The market for online content sales is growing, but contains the seeds of its own destruction. That’s my interpretation of the new online content sales report [PDF] from the Online Publishers Association. The report covers the first half of 2003. Here are the highlights, in my opinion:

  • The core online content market grew a respectable 14% between the first half of 2002 and 2003. The OPA’s definition on “content sales” is still too expansive my taste. They include personals (up 77% since 2002), streaming audio and video, games, credit repair, fantasy sports, and greeting cards. Core online content, in my analysis, includes business content, research, and general news. This market was $255 million in the first half of 2003, or about a third of the OPA’s content market.
  • General news is flat at about $35 million/year.
  • Online advertising is an order of magnitude larger than online content. The Interactive Advertising Bureau hasn’t released their numbers for the first half of 2003 yet, but it’s likely to be more than $3 billion.
  • Subscriptions dominate the online content market. About 88% of the market was subscription-based. Because the OPA doesn’t break this out by category, it’s hard to know how this applies to the core content market.
  • Single payments under $5 are less than $15 million/year (8% of total single payments which are 11.5% of the approximately $1.5 billion/year market). The OPA calls these “micropayments”. I’d call them “minipayments”.
  • Revenue per content buyer has been stalled at just under $25 for nearly two years. All growth in revenue comes from the conversion of Internet users into content buyers. This isn’t too surprising. It’s more than they pay for the daily newspaper. It’s about what most people pay for Internet access. It’s about half what they pay for local telephone, long distance, cable, broadband, or mobile service. Does anyone think that it will ever be greater than any of these?
  • The average content buyer spent $.25 on single payment content in the first half of 2003.

Conclusions: The market for online content will stagnate if content sellers can’t continue to find new buyers. Publishers of general news and information are misguided if they think that selling subscriptions or archives will ever be a serious business. Meanwhile they risk conceding their core markets to free, advertising-financed competitors if they pursue it.