1. First off, App.net's interests are not economically aligned with its users. It wants money from those users, and all things being equal, those users want to keep their money. So their goals are actually diametrically opposed. Who's to say that App.net will always cost $50 per year? What if, a year from now, it needs a lot more to keep the service going. App.net has incentives to figure out ways to raise the price to bring in more money. Now, that's fine. That's how businesses work. But to suggest that the economic interests are aligned is simply not true. Coldwell argues that the interests are aligned because it now has to make the service as good as can be so that users will want to pay. But the same thing applies to free-based services, as we explain in the next point...
2. A free-based service, supported by advertisers, has tons of incentive to keep its users just as happy as a fee-based service. Why? Because if it doesn't, people go elsewhere and the advertisers go with them. If the advertisements are too annoying and/or intrusive, people will go away and the value of that advertising drops. Any smart media property knows this, and actually works quite hard on keeping the user experience as good as possible, which quite frequently means pushing back against the desires of advertisers. Caldwell acts as if all such companies immediately give in to any ad company desire, which is either spoken from ignorance or out of a desire to misrepresent reality to benefit his own effort.

[Valve's Joe] Ludwig showed TF2's Sniper-focused update as an example. Each content update started with a teaser trailer that hinted at several possible new items or features, and Valve developers would monitor the community reaction in the forums to determine which aspects caught the players' attention. "We found people in the forums talking about how cool it would be if the Pyro could light the sniper's arrows on fire. To be honest, we hadn't considered it, but we were able to implement it by the time the update shipped," Ludwig said.

In another instance, players picked up on a blueprint displayed in passing within the teaser trailer for the Engineer-focused update of a mechanical hand item. Ludwig explained that "[The players] didn't realize it, but they were indirectly voting on the content of the update. When the update shipped, it included that robot hand."

Once Valve rolled out the in-game item system, it needed to get the players used to the idea of paying for them. "This wasn't a change we made lightly, but it was something we had to do to get our game into the free-to-play business model," Ludwig said.

"They had never paid for an item in TF2 at any point in the past, and we weren't sure how willing they'd be to pay now."

Ludwig outlined the players' possible objections to the item store, the first of which was TF2 turning into a "pay-to-win" game:

"We dealt with the pay to win concern in a few ways. The first was to make items involve tradeoffs, so there's no clear winner between two items. But by far the biggest thing we did to change this perception was to make all the items that change the game free. You can get them from item drops, or from the crafting system. It might be a little easier to buy them in the store, but you can get them without paying. The only items we sell exclusive to the store are cosmetic or items optional to gameplay."

"We are studying it and we expect to make that free, and instead of having 1 million [subscribers], having at least 10 million to 15 million in every corner of the earth.... Will you lose $50 million to $100 million in revenue? I don't think so. If the site is good, you'll get much more."

"People reading news for free on the web, that's got to change."

1. Those other sites don't have the qualities that make some people willing to pay for the WSJ. The quality isn't as good and the direct monetary benefit is not nearly as clear.
2. Most of those other sites have much clearer (free) competition.
3. Nowhere at all does Murdoch talk about actually giving people a reason to buy. All he's saying is that if they put up a paywall, people will pay. Sure, a few might, but it's a small number, and doing so will stagnate any sort of growth, piss off advertisers, and allow competitors to take a giant leap forward -- all in one shot.