to be downloaded at least 10,000 times before the Post's advertisers would take notice.

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