2010 Prediction: The Year of the Paid Subscription

This year the Web turns 21. So it's somewhat ironic that 2010 will also be the year the place finally sobers up.

Many of the startups and media sites that define the e-commerce ecosystem are, at long last, making serious plans to make serious money. Hulu, the slick portal that picked up where TiVo left off in killing the idea of "appointment television," is the free site likeliest to begin charging in 2010. Chase Carey, a top executive of News Corp., which owns 27 percent of Hulu, announced in October that "it's time to start getting paid for broadcast content online" and "Hulu concurs with that." Comcast's recent purchase of NBC Universal, Hulu's other founding network, makes a pay-model future only more likely. Hulu hasn't made any official announcements yet, and it may continue to offer ad-supported versions of some programming, but expect to start using your credit card when you need your Arrested Development fix.

Music is headed toward the same fate. Cloud-based, streaming music is poised to replace the mp3, and Spotify, Last.fm, Pandora, and Rhapsody are the big names that currently dominate the format. Most of these sites have a free-to-users, ad-supported model, but the labels are starting to grumble that too much money is being left on the table. Lady Gaga's "Poker Face" was one of the most popular songs on Spotify in Europe, but she reportedly earned just $167 for a million listens through the service. (Spotify disputes the figure.) Naturally, record companies want to improve these terms. Reportedly, in their negotiations with Spotify leading up to the service's U.S. launch, they have insisted that Spotify scrap its free version altogether and require subscriptions across the board.
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The biggest music retailer in the world, Apple, may be gearing up for a similar switch. The secretive company certainly hasn't said as much, but a recent acquisition suggests its head is in the cloud. In December, the Cupertino, Calif.-based company purchased Lala, a streaming music service, for something shy of $100 million. Lala has negligible revenues; what Apple really bought were its talented engineers and their cloudy expertise. And a subscription-based iTunes wouldn't be just for music. Apple is reportedly in talks with major outlets like Disney and CBS to start an online TV subscription service. The "millennial" generation is already shunning the cable box and relying on their computers for television viewing; an Apple venture along these lines could cause a stampede away from Comcast, Time Warner, and other cable providers.

Finally, there are the print dinosaurs, which are roaring louder than ever, led by prickly velociraptor in chief Rupert Murdoch. The News Corp. boss, who owns a globe-spanning collection of newspapers, including The Wall Street Journal and the London Times, wrote recently that "the old business model based mainly on advertising is dead." He has openly averred that many, if not all, of his remaining ad-supported news sites could go behind a pay wall this year. That would open the door for competitors to make the same move. The New York Times, for instance, is debating the wisdom of charging for online content too. If Murdoch's plan proves successful, emboldened newspapers and magazines across the country would begin erecting their own digital pay walls.

This is dismaying news to many consumers, especially Pirate Bay–surfing teens who think free content is a human right only slightly less essential than oxygen. But as the Web becomes the center of our multimedia world, the only way to ensure that the future will offer us more Arrested Developments, Lady Gagas, and Wall Street Journal investigations is to ante up. As NEWSWEEK's Dan Gross puts it, paid is the new free, and more expensive is the new cheap. In 2010, the 21-year-old Internet will finally pick up the tab.

Source: http://blog.newsweek.com/blogs/techtonicshifts/archive/2010/01/08/2010-prediction-the-year-of-the-paid-subscription.aspx?GT1=43002