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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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Like most (all?) business owners I am overwhelmed by the stream of information coming my way. So much of it seems vital yet I can only digest a relatively small amount. If a publisher could learn my interests and needs well enough to target content while still allowing for the happenstance discovery of reading, say, the print WSJ, I believe I would pay for the service. Thinking of newspapers online for a moment, NYTimes has in-depth but broad interest content, WSJ has an obvious focus, USAToday has the best pics of sports/world news. My only option is to access those and many more outlets to get what I want.
Posted 14 October 2009, 16:30 by Mark Gale
I think we have to take in to consideration that everybody today is a publisher. It’s so easy to set up shop on the web and start throwing content – not necessarily news – at your readers.
If you start charging for content someone else will give it away for free.
I do think Brill has a point (two revenues instead of one) but the achilles heel of micropayments is that it is costly to charge people via creditcards and unless you have a product people know and want you aren’t going to get them to buy coupons for ten articles per month or other kinds of subscriptions.
And I thinks it’s kind of suicidal to not allow sharing. I’ve just today been looking at magazines mediaplans and all of them highlight amount of copies printed vs. copies read.
Posted 14 October 2009, 16:11 by Miklas Njor
If you had to get a username and password and separately pay for every cable channel, cable would not have taken off. The bundling and ease of use was crucial. So the Online Journalism concept of one password makes sense. Further, having a network of properties allows for network advertising buys. The reason people pay is 1)no choice; 2) have a lesser but free choice and yet they are in love (emphasis on love)with the premium choice; 3) pay for a big bundle that feels like good value (cable TV) despite the fact they really only watch 5 channels. Shirky and others are wrong to assume the Journal only can charge because it deals with financial data. No one who loves the Journal reads it for financial data. They love the craft, the calibre of thinking, research and investigative reporting and world class narrative. But the Journal never gave consumers a choice: if you want us, you’ll have to pay. They did that online starting back in 1995. Meanwhile everyone ridiculed WSJ that they did not understand the Net (“information wants to be free”)and trained their readers to expect their content is alsways free. The only way to put that free genie back into a pay-per-view bottle is a cartel. Murdoch has reversed himself 180 degrees on this and is not trying to rally all publications to charge online to head off the “content kleptomaniacs.” The only way this can work is if all quality providers form an OPEC (without cheaters). You can create well-differentiated, high quality content but if you give it away for free for a generation of customers, you cannot expect them to start paying just because you changed your mind. So will the Online Jounalism model work? In 2001 I created an idea for one of the Online Journalism founders called “The Ring” in which a group of fairly highbrow content providers would join up to allow customers to use one password and pay one price to enter all the sites with a passport. It has been 8 years but perhaps the time has come to try it. And no, it may not work for all publications, but could for spearate affinity groups (sports publications, news & commentary, scientific, academic, etc) who like the lazy cable viewr, may love the idea of getting all those sources even if they gravitate routinely toward only a few.
Posted 14 October 2009, 16:03 by Christopher Graves
There are certain groups that will pay for content. I do not believe the general consumer will pay though.
The WSJ, the FT and the Economist can all be recognized as business expenses and can be expense reported for reimbursement.
Beyond those, groups that serve a specific business segment will be able to charge for content.
I still buy my local newspaper because it changed its news to be very local. This tactic may save them for a few more years, but it is a stop gap measure, not something that I believe is sustainable.
After that, I don’t see it happening.
Posted 14 October 2009, 16:03 by JLW
My comments on this subject begin at the 30 minute mark of this program from public television in Alabama.
http://www.aptv.org/VideoRoom/viewprogram.asp?FileID=1250
Posted 14 October 2009, 15:53 by Janet Guyon
Perhaps McKinsey can learn from Mr. Shirky. There is no justification in providing some articles to the open web and others only to Premium subscribers. Does it actually cost McKinsey more to produce the articles for Premium members than those for which there is open access? As Mr. Shirky states “people wanted to read … but they didn’t need to”.
Posted 14 October 2009, 15:45 by Phillip Morgan
A couple of points:
First is the concept of respecting the reader/viewer. Many people will be infuriated by suddenly being charged to view something they previously viewed for free. Relying on the “addiction” level is somewhat dismissive of both the content and the reader.
Also, readers/viewers are often offended by people wanting to make a large profit off information they consider important, such as health information.And that creates an opening for a competitor who doesn’t charge.
Finally, you note that a lot of information is interchangeable. Conceptually that may be so, but how the New York Post or Times covers the same information is often light-years apart. And your ideas on this topic are certainly not the same.
Posted 14 October 2009, 15:40 by Joan McClusky
There is no debate -sort of. When Hearst advised his man in Havana to “provide the pictures,” so he could “provide the war,” he was exercising the “publisher’s function.” There is the “content” you publish, and then there is the “content” some people use, to decide and to act.
The publisher’s job is to know the difference and to monetize the uses that in turn make money or save money (e.g. WSJ and The Economist are part of a culture that uses specific infomation to “make money.”) Most other readers do not re-market the information in most publications with that purpose in minde. But some do.
Publishers need to wake up and start thinking like “apps” developers. “How might ‘readers’ use their information to make money? Or, “What would they do with it that cost money or time?” Can I link content to functions? Who applies this information to …comparison shop, to research jobs, companies, invite bids, get professional opinions, check bona fides, price collectibles, and so on?
We need editors, but we also need associate publishers who understand how simple content, properly augmented with functional components, can enhance economic performance. “Send me the story, and I’ll package it with tools that help people make wiser economic choices.” Information can’t be successfully “walled in.” Therefore, you have to “set it free” and make it powerful enough to be worth something. -dlh
Posted 14 October 2009, 15:36 by David Hawthorne
This debate? is on the value of content – see the 4P’s (product marketing)
Clay Shirky – the value is the reader – focus is on the (4)P’s of the value of the reader profile
Steven Brill – the value is the content – focus on the (4)P’s of the value of the content
If content represents no value even the banner / advertising value model is questionable.
Combining the two is the next killer app.
The base for pay for content is value. Let’s discuss the ‘P’s for content value in addition to the ‘P’s for (customer/reader)profile – Google has quite a lot of knowledge of the latter.
Let’s illustrate from a personal perceptive – I receive to much content – Most of it is not of my interest – The average quality of the interesting part, is poor – The most reliable quality criterion is the source – The use / availability of search engines on quality aspects/profiles is …. ? – Searching relevant and high quality content takes quit a lot of effort / time / luck
So, for me, even the value of content is a relevant item, the value of my profile is not used effective.
Posted 14 October 2009, 15:30 by Tjalling Beets
This debate always seems to swing from ‘will people pay for media online’ to ‘will people pay for news online’ ?
OK – no i won’t pay for general news online, but yes I will pay for great, timely, deep online market intel.
No I’m not going to pay to watch YouTube videos, but yes I will pay for a great, DVD-quality on-demand movie via someone like Netflix.
I would prefer a subscription model over ppv though – because really I want it to feel like free. AND that’s where general paid news might fit perfectly – as a value add to a core entertainment/education service.
Where might we be heading ? All content feels like free, download/share/rip whatever you want. ISPs collect a content tax, track views via some universal ‘key’ and divvy up the collections via a ‘share-of-voice’ model. Simple!
Let’s now sit back and wait while the rearguard actions are fought and old business models take their last gasp.
Ultimately, the consumer will get what they want – online media that ‘feels like free’ whether paid for directly or indirectly.
Posted 14 October 2009, 15:21 by tim parsons