Because One Paywall Sorta Worked Very Briefly Many Years Ago, Free Is A Joke

from the interesting-theories dept

Mon, Jun 7th 2010 6:46am — Mike Masnick

Pickle Monger points us to this hilarious and uninformed piece by Sean Coughlan, at the BBC, which talks up the brilliance of paywalls and mocks the "digital hippies" who believe in free. Amusing, of course, that he's writing this for a free online publication. Damn digital hippy. Coughlan uses a single anecdote to prove paywalls work. Apparently, back in 1997, he worked for Rupert Murdoch and a digital group that, very briefly, offered a fee-based service for The Times (which is now going under its new paywall). And some people paid. That's about all the details we get. There's no indication of how many people paid. There's no indication of how much they paid. There's no indication of how much the service cost to run. There's no indication of what the competitive landscape was at the time. But because a few people sent in checks (ok, it was the UK, so "cheques"), paywalls are a brilliant success, and those damn digital hippies (you know, the ones who understand basic economics like supply and demand and marginal cost and price) ruined it all.

To support his position, he found an equally uninformed journalism (not economics) professor named Tim Luckhurst, who used to be an editor at a newspaper:

"It was an entirely irrational decision. We were wrong," says Tim Luckhurst, now professor of journalism at the University of Kent and former editor of the Scotsman. He is referring to the struggle to replace subscription revenue with that created by advertising. "It was a huge mistake. But we were all guilty of believing in the myth," he says.

Except, of course, as has been pointed out time and time again, subscription revenue has never paid for content. It's hasn't even covered the cost of materials and delivery in your average newspaper. The content has always been paid for by advertising, and you increase your advertising by increasing your viewership. The real mistake by newspapers wasn't that they didn't put up a paywall at the beginning, but that they didn't do much to actually engage their community. They just took their static newspapers and moved them online. But they didn't realize that they had always been in the business of selling the attention of their local community to advertisers. The problem was that in the online world, that local community had other options, and newspapers failed to do much to keep them.

This is one aspect that I expect we'll explore at the Techdirt Saves* Journalism event -- not just business models and what works, but actually engaging your community (and that means more than just putting up a comment form).

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Filed Under: evidence, journalism, paywalls

26 Comments

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Ima Fish (profile), 7 Jun 2010 @ 6:56am

If this paywall did work back in 1997, why did they ever stop doing it?
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Tom, 7 Jun 2010 @ 7:05am

Times Educational Supplement
The paywall was for a specific thing that the Times does: Times Educational Supplement. Its the sort of thing that could have worked with a paywall and still could in that it is ( a far as i know having never read it) a topic specific thing that no one else does.
But that does not mean that normal news will survive a paywall - i dont think it will. And thats where this article goes wrong.
But Murdochs either being very stupid or he has a cunning plan - like he will use this failure to put the boot into the BBC somehow.
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Dark Helmet (profile), 7 Jun 2010 @ 7:07am

Question for Mike...
Since, I can't attend the TechDirt Saves Journalism event:

While economies as a whole are not a zero sum game, can it be said that for all practical purposes advertising revenue ACTS like a zero sum entity when considered in a relatively short period of time? Like say a year or even five years? It seems to me that there is only so much advertising revenue to go around. Which leads me to my second question:

Does the possibility exist that an unintended consequence of advertising based online media will be massive and tightly controlled online media groups? It seems to me that one of the reasons ad based free industries made it, like television and to a lesser extent pre-new mellenium newspapers, was because they were so massively large and limited. Prior to cable, you had only a handful of channels in a given nation. Cable expanded that, but certainly not to the extent that the internet does for media.

If the market insists on free online media content, do we all run the risk of having more limited choices for online content providers on the internet the way we have it on television and had it in traditional newspapers? I don't argue with you on the economics making sense, but I do fear media monopolization of the internet due to the nature of ad-based business....
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Trails (profile), 7 Jun 2010 @ 7:21am

Unasked question
If the paywall worked so well, why'd they stop it?

