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.

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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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