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Summary:

Fans of newspaper paywalls like to roll out a number of defences for their position, including the fact that other content industries charge for access to what they produce, and therefore newspapers should be able to do likewise, but this isn’t the case at all.

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Fans of newspaper paywalls like to roll out a number of defences for their position, including the fact that some publications — such as the Wall Street Journal and the Economist — charge for their content, and therefore, every newspaper should be able to. Another popular rationale is that other content industries charge for access to what they produce, and therefore, newspapers should be able to do likewise. The latest version of this argument appeared in an op-ed piece in the Wall Street Journal written by TV writer and host Peter Funt, entitled simply “Customers Will Pay For Online Content.” The important point to remember, of course, is that the type of content has a lot to do with whether people will pay.

One of Funt’s main examples is HBO, the subscription TV service he says revolutionized the television business by proving that viewers would actually pay for TV content — material they were previously used to getting for free over the airwaves. He also mentions that consumers have shown a growing appetite for buying old episodes of TV shows, first on videocassette tapes and then on DVD, and that radio listeners have also signed up for subscription-access services such as XM Radio. Funt says:

virtually all trend lines in recent communications history have moved, with success, from free distribution to some form of pay model. The viewing and listening public has demonstrated repeatedly its willingness to spend for content, so long as there is some degree of perceived value.

Funt isn’t the only one to turn to HBO for evidence that paywalls could work for newspapers. David Simon, the widely admired creator of The Wire television series and a former Baltimore Sun reporter, has argued much the same thing. But, the flaw in this argument appears in Funt’s own description of why HBO succeeded in charging viewers for TV content: He says that “much of the fare, such as recent movies, concerts and high-profile sporting events, was unlike anything available on ‘regular’ TV.” In other words, it provided something completely different, and thus worth paying for.

A similar argument could be made for much of XM Radio’s content as well. Both XM and its former competitor Sirius Satellite Radio paid millions of dollars to radio jocks and commentators such as Howard Stern to get them to appear exclusively on satellite radio (it’s worth noting that both companies also lost hundreds of millions of dollars and wound up merging in 2008). In other words, the content was unique and different — and satellite radio also arguably offers convenience of access and higher quality compared with terrestrial radio (DVD versions of TV shows could be seen in this way as well). Can we say any of those things about the paywalled content offered by newspapers?

As Funt notes, News Corp. has recently launched a paywall at two of its newspapers — the Times of London and the Sunday Times — (with a fairly predictable effect on readership), and the NYT is preparing to launch a paywall based on the “metered access” model used by the Financial Times. Other newspapers that have launched paywalls include Newsday in Long Island and several papers in the Gannett chain. In many cases, however, these experiments seem aimed as much at keeping existing readers of the printed version as they are at extracting money from online readers.

The problem with both of Funt’s examples — HBO and satellite radio — is that they offered something different, something new enough or unique enough that it made what they were selling qualitatively better or more valuable. Some newspapers (including the New York Times, with Times Select) have tried putting content from columnists or features or special sections behind paywalls, and had little success over the long term. The reality is that most of what newspapers offer is a commodity product, something that has a relatively short shelf life and therefore is difficult to sell as unique or different. Until newspapers solve that problem, their paywall attempts are likely doomed.

Related content from GigaOM Pro (sub req’d): What We Can Learn From the Guardian’s Open Platform

Post and thumbnail photos courtesy of Flickr users Giuseppe Bognanni and Daniel R. Blume

  1. I’d have to say that I disagree. My biggest problem with this argument is the assumption that this information is abundant. In most markets (NYC, LA & Chicago are NOT typical markets), residents rely on local media to report on local government issues, schools, sports, etc. If that’s not something “completely different” from the news that they can find in other places, I don’t know what is.

    While I realize that the user base will shrink, at least it will consist of people who really want that information. That’s the group that a newspaper should want on a site anyway, one that has an active interest in the content, not people who digest it just because it’s there.

    The fact remains: Somebody has to foot the bill for the information gathering, or else noone will gather it. Why do you think there are rights given to the press? Because they need to uncover truths that people don’t want exposed. They need access to what people want to know about, so they can distribute it.

    So, I pose this question: Why shouldn’t the people who want this local news be the ones who pay for it to be gathered? They can demand better coverage if their finances sustain the site, or can choose to spend their money elsewhere and let the community go uncovered – but either way, THEY made the CHOICE rather than the DEMAND for free information.

    The sad thing is that many of the resources that news organizations use are available to the anyone who wants them. Many government documents are public records. There lies the issue, most people don’t know how to, much less have the patience to sift through mundane information in hopes of finding something that may impact them. Instead, they want it spoon-fed. They want to get to the punchline without listening to the whole joke.

