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By Clay Shirky
A digital universe means readers have plenty of sources to choose from. Publishers considering pay walls have to weigh the costs of losing readers with the benefits of gaining subscription revenues. -
By Steven Brill
Publishers don't need to make a choice between advertising and circulation revenue. By charging only certain kinds of readers or for certain kinds of content, they can still maintain a big, non-paying audience capable of generating ad revenues.
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Clay Shirky
The high price of charging for content
People will pay for content if it is necessary, irreplaceable, and unshareable. Businesses excited about the first five words of that sentence don't understand how constraining the next seven are.
First, most content isn't necessary. It's optional. Traffic to the New York Times's editorials fell precipitously during the days of their subscription service, TimesSelect. People wanted to read Paul Krugman and David Brooks, but they didn't need to. Second, replaceability is in the eye of the beholder. Your coverage of the bailout may have different words than the competition's does, but for the average reader, their reporting can be substituted for yours, and vice versa. Third, people like sharing—and dislike not sharing—but getting people to pay for content requires forbidding us from forwarding things we care about to family and friends.
In an analog world, per-copy pricing is a strategy for increasing the number of available copies. In a digital world, per-copy pricing is a strategy for decreasing the number of available copies. Pay wall revenues thus reduce audiences and ad revenues, while creating a competitive advantage for (and an audience exodus to) subsidized outlets—whether the subsidy comes from advertisers or users.
Pay walls also threaten syndication revenues, because syndicated content from even one subsidized outlet will spread at the expense of all locked-down versions.
Fees thus attach to special cases: people pay Cook's Illustrated to reward it for not taking ads. People pay the Financial Times because financial data is valuable in inverse proportion to its availability (unlike editorials, say, or political reporting). Harnessing users to expand reach is simple, cheap, and powerful; even if you commit yourself to pretending content is scarce, many of your competitors won't. This dynamic creates a competition between organizations working with and against the Internet's innate capabilities.
The key questions for the average publisher contemplating pay walls are: How serious will that competition be? How many users will you lose? Will banning sharing create a defensible advantage? And the answers are: crushing, most, and no.
Steven Brill
Two revenue streams are better than one
When we launched Journalism Online last April there was a great deal of misunderstanding about what we were doing. We were not suggesting that any publication go behind a pay wall. Rather, we're enabling publishers to sell content (mostly through subscriptions, although there may be some micro-sales) to a small portion of their online audience while maintaining the traffic necessary to sustain advertising revenue.
So, if there's to be a debate about whether our model makes sense, it ought to center on this question: Will, or should, publishers who invest in significant original content—be they newspapers, magazines, or online only sites—continue forever to give away everything they produce to everyone who wants it? Or, as advertising rates continue to plummet amid a growing glut of inventory, should they, and can they, create a circulation revenue stream, too? Here are three of the ways our 16-dial Reader Revenue Platform™ enables them to do that:
Sampling: Publishers will set a dial so that only the most avid online readers are asked to pay. Everyone else will continue to read, and see ads, undeterred. These avid readers may be defined as those who come to the site ten times a month, or 30, or six—or any other measure of engagement the publisher sets (and re-sets as the market develops).
Market Access Pay Points: Publishers will adjust payment requests and amounts based on whether the reader is in- or out-of market. Thus, a newspaper based in London with a small but highly engaged U.S. audience could charge them (and sacrifice minimal ad revenue because its advertisers are likely to be looking for a UK audience.) Or, a college newspaper could use Market Access Pay Points to get alumni and parents to pay a few dollars a month while keeping the paper free to the college community.
Select Content Pay Points: Publishers can charge for certain high value content (perhaps in concert with a sampling plan), while keeping much of the site free.
Thus, we're not suggesting that any publisher make an either-or choice between ad revenue and reader-revenue but, rather, that publishers do what they've always done: go for both.
Shirky's response to Brill
Journalism Online assumes that publishers' failure to retain pricing power online is a readily reversible accident. Were this true, any publication could start charging tomorrow, as JO's technical solutions aren't rocket science. Publishers can't start charging tomorrow, of course, because their problem isn't technology—it's new and brutal competition. JO's real offering isn't tools, but collusion.
Adding fees online inhibits use while rewarding disloyalty. Deciding to aggravate only your most faithful users, alumni, or expats limits this trade-off but doesn't change it. It's no accident that the Big Three fee-for-content services—the FT, the Economist, and the WSJ—all reach price-insensitive audiences. The sad fact for most publishers is that there is no cartel large enough to make the average reader similarly price insensitive, and no user revenues that can offset competition from ad-supported and nonprofit publishers.
Brill's response to Shirky
This exchange demonstrates how last year the either/or debate has become. In fact, I agree completely with Clay's analysis, so this isn't much of a debate. We're against the same pay walls he is. What we're all about is providing our multidial Reader Revenue Platform™ to enable publishers to charge only their most engaged, addicted customers only for that which is, as Clay puts it so well, "necessary and irreplaceable." As for his point about readers being able to share, he's right, and we have a plan for that too. Space constraints don't allow me to describe it here in detail, but it has a lot to do with our sampling and viral marketing strategies.
