Monday, August 21, 2000

Week of 08/21/2000

The New Net Struggle: Pay-Per-Use or Free?
- by David Matthews 2

Back in July of 1998, I talked about supposedly a new trend in software, which I called Pay-Per-Use. That was where you would buy a product at lower-than-usual costs, but you could only use that product for a limited time, and then if you wanted to use it any longer, you would have to pay extra.

At that particular time, the pay-per-use product that people were talking about was called DIVX. It was a form of Digital Video Disc that you could only play on a special DIVX-DVD player. It limited you to a certain number of times you could play that disc. Say, for instance, ten times. If you wanted to play it after those ten times are up, you would have to pay extra for it. And the player often came complete with a phone jack and on-screen menu system so you could pay for that renewal with your credit card. Wonderful little tool, perfect for those impulsive buyers that seem to spend all of their time on the Home Shopping Channel.

Not surprisingly, people didn’t buy the whole DIVX idea. Why? Because it sucked! Nobody wanted to pay a subscription for something that they could otherwise get for full price and use indefinitely. Would you? I certainly wouldn’t!

So DIVX folded up and the company that sponsored it had to eat a lot of money to buy back those old DIVX players in exchange for normal DVD players. Three cheers for the anti-DIVX crowd!

But while DIVX died, the notion of pay-per-use did not go with it. Instead, it festered in the brains of executives and corporate attorneys. It clung to the backs of their skulls like squashed love bugs on the windshield of a car.

They saw how successful companies that use pay-per-use systems could be. After all, who would have figured that an online provider like America Online would someday not only buy out other software companies like ICQ and Netscape, but also buy out Time-Warner, one of the largest communications and publishing mediums in the world?

And of course, how could we not ignore the success of subscription-based sites dedicated to sex? Danni Ashe has gone from being an obscure but very voluptuous dancer and model to being the most downloaded woman on the Internet, whose website has dominated over sites dedicated to politics, housekeeping, and Oprah Winfrey. She’s now considered by the press to be the queen of the adult websites.. although the term the media often uses is less-than flattering. Of course, she would not be so successful if she didn’t charge people a regular subscription fee.

So now the suit-and-tie corporate executives have decided to try pay-per-use again.. this time with software products.

McAffee’s VirusScan was one of the first to go pay-per-use. They offered a really cheap virus protection system that you could use on your system. Then they offered you six months of free upgrades (which has now been reduced to three months). After that, you couldn’t upgrade your system, but you could still update the virus data for free. If you wanted to upgrade your system, you had to sign up with their "Virus Clinic" program, which charged a monthly fee.

Other software companies are also going subscription. Real Networks, which has had tremendous success with their free RealPlayer and their $30 RealPlayer Plus system, is now offering their latest "Plus" system to the public.. for $9.95 a month. The once-free Remarq newsgroup search engine has been bought up and now offers a monthly subscription fee just to use their service.

Even the Godzilla of software, Microsoft, is eager to get into the pay-per-use system with their Office products. Imagine, if you will, getting a regular reminder that your Microsoft Word subscription is just a few days away from expiring. Or wanting to check your sales database, but instead get a message that your Microsoft Access program has expired and your IT department hasn’t bothered to renew the company’s subscription.

Now let’s get brutally honest here.. will pay-per-use programs work? In most instances, probably not. Certainly in the case of Microsoft, this commentator feels that Bill Gates would be commercially castrating himself if he allows his Office products to go subscription. As long as there are alternatives out there that do not operate on a pay-per-use system, people will flock to them.

Once again, the suit-and-tie executives and the corporate attorneys have forgotten a fundamental fact about consumers.. they WANT free stuff! Joe and Jane Six-Pack are penny-pinchers who will cut as many corners as possible to make ends meet. They’re not like some of these silver-spoon-fed executives who have had everything handed to them.

And when it comes to the Internet, there is a huge segment of that crowd that believes that it is more than just a bastion of free speech, but also of free content.

I call them the "Freebies", because that is what they believe the Internet should be.. just one free medium where EVERYTHING is at their grasp at no cost. They not only oppose the pay-per-use system, they encourage other people to get as much stuff out there for free as possible.

You see many of these Freebies in the newsgroups, asking for whatever files they can get their hands on, especially from subscription sites. They don’t want to pay the subscription fee for those sites, they just want the files, free and clear. Copyrights and "Terms Of Service" agreement be damned for these people, and they’ll even let you know it! Not to your face, of course.. but through some bogus e-mail account.

You can see these Freebies at the password sites. They’re the ones who manage to get their hands on someone’s password on a subscription site and post them for anyone to have access to. The webmasters to these password sites claim that all they’re doing is just second-guessing their fellow content creators, but by posting that access for anyone to use, they in fact cause more harm than good.

These are the people who created free content engines like Napster and Gneutilla. These are the users who gave entertainers like Lars Ulrich of Metallica reason to take Napster to court. These are the people who really don’t have to face any kind of retribution for their actions. After all, they’d say they aren’t the ones who are posting the copyrighted material, they’re just using what’s out there. They believe - erroneously or not - that if it is out in the newsgroups, it is theirs for the taking.

Who make up these Freebies? Well, many of them are students.. young men and women who already enjoy a lot of things from other people. In addition to room and board, they often enjoy unlimited high-speed network access via their college or university. They are so used to having things given to them that the notion of having to pay for such access borderlines on blasphemy.

Some are loyal fans of a certain group or a certain website model, and whose only motivation to collect every conceivable file - free or subscription - is out of sheer greed. Quite often these people will post such material on their own fan sites.

And still other Freebies have a more mercenary motivation. These are the online pirates, people who take that material, copyright protected or not, burn them onto CD’s and sell them for their own gain. Some even have the audacity to auction such material off on eBay. As a content-maker myself, I find this particular subgroup of Freebies to be in the same league as online child predators. After all, it’s one thing to take a person’s hard work and talent, it is another to make a buck off of it.

But for whatever reason, these Freebies are the ones who serve as a constant thorn in the sides of not only the corporate suits and their slick attorneys, but to the webmasters and content providers in general. They make it difficult for even struggling webmasters to make a buck when they’re constantly having to keep an eye out for these people.

And yes, it is very tempting to consider siding with the Freebies.. We all want something for nothing.. or at least as close to nothing as we can get. And yes, it is frustrating to see something that was once free go subscription. I’ve been a big critic of such a trend, knowing that people are, by nature, drawn to free things. At the same time, though, I also know the frustrations of being a content provider out there in a realm where millionaires can be made overnight. We all want that piece of the megabuck pie, even though many of us would never even get the crumbs.

In between the subscription crowd and the Freebies lay the rest of the online community. Joe and Jane Six-Pack, relative newbies, often side with the Freebie crowd, while members of Congress - equally relative newbies - are more adherent to the corporate subscription evangelists.

And here’s the crux of this situation: Every time some service or product goes pay-per-use, it serves as yet another reason for the Freebies to dig even deeper and push further in their quest for even more content. The content providers really do need to tread a very fine line when it comes to taking users for granted, because while people can be loyal to a certain product, they don’t necessarily feel that the product is worth continually paying $9.95 a month for.

Look, the sad reality is that at some point, we ALL have to pay a price for going online. Some things are worth paying a continual price for, but others are not. Software is one of those things that does not fall into that pay-per-use category. If software companies are serious about making a buck off their products, this is not the way to go.

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