    Most news does not lie on the surface, they take countless hours of work, interviews and investigation. Many stories never make it to print – and that’s OK, because there’s always something else that’s important waiting around the corner.

    Take the recent developments in Bell, California, where the city manager was being paid nearly $1 million a year, nearly quadruple the state average, among other highly paid government offices. Now, some of the officials involved have resigned and the state will likely reform government salaries. I beg you to find a resident of Bell who wishes that they didn’t know this was how their tax money was being spent.

    This same issue happens in communities around the country – people who don’t know how to hold their school districts accountable, who don’t spread the message about a criminal at large, who cut out photos of their son’s baseball game.

    They want the information, but expecting it for free just doesn’t add up in my book.

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    1. Re: The local news issue; this is being addressed by some of the hyperlocal news sites that’ve started proliferating recently, including Patch, Topix & others. No question, they have a long way to go but I think these sites have the potential to capitalize on this market and provide information at an even more granular level than local newspapers in those non-major-market areas.

      Clearly, news agencies serve an important role but the newspaper industry has left itself exposed to competition from new outlets of information; outlets that play by a different set of rules & have different standards in both their reporting and revenue models. Some of those are content aggregators and portal sites that do nothing but compile but many are digital news producers like The Huffington Post & Business Insider that do in fact produce their own content & conduct those same interviews/magazine-length pieces as the mainstream media; just at a much faster rate.

      The bloated office staffs & easy work days indicative of industries insulated from competition are over for the newspaper industry but that doesn’t mean they still can’t put out a quality product and generate alternative streams of revenue. I think where paywalls do have the chance to succeed is in the medium where content is delivered; particularly in mobile, where many papers are selling fee-based apps at a price point low enough to entice people who want an easy way to get that information. But as the author indicates, the failures associated with past implementations of web-based paywalls make me believe the same fate awaits those who try the same thing today.

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    2. That’s a good point, Matt — and I think that for those kinds of reasons, the one place pay-for-content models might work is the hyper-local, even if it is a “tip jar” type of approach. Thanks for the comment.

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  2. Newspapers can have content you can’t get anywhere else: it’s called a scoop.

    Unfortunately, many newspapers now have newsrooms that are a fraction of their former size and don’t go after scoops anymore.

    But I’m tired of the paywalls arguments. Let newspapers experiment with paywalls; it gives them more options on how to make money. The future of newspapers will depend on a “Heinz 57″ model – many different sources of revenue.

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    1. Thanks for the comment, Tom — has anyone tried charging money just for scoops? They have a short shelf-life as well, and are a lot fewer in number than most newspapers would like to think. I agree that experimentation is good though.

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  3. [...] is a paywall and getting people to pay for news content. Unfortunately as highlighted here and  elsewhere, it probably won’t work. It is so hard to charge people for something when they are used to getting it for [...]

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  4. Thanks for offering many interesting thoughts on this “pay wall” topic. I’d argue that The NYT offers more “unique” material than, say, XM Sirius — from Bob Herbert, to Frank Rich, to David Carr, to…well, the list is very long, much longer than any list with Howard Stern on it.

    It’s quite true the Times failed with its original pay wall, but that was primarily because it hoped for new online customers, when, in fact, the goal for newspaper publishers at this point is to retain a base of paying subs (in the NYT case about a million), and to do that requires protecting the unique content by not giving it away free. I’ve written about this at: http://www.FuntonFronts.com.

    Anyway, I’m pleased to have helped stir the pot. –Peter Funt

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    1. I agree that most paywalls are aimed at protecting the paying subscriber base, Peter — I’m just not sure that’s a wise strategy. It’s fundamentally a protectionist sort of approach rather than something that encourages growth, and that makes me uneasy. I also think Times Select didn’t work because not enough people thought that the content was unique enough to pay for, regardless of what you or I or the NYT thinks of it. Thanks for the comment.

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    2. Rurik Bradbury Tuesday, August 3, 2010

      The problem today is a massive misalignment of resources. A big news story may have ‘2000 articles’ listed by Google News on that subject — which was fine when there were 2000 geographies with one newspaper each, but is a problem now there is only one geography, the internet.

      The NY Times should focus on being one of the ‘last men standing’, so when those 2000 outlets are whittled down to 20 in a couple of years, the NY Times has the best write-up.

      My suggestion: give away content for free in exchange for highly-granular demographic info from readers.

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  5. Headline news has become a commodity, pure and simple. Putting up paywalls won’t have people paying for headline news, it’ll just have them looking elsewhere.But behind all the paywall tricks and traps newspapers may come up with, ultimately they will have to develop some sort of content strategy that will make me want to pay for their content. Headline news is great, OpEds are great… but what else you got?

