Marketing Letters (forthcoming)

Girish N. Punj.

“People hate, hate, hate to subscribe to things on the Internet” (Bill Gates, 2005)

Over the past decade, there has been a substantial increase in the demand for online content, but there has been little change in consumers’ willingness to pay for it. Consumers continue to regard free access to content on the Internet as an inalienable right. Digital content providers, on the other hand, believe that “smart” content has the potential to change people’s lives. An increasing number of digital content providers are considering ways to charge consumers for content that was previously free. A key question for these companies is whether a change in business model from one that is advertising-supported to one that is subscription-based likely to generate more revenue.

Professor Girish Punj’s research profiles consumers who are more likely to pay for general online content and estimates the amount they are likely to pay. Data from a nationally representative probability sample of 755 Internet users is used to estimate a logistic regression model. Results show that while the amount subscribers are likely to pay for digital content is related to income and education, willingness to pay is more strongly related to age and gender. The findings imply that projected subscription revenues for various demographic segments may not necessarily align with the willingness to pay for online content reported by the same segments. Communicating the information value of online content is likely to provide greater success in enhancing consumer willingness to pay, rather than tactics intended to limit access to proprietary digital content.