We've written about upstart textbook company Flat World Knowledge a number of times, mostly highlighting its interesting business model of giving away digital versions of its textbooks for free, while then charging for various scarcities, including printed versions. It's also done some interesting things, like creating a make your own textbook platform. However, the company has now announced a surprising about face, saying that it will no longer offer free access to its textbooks.

The company's explanation here rings hollow:

Cost partly motivated the decision, according to Jeff Shelstad, the company’s co-founder and chief executive officer. “We’ve got to be smart with the limited capital that we have” if the company is to survive 10 years from now, he said.

There’s also “an element of fairness” behind the move, Mr. Shelstad said. Some institutional partners have been paying as much as $20 to $25 per student for access to Flat World content, while other partners pay far less. The goal is to even things out while remaining affordable, according to Mr. Shelstad. “We have anchored ourselves around affordability, and we are still there with this move,” he said.

None of those arguments make much sense, frankly. The "costs" associated with offering up free access could be alleviated by putting the works on other platforms like BitTorrent. The "fairness" argument also makes little sense. If everyone chooses to opt-in to whatever level they think makes the most sense for their situation, what's the problem?

And, of course, this move goes 100% against the promise that the company made when it first launched:

Are you reading this feeling a bit jaded? Something must be coming -- some advertising, spam, a charge after a trial period, lock-in to a product, something. Breathe. Relax. It's just not coming.

Our business model eliminates the catch. We're giving away great textbooks and making them open because it solves real problems for students and instructors. In so doing, we are creating a large market for our product. We then turn around and sell things of value to that large market -- more convenient ways to consume our free book (print, audio, PDF) and efficient ways to study (study aids). Sure, we'll make less money per student than the big guys. But that's okay. We'll be selling to a lot more of them, and we'll be doing it for a lot less money (thanks to technology like web-hosted services, XML, print-on-demand, and more). Like we said... just a smarter way to do business. For all of us.

Apparently they didn't mean most of that. Makes it a bit more difficult to trust the company on any future promises. That's not to say that the company might not still be an important player in disrupting traditional textbook pricing, but it seems like it's just opened up opportunities for others to come in and focus on truly open solutions.

Brian LaSorsa points us to the news of a new joint study by Columbia and Indiana University, indicating that online readers will be slightly more accepting of paywalls if you plead the threat of bankruptcy than if you talk about profit and financial sustainability.

In the post-paywall survey, participants read one of two “justification” paragraphs, one emphasizing a profit motive and one emphasizing financial need (that paragraph concluded, “if the NY Times does not implement digital subscriptions, the likelihood that it will go bankrupt seems high”).

Participants then “rated how the information changed their support for the paywall and their willingness to pay.” The results showed that “When participants were provided with a compelling justification for the paywall — that the NYT was likely to go bankrupt without it — their support and willingness to pay increased. In contrast, when participants were provided with a justification that emphasized financial stability, their support and willingness to pay decreased.”

As we've often noted, paywalls may generate a little bit of revenue, or even brief periods of encouraging success, but they are ultimately not a sustainable business model for online news (though financial news may prove to be a rare exception to this rule). A survey like this one is rather emotionally manipulative, but by ending on that dark note of bankruptcy it demonstrates an important point: readers will only consider paying if they think, even temporarily, that they can't get what they want for free. The more the New York Times or any other newspaper retreats into the shadow of the paywall, the more competitors will provide readers with a compelling option. When they see that financial stability and quality content is possible without a paywall (something they already seem aware of, judging by this study's results) they won't be so willing to provide a financial safety net to old institutions encumbered by legacy costs.

Of course, more importantly, even these swing voters who are hooked by the sob story represent only a small portion of the overall study. Its broader results (from the full paper) are even more illustrative:

Only 7 percent planned to buy or had already purchased a digital subscription. Another 12 percent already had a paper subscription that provided online access and 16 percent were unsure of their response. Of the 65 percent who planned not to pay, 59 percent felt very certain of their response.

Results suggest that price and availability of free news sources were barriers to paying. Most participants rated the paywall as expensive (68 percent), though only 18 percent of those who planned not to pay or were unsure said it was “very true” that they could not afford it. Few (6 percent) thought the price was inexpensive, with about a quarter (26 percent) indicating the price was about right. Participants who planned not to pay or were unsure most commonly planned to stay within the free monthly limit (60 percent), switch to other news sources (44 percent), and use loopholes (39 percent).

Now, the New York Times paywall has performed somewhat better than expected, largely because it's not much of a wall at all, but a study like this just enforces the idea that it's a stop-gap solution at best—and a hindrance to smarter strategies at worst.