Slate Ends Its 10-Month Experiment With Subscriptions

February 15, 1999

Slate Ends Its 10-Month Experiment With Subscriptions

By ALEX KUCZYNSKI

t was an important test of one facet of Internet commerce: Would readers pay an annual subscription rate of $19.95 for the privilege of reading a magazine online?
If the tale of Slate magazine, which is owned by Microsoft, is any indication, the answer is no. Ten months after deciding to charge readers $19.95 a year, the publisher of the online magazine announced in an e-mail notice to subscribers that, as of last Friday, it would be available free on the World Wide Web.
Michael Kinsley, Slate's editor, said that the decision was not a setback.
"Obviously, you don't like to reverse course," he said. "You try one thing, you try another. It's a stage in the learning process."
In the e-mail to subscribers, Scott Moore -- who was named publisher of the online magazine last Monday -- wrote that there were two reasons for the change.
"First, the advertising market on the Web has continued to expand at a remarkable pace, " he wrote. "It roughly doubled in 1998 to about $1.8 million, is predicted to grow to about $3 billion in 1999, and should continue a healthy 50 percent to 60 percent annual growth rate for the next several years."
He explained that "the biggest problem with remaining paid was that doing so would restrict our advertising potential."
"We're confident," he wrote. "that by making Slate.com free our audience will grow substantially and this will make us more attractive to advertisers."
The second problem, Moore wrote, was that, on the Web, "paid subscriptions for content (other than smut and investments) simply have not grown as expected."
Under the new arrangement, readers who pay $19.95 a year will get e-mail deliveries and print-out editions, and have access to the archives and general bulletin board of Slate, services that will not be provided free.
Bill Bass, an analyst at Forrester Research Inc., said that the issue was one of supply and demand. " Last year, I said this was the dumbest thing I had ever heard," he said. "There is so much free content on the Web that if you try and charge for it people won't go to you. There is too much substitutable content."
He pointed to the fact that readers can look at Salon magazine, a Slate competitor, which is free. "It's like if Ford came out with a Taurus that cost $50,000. If I can get a Camry for $25,000, why would I pay $50,000 for a Taurus?" he asked.
Bass added that only two areas on the Internet can charge for their services: financial and pornography sites. He said that financial sites like thestreet.com and The Wall Street Journal's Web site are popular because they offer specific advice that few other sites offer, and the subscription prices can be written off as business expenses.
"The only wildly successful sites that charge have been adult entertainment," he said. "And people tend not to act economically rationally around adult entertainment."
Patrick Keane, a senior analyst at Jupiter Communications, an online market research firm, pointed out that there is also a psychological hurdle for consumers to overcome in paying for content on the Web.
"People see their personal computers as a utility device, and they're going to pay for information that leads them toward a task, or that helps them with a purchasing decision," he said. "So consumers don't have a natural proclivity to pay for content on line."
However, he added that the Internet is a maturing market. "After all," he said, referring to cable TV, "if somebody had told you in 1975 that you would be paying $40 a month for your television, would you have believed it?"

In an editor's letter posted on Friday, Kinsley answered what he expected would be readers' questions about the decision. "It's painful," he wrote, "to think of turning away so many Slate readers from so much of our content -- not to mention the potential readers who don't come in the first place. The spreadsheet wizards figure that ad revenue from the increased traffic will more than compensate for the lost subscriptions."
Moore said that the paying subscribers number in "the high twenty thousands" and that the magazine was visited by 300,000 to 400,000 news users each month. Moore would not disclose Slate's ad revenue, which is charted by an internal group, MSN Advertising Sales.
Slate was started in June 1996 and, after some false starts, began charging last March. It has remained something of a sideshow in Microsoft's Internet strategy, which in earlier stages emphasized entertainment programming or local information but is now focused on building traffic to a home page, MSN.com, that directs users to both content and electronic commerce.
On its Web site Friday, Salon, which is published by Salon Internet Inc., crowed over the news, with a commentary headlined sardonically "Slate rejoins the Web." Later, in an interview, David Talbot, the editor and chief executive of Salon, said that Slate's decision to charge readers "was a case of Microsoft's hubris" and "prevented other sites from linking to it, further restricting circulation."
"When you charge, it prevents other sites from linking to you, which is how the Web grows, when you become integrated to other Web sites through links," he said. "When you hit a gate as a reader saying you have to pay, Web sites stop linking to you."
Marisa Bowe, the editor of the online magazine Word, which is owned by the Zapata Corp., said that she was not surprised at Slate's decision.
"So far, no one has really been willing to pay to read anything on the Web," she said. "It's a little heartbreaking for me to say, but the Web magazines are just not as important, yet, as the print magazines."
Kinsley said, "I think if she's going to be depressed about that, she's going to be depressed for a while."

Related Sites
These sites are not part of The New York Times on the Web, and The Times has no control over their content or availability.

Slate
Salon
Kinsley's letter
MSN.com
Salon commentary on Slate
Word

Help/Feedback | Classifieds | Services | New York Today