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People will pay for online content that will add value or make business sense. The Financial Times make profit the e-way because its customers make business out of the information available in it.
However people may not be willing to pay for general content that can be replaced by other free content available in the web. Therefore these content should be offered free access.
The content (which is the product here) and the target customer will determine if the content is worth a price or not.
Posted 15 October 2009, 00:52 by Harini
All I have to say – to Mr. Brill:
There is no more “original, significant content”
not anywhere.
Ingrid Wild Kleckner
Posted 15 October 2009, 00:40 by Ingrid Wild Kleckner
I assume many (if not all) commentators saw this article for free via McKinsey. This is a prime example of a model based on free and paid (via subscription) content so it is definitely possible…you just have to give away the stuff of lesser value and charge where value is high enough to do so. Make sure you set up your web analytics to be able to make the most informed decisions possible.
Posted 14 October 2009, 22:47 by Nick Hoare
The idea of paying for content will no longer be novel soon. And yes I believe as people’s perception of internet moves towards the scale of credibility and dependence, they will pay for what they want to get less the hassle. This is already evident in the millions of dollars made in ebooks (sometimes even worthless ones).
But I think there will be 2 possible models. One is charging at premium (like McKinsey), targeted at specific groups of people. The other, I think it will be charged at minimal rates (like an iphone app) and targeted at the mass.
Of course, free content will continue to reign, but the idea of paying for content will become acceptable and more receptive in the near future.
Posted 14 October 2009, 21:58 by Belinda Ang
I don’t think the average user will every pay for online content – he doesn’t see the need to. There will be content that is targeted at niche users, say pharma industry folks who maybe willing to pay. Even if it’s a more broader interest – like Business – a very small section maybe willing to pay. Isn’t this similar to radio? There is free FM everywhere – a small niche chooses to pay for stuff like Worldspace, XM etc. As a Worldspace user, I can see the value it brings – no ads, choice of music suited to my taste. I don’t see that kind of clear value with most online content. I have paid for the online edition of The Friday Times – a Pakistani weekly which is not available in India/and not free online , since I saw value in it.
Posted 14 October 2009, 21:07 by Lakshmipathy Bhat
Clay Shirky appears to make quite a few assumptions about visitor behavior and mindset. As a web analyst I have learned to never be surprised by visitor behavior and motivation online.
A few things that Clay doesn’t touch on that might have an impact:
1. On the 3rd Nov this year PayPal will open up their worldwide net payment platform to the global developer community http://cli.gs/52gEYN This will allow developers to embed it in all sorts of different environments including mobile.
2. Mobile. More people are absorbing news via their mobile smart phones while on the move(certainly in Europe and Asia), so with the potential for 3rd party micro payments via mobile likely to become a reality this opens the door for low cost payments of specific mobile content.
3. Papers carry very defined editorial stances that people identify with, The Guardian and The Daily Mail in the UK are two examples. Some people in fact may well be prepared to pay small amounts for a portion of this content as a way of vindicating their position. It sounds odd but it’s not inconceivable. Predicting how people will respond to new developments online is no easy job.
Posted 14 October 2009, 21:06 by Hugh Gage
People will pay for content that is unique, specialized and fulfills a particular need in a way that they cannot get for free.
Posted 14 October 2009, 20:29 by Mark Jaffe
haha xD Clay Shirky’s a classic “no” guy – seeing only problems and not solutions. Because he IS very intelligent and knowledgeable he raises some great points.
Whether Steven Brill has the answer or not, he definitely has the attitude of taking the “problems” as laid out by those who are good at identifying them and looking for solutions e.g. if people will only pay for what’s necessary then how do you make your content necessary? There are ways to do this for all types of content.
I think Kevin Kelly has a lot to offer to this discussion as far as realising the power shift (from the marketers back to the people) and adapting a new business model for it – freemium or otherwise. Give to receive, etc.
Posted 14 October 2009, 20:05 by Seth
I am first in line to want to see a strong media. It is important for any democracy.
That being said, as a marketing professional, I am far less likely to work with medial channels that charge for or limit sharing of their information. We all dream of our messaging getting picked up and carried in a “viral” manner. This will not happen with the constraints of paid-for, non-sharable content.
Roger
http://rbnolan.wordpress.com/
Posted 14 October 2009, 19:00 by Roger Nolan
Hmm, maybe we could start charging for it if we stop calling it “content”.
People will only pay for something they value. Commoditising the media offering online cheapens the whole deal to zero.
Why not think about how the offering adds value to people’s lives before worrying about how (and how much) to charge for it? Why not put the accountants and middle management back in the box for a little while?
Why not remake media from the ground up?
http://www.boscutti.com/
Posted 14 October 2009, 18:45 by BOSCUTTI