The article claims "Word filtered down from above that there was a new idea in town. It was called giving it away for nothing."

Bullshit. Companies, least of all ones run by Murdoch, don't give up revenue without a plan in place. So what was it? Coughlan ascribes this to "digital hippy" media consultants with a "dot-com philosophy", but that's simple rhetoric from someone who clearly doesn't understand (or chooses to ignore) the economics of the situation.

So what was the plan? Why ditch the paywall? Why add one now? Without these pieces, this article comes as off as simple "get off my lawn" type kvetching from a "right to revenue" believer.
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John Doe, 7 Jun 2010 @ 8:04am

I am slow at times but I eventually get there...
It finally occurred to me that since subscription fees didn't even cover the cost of printing and delivery, their attempt to charge for what is essentially free printing and delivery is ludicrous. The real problem for papers is online ad revenue is way less than print ad revenue. So since they use to be able to charge for the paper they think they still can.
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ethorad (profile), 7 Jun 2010 @ 8:10am

The BBC isn't "free"
Coughlan doesn't work for a free online publication - it's just free to you guys outside the UK. I have to pay £145 ($200) a year so that you can read Coughlan's poorly thought out diatribes!

Having said that, even if the £145 was optional* I'd still pay it as I value what I get from the BBC.

(*yes, I know it is optional. I could get rid of any TV signal receivers and only watch prerecorded DVDs.)
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out_of_the_blue, 7 Jun 2010 @ 8:16am

Does advertising *actually* pay the freight?
Or is that just a *myth* that newspapers and ad agencies peddle as *their* way to skim money from a complex system? It's certainly true that (for an actual product) adverising doesn't guarantee it selling, nor does lack of advertising mean lack of sales. So the premise here needs to be evaluated for each case, seller, or product.

Look at the big picture and see this notion scales well: for big companies and big products (say, automobiles, everyone knows them), does advertising actually work even to shift purchases from company F to company G, when Japanese companies N or T have better vehicles cheaper? -- Or is the whole area of high priced ad agencies and over-paid executives just a cozy private club of mutual schmoozing and expense accounts that doesn't actually contribute to the bottom line? Executives will pay any amount out of the corporate account to enhance their own prestige; advertising is a splashy way of *appearing* to be doing something.
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Chronno S. Trigger (profile), 7 Jun 2010 @ 8:27am

Re: Question for Mike...
I think the idea behind advertising is; the more people see your product the more people buy your product. The more people that buy your product the more money you have to spend on advertising. The more money you spend on advertising the more people see your product.

Maybe if you just look at the first cycle then it's a zero sum game, but once it starts cycling, it's not. And, that only takes into account once source of advertising. Any media could have multiple.
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out_of_the_blue, 7 Jun 2010 @ 8:36am

Re: Does advertising *actually* pay the freight?
I see a took a little jump there, let me fill in: I'm asking whether the *whole* notion of advertising is going to work in our new modern age. It did when sources and companies were few, but will it still work when the cost of advertising doesn't drop much (or so they hope), and the number of places to advertise increases daily? Those advertising are only going on a *myth* that advertising *works*.
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Anonymous Coward, 7 Jun 2010 @ 8:48am

"This is one aspect that I expect we'll explore at the Techdirt Saves* Journalism event -- not just business models and what works, but actually engaging your community (and that means more than just putting up a comment form). " - back to selling lots of t-shirts? most of the business models that you have pushed here that work for newspapers involve not really being newspapers anymore, but being seminar hosts, or making personal appearances.

what i find really odd is that people are (according to the post above this one) reading and consuming more, yet the companies and individuals who produce the content are suppose to do it for free. i am amazed that you cannot see a basic supply and demand issue that says free isnt the answer.
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Modplan (profile), 7 Jun 2010 @ 9:07am

Re:
I am amazed at the amount of time you spend on most Techdirt posts making crap up about what Mike has said, what others have said, and ignoring any prior discussion that has happened at Techdirt, including the ones you've been involved in.
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Richard (profile), 7 Jun 2010 @ 9:12am

