Spending on Paid Content Climbs 14%

Posted on December 28, 2004

The Online Publishers Association (OPA) has released its Paid Content U.S. Market Spending Report covering Q1 and Q2 of 2004. The study, conducted by comScore Networks, determined that consumer spending for online content in the U.S. grew to $853 million in the first half of 2004, an increase of 14 percent over the same period last year. The share of online consumers in the U.S. who paid for Web content in Q1 2004 grew to 11.2 percent before falling slightly to 11.0 percent in Q2 2004. comScore Networks calculated the results of the study by passively and electronically monitoring the actual purchase and usage transactions that took place during the analysis period within its representative panel of more than 1.5 million U.S. online consumers.

Entertainment/Lifestyles overtook Business/Investment content as the second largest paid content category in the first half of 2004. Spending in the Entertainment category -- fueled primarily by growth in the music segment -- grew to $182.8 million in the first half of 2004, a 78.3 percent increase over the same period last year, making it the fastest growing paid content category. Sports (which includes fantasy games) and Games also showed strong gains of 68.7 percent and 27.4 percent, respectively.

"For the first time ever, growth in paid content spending was fueled primarily by consumers using the Internet for entertainment and for fun," said Michael Zimbalist, president of the Online Publishers Association. "This supports a growing body of evidence that consumers' use of the Internet is evolving far beyond functional activities. We believe that online entertainment will continue to grow as broadband proliferates."

While Personals/Dating held its position as the leading paid content category, with U.S. consumers spending $227.9 million in the first half of 2004, spending on both Personals/Dating and Business/Investment content registered slight declines in each of the last three quarters since peaking in Q3 2003. The declines in Personals/Dating reverse a two and a half year period of rapid category growth.

In the first half of 2004, 90 percent of paid content revenue came through subscription sales -- the highest percentage yet recorded -- driven by a significant shift from single purchases to the subscription model in the Games, News and Research categories.

While a significant portion of spending in the Games category still comes through single purchases, the portion of category sales attributable to subscriptions has grown dramatically over time, up from 48.4 percent in 2002 to 65.3 percent in the first half of 2004.

According to the report, monthly subscriptions accounted for 54.4 percent of total subscription revenues in the first half of 2004 versus 46 percent in the same period last year, as growth in monthly subscription revenue continues to outpace annual subscription revenue growth.