I checked out ChinesePod.com, and they do charge for their premium services (grammar bank, lesson transcripts and exercises). In fact, they charge $30 (USD) per month for premium services. So, they put out the hook with the free services, then offer premium services.
One of my favorite business strategies is thoroughly check out the competition, and then look for `holes` in what they providing. What`s missing from their product/service? Then I can create a better product (and I`m not talking about copying!) - and I think you can do the same!
increasing numbers of academic institutions are putting language learning resources on the web which are open to everyone
I feel you may be in trouble. If academic institutions, which are businesses within a different industry and have no pressure to create an income from that particular service and are only using it as a premium they have nothing to lose and will saturate your marke
not everyone is willing to spend that much time looking for free resources--
I feel most people are not.
It appear the industry in which you want to enter has a very ease of entry into the market place and competition is going to be tough and the market place is going to be saturated ( as you already described it).
I do feel you can find a way to market your product but you will have to be super creative, because even if you do find a nice niche what is to stop any number of the existing organizations who are already giving the service away from doing the same thing as you.
A couple possible creative marketing ideas