A Slovakian Start-Up Looks to Cable for Its Media Model

International Herald Tribune

Piano Media, a small Slovakian start-up that begin in May last year, has lofty ambitions to transform online media publishing.

Offering online publishers a way to monetize their Web content, Piano brings individual publishers together into one payment system, giving viewers a way to pay once to access exclusive content across a range of Web sites.

“It’s like cable TV,” said David Brauchli, Piano’s communications director. “We did research and found about 50 percent of people don’t mind paying for online content as long as it’s convenient and affordable.”

Starting with nine publishers, operating 40 Web sites, the company generated more than €40,000, or $50,000 at current rates, in its first month. In January it expanded into Slovenia, linking up with another nine publishers. The Slovenian business brought in revenue of more than €26,000 in its first month.

Publishers pay nothing to join the platform. Piano’s business model is to take 30 percent of subscription income for creating and managing the pay wall and payment gateway. The publisher of the site that brings in the subscription takes 40 percent while the remaining 30 percent is distributed among the publishers in proportion to the time spent by the subscriber on their sites.

“We employ a chronological meter algorithm which calculates the amount of time and content you consume, so money is divided between Web sites based on the content and its value,” said Mr. Brauchli. “Publishers are rewarded for good content.”

Matus Kostolny is editor in chief of SME, the largest daily newspaper in Slovakia. The paper joined the Piano system when Piano started, introducing a pay wall for the first time.

“We believe paid online content could be, in the future, one of the solutions for media,” Mr. Kostolny said in an e-mail from Bratislava. “We knew we needed to teach our online readers that behind these stories published online is a lot of human work and they should not be for free.”

SME has chosen to place opinion pieces and exclusive stories behind its pay wall. Mr. Kostolny says it also chooses how long each article remains locked.

“Some articles are locked forever. Some stay in that status only for hours,” he said. “Actually, we publish our best news stories online earlier than in print, but those stories stay in Piano until the print publication.”

Mr. Brauchli said relatively little content over all goes behind the pay wall.

“In Slovakia, 10 percent or less of a Web site’s total content is in the system. In Slovenia it’s 15 percent,” he said. “We recommend monetizing exclusive content, investigative reporting, video, instead of general and spot news which will be found all over the Web.”

In April, Piano announced a €2 million investment from 3TS Capital Partners. Monogram Ventures, Etarget and NextBig were the original partners who supplied the company’s €300,000 seed funding. The new money will be used for further expansion, new software development and increased marketing.

“Like any start-up, Piano has a high cash burn rate right now. The investment will help stabilize that, but also enable us to hire more people to refine programming, marketing and improve services,” said Mr. Brauchli. “We are also researching more markets to see which will be next.

“We’ve done two small, quite similar countries; revenue-wise, they are about the same so people are curious as to what’s next,” he added. “Two more markets will be opened by the end of 2012 and each one will prove a different set of realities on how paid content systems work.”

Piano’s system is intriguing because it has managed to bring competitors together. Many publishers are making the switch from free to paid online content, but most who do so have begun charging for their own content individually, using platforms like Press+.

Mr. Brauchli said that may work for large publishers, able to generate enough content to make it reasonable to ask people to pay for it.

“Slovak publishers don’t have enough content to set up their own pay wall,” he said. “But by grouping together they bundle all that content, and it is enough to make it worthwhile for consumers to pay for it.”

Robert Andrews, senior international editor at paidContent, a Web site covering paid content business models and technologies, said Piano’s biggest coup was corralling the publishers.

“They pulled off a neat trick in bringing together competing publishers. That wouldn’t be seen in markets like the U.K., where it is more competitive,” he said. “It’s interesting Piano has gotten around the problem by not forming a joint venture, so it doesn’t warrant attention from competition authorities. If Piano becomes larger though it might attract such attention.”

Mr. Andrews said he saw three tiers of countries for Piano’s future expansion.

“Tier one is the smaller Internet markets like where they are, Serbia, Czech Republic,” he said. “The second tier is larger European countries like France, Belgium, Netherlands, where there’s a higher degree of publisher cooperation and publishers are already considering doing the same thing. The third tier is the more difficult larger countries like the U.K., U.S., where there’s competition concerns, but also larger publishers that can supply their own payment system.”

Piano has made small, encouraging steps in monetizing Web content but may find larger markets more challenging, he added.

Mr. Brauchli said educating both consumers and publishers was a slow and steady process.

“The thing about payment systems is, after not paying for 15 years, you need to change people’s mind-sets,” he said. “Also, publishers have unrealistic expectations, they think a pay wall will instantly bring in a lot of money and all their revenue problems will disappear.”

In reality, “it takes time,” he said. Still the pay wall system “isn’t going to go away and it isn’t that expensive.”

In Slovakia a monthly subscription costs €3.90; in Slovenia, €4.89.

Perhaps surprisingly, Mr. Brauchli said publishers should look to rising online advertising rates to keep the industry alive, rather than relying on online subscriptions.

“Historically newspapers were always supported by advertising and subscriptions only accounted for a little bit,” he said. “This is the same.”