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Making Money Online from Intellectual Property.

Media organizations are among the masters of the Internet. Yet roadblocks remain in preventing all content providers over the Internet from building thriving electronic commerce enterprises: How to implement online transaction systems that defend against intellectual property theft, fraudulent credit card use, and costly chargebacks? How to make money on typically low cost transactions (under $20 or far less) without having profits eaten up by bank charges? How to penetrate new markets that don't necessarily have access to traditional credit cards, or that do not want to enter their credit card numbers online?

There is a telephony-based application and solution that has proven itself in the adult entertainment industry, possibly the single largest moneymaking category on the Internet. It is an application and a solution that is well suited to all content-oriented web Sites, including newspapers, magazines, book publishers, and the recording industry, making their products and services universally available.

By adopting telephony-based payment systems that charge transactions to phone bill accounts, all content providers including newspaper and magazine publishers, broadcasters, book publishers, and the recording industry can realize the same benefits that the adult entertainment business has enjoyed since the commercialization of the Internet. The result: Publishers will be protecting their interests, as well as the intellectual property rights of their content producers. And, hopefully, consumers will respond by rejecting the illegal practice of freely swapping back and forth amongst themselves copyright-protected intellectual property

Recent developments among book publishers will inevitably improve publishers of all printed material the ability to sell electronic content for two reasons: increased familiarity and improved formatting. Andersen Consulting has projected that demand for e-books will reach $2.3 billion by 2005, in the U.S. alone The proliferation of e-books will draw many thousands of readers, helping them to become more familiar and comfortable with downloading and reading text on screen. The potential already has been dramatically proven by the success of the much-discussed release of horror-maven Stephen Kings electronic novella, Riding the Bullet, last spring. Some 400,000 copies of the story were downloaded in just the first 24 hours. Since then, King came out with his next e-book experiment, The Plant, and the following challenge to his fans posted on his "Official Stephen King Web Presence" site:

"I'm committed to publishing at least the first two segments. Whether or not I publish more depends...Depends on what?...In the words of The Turtles, 'You, baby, nobody but you.' If you pay, the story rolls. If you don't, the story folds...How much? Buck an episode...flow does it work?..."

King's site provides various payment options, including credit card, check, or money order and a link to Amazon.com's payment site. Fans are also given the option of reading first and then deciding whether or not they want to pay. But if there are more freeloaders than payers, King threatens not to pen any more entries to The Plant. He encourages his fans to participate in the experiment and perhaps becoming fodder and virtual partners for a future King novel with the following enticement: "My friends, we have a chance to become Big Publishing's worst nightmare." So far, the experiment seems to be working as more than three-quarters of over 150,000 visitors to the site in the six weeks of the experiment ponied up the buck per chapter payment.

Moreover, lessons have been learned from that experiment and apparently taken to heart. Microsoft claims that it has improved its software technology making digital text easier to read. The software giant announced this past summer separate strategic alliances with Barnesandnoble.com and Amazon.com, demonstrating these companies' commitment to selling digital books. They will compete head-to-toe in this new "e-rena" with Adobe Systems, which recently purchased Glassbook, a maker of reader software and a strategic partnership. Microsoft projects that as many as 100,000 titles in digital format could be on sale as soon as next year.

Clearly, publishers of e-books as well as the recording industry, stand to maximize their margins by making their products available for purchase by teenagers. This market generally has disposable income but generally does not have access to credit cards. There is also an untapped market of consumers who prefer not to use their cards for online purchases.

Meantime, newspaper and magazine publishers have gold to mine of their own. tn addition to the success enjoyed by national papers such as USA Today and The Wall Street Journal, regional papers stand to make a lot of money through e-commerce. The selling of classified ads is natural for telephony based payment systems-low price, high volume transactions handled quickly and easily for the paper and buyer. The new medium helps periodicals reach beyond traditional revenue streams. For example, The Knoxville News Sentinel formed a strategic alliance with the University of Tennessee and sells an extensive range of merchandise related to the school's football and women's basket teams, the "Volunteers" including T-shirts, pins, mouse pads, coffee mugs, and more. From January through March 1998, the site raised more than $150,000 through nearly 3,700 sales. Now, imagine what they could have done had payment systems been available to support "Vols" fans who do not have credit cards-no doubt, including a large proporti on of the University of Tennesee's student body-plus fans who won't use credit cards online

Two questions about telephony-based payment systems that are often asked are:

1. Does making e-commerce transactions easier invite minors to access sites not appropriate for all audiences?

2. Will charging purchases to these sites to a family or company phone bill create fiscal havoc?

Better questions to ask are: Who's in charge? Why should people not paying the bills be able to get away with this? Parents rightfully concerned about minors accessing adult entertainment sites on the Internet can install safeguard software, set parameters on what their ISP will allow teens to access, and monitor their credit card and phone bills closely for suspicious charges. Also, telephony-based payment systems require relationships with local or long-distance carriers and are best suited to small-ticket items, not expensive market research studies, for example.

Publishers in alliance with one another through organizations such as Advertising Media Credit Executives Association can also learn from adult entertainment sites, effective ways to turn window shoppers into buyers. Adult entertainment sites are masters of rerouting traffic to similar sites. When a suffer finishes window shopping an adult site, there is a good likelihood they will be routed to several similar domains via pop-up windows and banner ads before exiting back to their search engine or to the previously visited site.

Curiosity being what it is there is an equally high likelihood that they will be drawn to checkout its contents and eventually spend some money. The larger site with the larger inventory pays smaller operators for sales that result in traffic directed their way. The adult entertainment industry has created for itself a very friendly but still competitive environment.

So why can't--make that, why don't--other industries employ these same billing and rerouting tactics to make more efficient use of the traffic, potential sales, and mutually beneficial strategic alliances online? If someone wants to buy merchandise or services online, but can't find what it is they are looking for at the first site visited, why make them go back to their search engine? Why make them go through the process of logging onto the next site on the list, or changing search parameters altogether? Why doesn't the web do this work for them? If they can't find what they are looking for in the archives of one publication, why not reroute them to other sites and sources of previously published information? Isn't it better to make money from sales commissions or referral fees than no money at all?

There are a host of products that more consumers would and could buy online if e-commerce offered more payment options. Enough knowledge and professional experience is known that, by and large, entering a credit card number online is safe and that the chances of becoming a victim of fraud, especially at well-known, national brand name sites, is miniscule. But now enter the small to medium-size unknown business of an author (less famous than Stephen King!) or entertainer. The consumer may be reluctant to release credit card information to these entrepreneurs without having the merchandise in-hand or without knowing the quality or value of their content. For the small to medium-size e-merchant, getting authorization to accept credit cards online can be a hassle or not sufficiently cost-effective to justify merchant fees.

Also, the likelihood of credit card fraud is greater with international transactions. It is virtually impossible to verify the status of overseas issued credit cards when presented online and so most online merchants don't even bother; they just run the risk and, sometimes, pay the consequences.

Offering telephony-based payment options in addition to traditional bank issued credit cards will give the media industry more control over new markets, as well as over losses stemming from fraudulent transactions. Or, it can continue to hear the "ker-plunk" sound of window shoppers leaving without buying, instead of the "ker-ching" sound of the virtual cash register!

Montgomery "Monte" L. McIndoe is Chief Operating Officer of Global Internet Billing US.
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Title Annotation:charging online purchases to phone bill widens customer base
Author:L. MCINDOE, MONTGOMERY "MONTE"
Publication:Business Credit
Geographic Code:1USA
Date:Oct 1, 2000
Words:1542
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