The problem is the advertising
Advertising has changed. In the old days a few large organisations paid a lot of money to put a few big ads in a mass circulation newspaper and the newspaper made a lot of money. These days Google uses technology (sometimes a little intrusively admittedly) to send very targeted ads from a large number of advertisers to specific individuals. The fees are individually small - but Google uses tech to handle this system - and makes a lot of money.
That business was available to newspapers in 1997 - Google was not there yet. They failed to take the opportunity. They have no-one else to blame.
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Garrett, 7 Jun 2010 @ 9:13am

Re:
Supply and demand is exactly the point. Demand may be high, but the supply is overwhelming. How many decent blogs/sites/portals exist online for someone to find news or information....Hundreds of thousands? There is always something else to fill a need of a user, and its only a few seconds away. In that ecosystem, a site needs to retain and recruit as many visitors as possible to get their page views and ad revenue.

You decry the view that content is suposed to be free. Very few believe is MUST be free, just that free is the best business option. A site is enirely welcome to charge for their content. But in a sea of free competitors, it had better be damn sure the content is unique and worth it, and be damn sure the masses can even find it. Meanwhile, the "free" site is getting 5 million visitors a month and making 3K in ad revenue daily.
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DocMenach (profile), 7 Jun 2010 @ 9:22am

Re:
what i find really odd is that people are (according to the post above this one) reading and consuming more, yet the companies and individuals who produce the content are suppose to do it for free. i am amazed that you cannot see a basic supply and demand issue that says free isnt the answer.

He has never said that the companies and individuals who produce the content need to do it for free. You pulled that out of nowhere. He has said that the companies and individuals are best off finding better ways to monetize the content, and that most of their current ideas of monetizing their content are shortsighted. Radio and Broadcast Television never charged the end user. Newspapers and Cable TV made most of their money from advertising, not from subscription fees. Why should it be different for internet distribution?
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Anonymous Coward, 7 Jun 2010 @ 9:27am

Re: Re:
"Radio and Broadcast Television never charged the end user. Newspapers and Cable TV made most of their money from advertising, not from subscription fees. Why should it be different for internet distribution?" - xm sat, hbo, ppv movies, premium movies,m subscriptions, delivery, magazines... i could go on. safe to say that there are plenty of "user pays" or "user supports" models out there in the field.
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Anonymous Coward, 7 Jun 2010 @ 9:30am

Re: Re:
supply is limited and getting more limited by the day as news organizations stop sending their own reporters to cover stories and instead rely on pool reporters or wire services for coverage. most of the actual coverage is being replaced by talking heads spewing opinion (sort of like techdirt) rather than anyone actually trying to get the story or making the stories relevant for the readers / viewers. the ratios of op-ed and opinion columns to actually content is very far out of whack now.
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sinrtb, 7 Jun 2010 @ 10:12am

Re: Re: Re:
your fail derives from the fact that you are using anecdotal evidence to counter empirical evidence.

Go to any newstand and count the number of magazines without adverts vs those with.

Count the number of channels with commercials vs the number of channels without.

And then you will be better prepared for your own question "Why should it be different for internet distribution?" the answer given based on data would be, that currently it is not. There are few paywall sites compared to the number of ad supported sites. However given the current state of the ad-based vs the subscruiption based business models then you can see that this is un-surprising, and changes nothing as media transforms from print to online.
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Anonymous Coward, 7 Jun 2010 @ 10:13am

Somewhat amusing, since Mike puts up "reg-walls" for some content that also easily could be free. Except you are selling your personal information, something I'm less likely to give up than money.

I don't understand techdirt's aversion to paywall experiments. Some work (consumer reports and Wall Street Journal,) and most don't. Why not rag on how horses are an outdated mode of transportation and cowboys need to get with the time and get ATV's?

