Hooked on free Web services? Prepare to pay

Free access to e-mail, bank accounts and networking sites -- now taken for granted -- may soon be a thing of the past.

April 05, 2009|DAVID LAZARUS

The Web is a great place to freeload. But that could be changing.

In the latest example of fees being introduced for a service that once came with no strings attached, Eastman Kodak Co. says it'll begin charging $4.99 to $19.99 annually for its previously free online photo-storage service, Kodak Gallery.

If you don't pay by May 16, the company warns, all your photos could be deleted.

"This puts people in a very difficult position," said Joe Ridout, a spokesman for the advocacy group Consumer Action. "This isn't just any commodity. These photos represent very important, emotional memories for a lot of people."

In other words, you'll pay to protect those memories, at least if you want to stay with Kodak. Or you'll start storing photos yourself on CDs or hard drives (which you probably should have done all along).

I can't fault Kodak for charging a fee for a service that has obvious costs involved. It may be cheaper than ever to store images in digital form, but the company still has to maintain plenty of computer hardware to allow users to access their snapshots worldwide.

If anything, Kodak's move makes me think about all the ostensibly free services I take for granted online -- and how vulnerable I and millions of others would be if those service providers decided to charge for what they offer.

For example, I've switched all my personal e-mail to the leading webmail providers -- Gmail, Yahoo and Hotmail. I got tired of sending out updated addresses each time I switched Internet service providers, and it's just a whole lot more convenient being able to access my e-mail anywhere.

I used to carry around an appointment book and an address book. Now my calendar and contacts are also online, for free, thanks again to the likes of Google and Yahoo.

Online banking, online bill paying, online access to brokerage and mortgage accounts -- these too have become routine parts of my life.

And I'd like to think that everyone from Yahoo to my bank would want to keep offering these free services to keep me as a loyal user-customer. But recent history isn't on consumers' side.

When ATMs were introduced, there were no fees associated with using them. The banking industry wanted people to be comfortable with the idea of dealing with a machine rather than a costlier human being.

Beginning in 1988, however, banks started tacking on surcharges for ATM users with cards from other networks. Other fees followed -- for telephone transactions, check cashing, even just for speaking with a teller or receiving canceled checks in the mail.

Why should the Internet be any different?

Craigslist once allowed users to post all listings for free. Now it charges fees for job openings in various cities, New York apartment rentals and erotic services.

Basketball superstar Kobe Bryant is now charging a $49.95 membership fee for his recently relaunched website, The fee provides access to Bryant's blog, message boards and other features.

So it's hard not to wonder: When will my bank start charging a monthly fee for online bill paying? When will Google, Yahoo and Microsoft begin charging for access to e-mail, calendars and contacts?

Surely Facebook and Twitter, with their millions of users, could get away with some sort of fee structure, just as Club Penguin, a popular kids' site, charges for upgraded capabilities.

"I'm surprised there hasn't been more of a transition to fees," said David Reibstein, a professor of marketing at the University of Pennsylvania's Wharton School. "There's a cost to all these services, and an increasing number of service providers are discovering that they can't do this for free."

In most cases, he said, online service providers aren't engaging in a bait-and-switch. They offer their free services with the best of intentions but later realize that ad revenue is insufficient to keep operating.

"The only reason they introduce fees is because they can't figure out a better business model," Reibstein said.

In Kodak's case, you almost have to feel sorry for the company. Digital technology upended the camera-film business even more than it hammered the newspaper industry. Online photo storage and processing must have seemed like a sensible niche to pursue.

But many Kodak Gallery users preferred keeping free photo albums online to having prints developed or CDs burned. So Kodak now requires at least $4.99 worth of purchases annually for people storing 2 gigabytes or less of pictures at the site, and $19.99 for those storing more than 2 GB.

"If you do not meet the applicable minimum purchase requirement, your photos may be deleted," the company told users.

Mark Cook, director of product marketing for Kodak Gallery, said the site warehouses about 5 billion images, costing the company tens of millions of dollars a year in storage expenses.

He said "a significant amount" of the site's 70 million members don't pay for any extra services. They use it solely as an online photo repository.

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