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  6. If a newspaper site wants to put up a pay wall, I’ll pretty much leave the site and go find someone else’s take on the story. Which in about 90% of all cases I’ve experienced is quite easy (especially since Google news will link multiple sites that have a story on a particular topic).

    Rather than complain about the paywall and argue if it’s going to be successful, why not vote with your wallet? If you hit a paywall and don’t want to pay, then leave the site. Trust me, when they start losing money, they’ll start paying attention.

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  7. Having read a few other posts on the topic, I beginning to suspect GigaOM just doesn’t get it.

    Real journalism is in short supply and getting increasingly rare. That’s of great concern in a democracy, where the “forth branch of government” serves as the citizenry’s front-line eyes and ears for uncovering corruption and abuse of power.

    There’s an old saying that GigaOM has apparently forgot: “you get what you pay for.” It’s perhaps the expectation that information should be free on the Internet that has left news rooms without a valid business model and the cash the produce relevant original content. “Commodity”-like reporting is a symptom, not a precondition. I subscribe to the Wall Street Journal and my local paper because the quality of reporting, the content, analysis, commentary, etc., simply can’t be matched anywhere except by their online sites. If one day I decide to entirely forgo hardcopy, I’ll gladly pay a fee to support the kind of professional journalism that our best news organizations practice.

    What I would like to know, if paywalls are a dead business model, what content does GigaOM Pro have that makes it a viable business model for GigaOM Networks?

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    1. Thanks for the comment, Ray. I agree that journalism needs to be supported, I just don’t think that paywalls are the best way to do it. And while you and others are happy to subscribe, there don’t seem to be enough of you to keep everyone going. As for GigaOM Pro, what we try to do is take the news (which we provide for free) and add analysis and context in a longer format that provides value readers are willing to pay for.

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  8. I have no strong opinion on whether paywalls would work or not, and I think that both sides of the argument offer more moralizing (“I deserve to be paid for my content!” vs. “I deserve free content!”) than any sort of attempt to grapple with the reality of whether there’s any way to sustain the current economics of content creation. But, since TimesSelect was brought up in this conversation, I have to say that that was a terribly misguided example of a paywall, for reasons that media people by and large still don’t get.

    For a paywall to work, it has to be charging for things that people value in a literal, monetary sense, because they can’t get it elsewhere for free. So what did the Times do? They charged for opinion — the one thing that already exists for free on the Internet in almost infinite amounts. This almost certain reflects the Times’ own internal heirarchy — you don’t get coveted op-ed page space unless you’ve spent years as an established journalist or thinker, and surely the opinion writers are among the best paid people on the NY Times staff. But any jerk with a blog can be David Brooks or Maureen Dowd — or at least a close enough facsimilie that the vast majority of the population wouldn’t pay for David Brooks or Maureen Dowd.

    Meanwhile, the Times was giving away for free reportage from places like Iraq or Afghanistan, where the number of English-language reporters on the ground can probably be counted on two hands. It’s madness, and it indicates a terrible insularity.

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    1. That’s a good point, jfruh — commentary is not in short supply on the Internet :-) I wonder what kind of response the NYT would have gotten if it had charged for foreign-news reporting of the kind you are describing. I’m not sure it would have had any more success, unfortunately — the shelf life for that kind of thing is so short. But I could be wrong.

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  9. It’s unfortunate to see the paywall debate go on and on so unnecessarily. The content business (including newspapers) has widely always been behind a paywall, and that’s been consumer/user — not business — driven because good content costs money to make. Research it over any platform across history. I have. You’ll see what I mean.

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  10. Of course! When you have a unique and high quality product, people will pay a premium for it. When your product becomes relatively common, alternatives of comparable quality abound, and said alternatives are widely available for free, people aren’t going to pay anymore.

    The value of news delivery collapsed. The value of news aggregation collapsed. The value of opinion pieces collapsed. The value of newspaper advertising collapsed. The value of virtually every facet of “a newspaper” dropped, in many cases to 0. One exception, professional journalism, still has immense value, but it alone can’t support a complacent beast.

    The newspaper used to be our window to the world. Now, Google is the window to the world, and to news.

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    1. I agree, Jack — news aggregation and delivery used to be the exclusive domain of newspapers, but now there are so many other ways of accomplishing that. They have to figure out how to make the other parts of what they do pay, and that is not an easy problem to solve.

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      1. Rurik Bradbury Tuesday, August 3, 2010

        But you’re assuming that these big general news organizations will continue to exist. The buggywhip makers all died out (I don’t think any of them transitioned into automobile-makers).

        I suspect there will be a few larger survivors — much slimmed-down — who finally have some leverage to charge, or enough readers to subsist on ads. But until then, there is no way to ‘make people people pay’. That’s a pipedream, because you can’t sell a commodity at prices higher than market value (which is zero, for general news).

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