If this doesn't work out, I'm looking forward to a bright future in the food services industry.
Collusion for pay wall/collision with brick wall
By Jay Small | Tue, 08/25/2009 - 7:19am
First, Tim Rutten makes the case that saving "premium" journalism means an act of Congress -- specifically, an antitrust exemption so papers can collude on paid content pricing on their Web sites. Then, the reaction.
Steve Outing, for example:
"He's joking, right? U.S. newspapers, many with a history of profit margins in the 20-30% range for many years, suddenly should be allowed to collude because they've had a rough couple years? That's outrageous. The marketplace and disruptive technologies are forcing newspapers to change or die. So they have to change, reinvent themselves for the digital age. Let’s keep government out of this, unless it's in more useful ways such as supporting the expansion of broadband to all, giving media players large and small a level playing field."
And from Michael Masnick at Techdirt:
"It's difficult to think of anything to say to people who think these ways, other than "good luck." The real world doesn't believe in such limitations. If the newspapers collude and come up with a pricing scheme where the lowest option starts at $10 per month -- fine. Just go do it, and then let's see what happens. Because talking about it is getting pretty silly."
Masnick predicts "smart" news organizations, and/or individuals, would break off from a colluding pack and soak up the traffic it sheds.
As someone who spent most of the last 15 years pulling newspaper companies into the digital age, I do not always agree with people who presume our industry cannot and does not innovate. It can. It does. Newspapers' best digital properties, you gotta admit, are pretty good, pretty competitive. The ranges of size, of best and worst, and of experimentation out there, all run very wide. I doubt the whole industry would move lockstep in any direction, especially toward digital paywalls.
Pay walls amount to a business decision: choosing your market. Newspaper publishers who put Web content behind pay walls choose to exit the advertiser-supported market for content, and battle instead in the consumer-supported market.
Can't you do both? No, apparently. Every example I see of erecting pay walls so diminishes traffic vs. market potential that advertising becomes, at best, a second revenue stream behind subscription fees. (That may not be true of WSJ.com, but not all WSJ content stays behind the wall.)
Meanwhile, the major search engines might still crawl and index your pay wall site, which you'd think would help. But they'll insist you provide their consumer searchers at least the first page free when they click through. That adds complexity to your technology model while diminishing your subscriber base in exchange for trickles of drive-by traffic.
In cases where Web proprietors start with content behind a pay wall and later decide to set it free, new advertising revenue quickly outpaces the old pay wall revenue because traffic grows that much.
Where are the news pay wall success stories that would inspire confidence in the consumer-supported market?
Comments
First, let me say that I'm
First, let me say that I'm highly skeptical that a pay model will work for consumer news sites. I'm certainly not advocating for it.
But, I've worked with two different pay models, and can share some insights.
First, a hybrid free/paid consumer news site, where all web-original content is free, and only the repurposed print content is behind the pay wall. When you erect such a wall on some of your content, you can expect traffic at first to drop precipitously (40 percent is a number I've seen). The argument for doing so is not the piddling revenue you get from the paid online subscriptions (about 1-2 percent of your paid print circulation is a good guide), but to prevent people from dropping their print subscriptions "because I can can get it for free online." Traffic should rebound, but will never be as high as it would be without the wall. Still, there is advertising revenue. And this is a key selling point for your ad sales team -- people who pay for local content are much better potential customers of local businesses than the millions of random drive-by readers who come from Drudge, Fark, Google, Yahoo, Facebook, Twitter, etc.
Second, a fully paid site for people who use the news and data to do their jobs. No one pays for this out of pocket. It's all business expense. And the more essential to the job, the higher the premium you can charge for subscriptions. Some are extraordinarily expensive, serving a relatively few number of people. Even with paid sites that get only in the tens of thousands of page views a day, the advertising is significant. You can charge a much higher CPM to reach a highly targeted audience that is paying a lot of money for content. Advertising is a very nice additive, though not the main revenue source.
Like I said, I'm not advocating for paid content. In fact, I find the entire conversation largely a waste of time. But I thought I'd add a bit of perspective I haven't seen expressed.
Good insights
Hey, Ken, good to see you here, and thanks for chiming in with this perspective.
I have more experience with the first model you describe (mix of free and pay) than the second. And as you describe, I'd associate that second model more with content types that carry high and unusual value propositions (vertical business content, market intelligence etc.).
Unfortunately for general news providers, I doubt news fits that description. Demand for it is incidental and transient, except among media types themselves -- and let's face it, journalists are paid, conditioned and wired to care more about news than anyone else. We simply shouldn't assign that same depth of interest to the rest of the world as we construct business models.
Actually, what's instructive
Actually, what's instructive about the fully paid site is that the content providers are asking the right kinds of questions. Such as, "how do my customers do their jobs, and how can I help them be better at it?" The value proposition is not just with timely marketplace information, but also that saving time saves money.
This doesn't translate perfectly to consumer information (or news), but we have to ask the right questions. How can we save people time? How do they go about their daily lives? Instead of news and information sites being time sucks, how can we help people be more efficient at what they do? This is why some aggregators do very well.
Anyway, food for thought.