Seems like a rant that has gone on way too long and way past due. It's cliche now to see techdirt continue this tirade.
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Allen Harkleroad (profile), 7 Jun 2010 @ 10:53am

Paywalls
I've had great success with a Paywall on www.poserworld.com, we've been charging for access to our 3D content for about 10 years. Of course what I have available are scarce goods (digital content) that cannot be obtained elsewhere.

I also tried a Paywall on Designer Today (graphic design magazine) and met with only a small success and eventually abandoned the charge for access to our premium content.

It all boils down to the fact that if what someone is charging access to can be found elsewhere for free, then a Paywall isn't going to be profitable. Until newspapers find something of substantial value to provide to paying customers then they are doomed to failure by charging for access.

Just my .02
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Garrett, 7 Jun 2010 @ 10:57am

Re: Re: Re:
I can see the argument that as the amount of news sources grow, the amount of stellar reporting would shrink as a percentage of the whole. I don't necessary subscribe to that belief, but understand it.

But the same could be said of changes in journalism throughout history. From no newspapers...to a few....to many. From 3 nightly news hours to 40 cable news networks. From no internet to where we are now. While there may of course be differences, increased access to info cannot be considered a detriment to society. Isn't being exposed to multiple viewpoints the beauty of the information age? Whether individuals decides to persue those viewpoints is a different topic alltogether, and I would think more in the realm of psychology than business models.

Also, I don't believe that major news organizations not sending out their in-house reporters to events somehow diminishes the flow of news out of that event. With the internet, every local resident and local news crew can get info to the whole world instantly via blogs, twitter, facebook, local sites, email, youtube, google news, digg, etc. If it is relevant, the nation will find out about it. And hear it quickly, and from more sources and angles. Isn't this the essence of news? Why does a "major organization" have to fly someone to an event to make that info worthy enough to be known?
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Anonymous Coward, 7 Jun 2010 @ 11:38am

Re:
TechDirt doesn't have an aversion to paywalls. Customers do. And when you run a technological economic discussion site, talking about business models is what you do.

And your cowboy crap makes no sense. Horses are still a profitable business, just not as profitable as they used to be. And you'd be hard pressed to find a cowboy that doesn't own a car.

Do you have a point, or are you just being contrary?
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Mark Blafkin (profile), 7 Jun 2010 @ 1:36pm

A better example...
The BBC piece is pure bollocks, however, so is the concept that paywalls are always a dumb idea (which seems to be the overwhelming view of the Techdirt community).

Bloomberg is the best example of an incredibly viable pay-for-content model. Subscribers are willing to pay a seemingly absurd amount of money and navigate a DRM system that would impress the CIA, for access to the kind of reporting/intelligence that can make them money, and that value is actually increased by the fact that they have access to it as early as possible. Incredibly, there are some types of information which are made MORE valuable by the fewer people that know them.

Both the free and pay-for business models are equally valid in the online world. I think the free model will continue to be the leading model, but for certain types of information and reporting the paywall or freemium concepts will be the right choice of business model.
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Anonymous Coward, 7 Jun 2010 @ 7:29pm

Re: Re:
techdirt has an aversion to anything that doesnt support the cwf / rtb thing. everything else is poor. you have to learn that basic fact before you can enjoy techdirt for that it is, one mans opinion against reality.
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PaulT (profile), 7 Jun 2010 @ 10:38pm

Re: Re: Re:
Yeah, but you're that one man, and you don't have to post here if you don't want to.

Better yet, you could come up with one single shred of evidence that actually refutes Mike's points rather than attacking him and things he hasn't said, or deliberately misrepresenting the points raised. We're still waiting for you to provide a single post that does any of these.
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Anonymous Coward, 8 Jun 2010 @ 2:20am

Re: Re: Re:
So we -- real people -- have to listen your (one mans) opinion as an alternative?
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Anonymous Coward, 11 Jun 2010 @ 9:48am

"what works, but actually engaging your community (and that means more than just putting up a comment form). "
Like putting the annoying ad-bar up at the top? That went away real-quick-like with adblock element hider.
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