by Ima Fish

Filed Under:

Debunking The Logic In Favor Of Paywalls

from the big-money-fail dept

This is a guest post from regular commenter, Ima Fish, and is cross posted from his own blog:

Marion Maneker over at the Big Money website wrote a piece entitled "The Weird Logic of Paywall Challengers."  He attempts to show that the arguments used by those against paywalls are illogical.  He also attempts to show that paywalls are not only a good idea but a necessity for news websites.

First, a little background.  Some internet news sites are making people pay to view content.  That's called a paywall.  You can't view the content without paying.  So far the attempts to implement paywalls have been complete failures.  For example, when Newsday set up a paywall, only 35 people paid.  After the Times instituted a paywall, its readership dropped by 2/3rds.  And because those articles are not being indexed by Google (or Bing or Yahoo), they're essentially invisible to people on the web.

So what's Maneker arguments in favor of paywalls? What errors in logic have those against paywalls made? Let's go through his points.

His first point is that even if ad revenues are back, news outlets should diversify by charging anyway.  He doesn't seem to get this, but as I explained above, paywalls kill off advertising by driving viewers and readers away.  So Maneker's argument that news outlets should diversify by relying on both advertising and paywalls fails as it is self contradictory. 

His second point is that news outlets charging "for content has always been part of its long-term strategy."  He's absolutely right that newspapers have tended to charge for content. However, that was never done for profit. Profits always came from advertising, classifieds, and obituaries. 

There were two reasons newspapers did charge.  The first was to cover the costs of publishing.  However, those costs no longer exist in the digital realm. 

The second reason newspapers charged was to show advertisers how many actual readers they had.  If a newspaper publisher simply gave away its papers, it could claim that millions of people are reading when in fact no one is reading.  People paying for newspapers is a pretty good indication to advertisers that people are in fact reading.  But in the digital realm news outlets do not need paying customers to tell advertisers how many unique people are reading.  All that information can be tracked automatically in real time.  Heck, in the digital realm news outlets can give specific information about page views and what ads are working and what ads are not.

His third point is that "central to any media strategy should be the idea of charging for some content."  Has he never listened to broadcast radio?  Has he never watched broadcast TV?  Has he never used Google, Facebook, or Twitter?  And despite being contradicted by legitimate business models, his third argument is circular.  He's essentially arguing that news outlets should charge for content because they should charge for content.  It only concludes its premise without telling us why.

Along with his third point he pulls the following assertion out of his ass, "Digital distribution should make content much cheaper--but it shouldn't make it free."  Why shouldn't it be free?  He never explains.

Hundreds of years ago the most efficient means to distribute news was to print it on paper and deliver it locally.  Times changed.  Radio came along and made delivering news in real time more efficient.  But it still lacked the newspaper's depth.  TV news had the same problem.  But the internet does not.  It has the efficiency, the immediacy, and the depth.  Because the distribution costs are essentially zero, economically speaking, there is no reason why the cost of the content should not also be free.

If Maneker's piece is any indication, the pro-paywallers' dream of making us pay for news is a lost cause.

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  1. icon
    DNY (profile), 30 Jul 2010 @ 7:47am

    Too clever by half advertising

    It seems to me that the urge to put up paywalls was created by content providers having tried to be too clever by half in selling online advertising, resulting in online advertising becoming if not worthless, at least worth less as a revenue source. The urge to get more revenue by having ads be adaptive (before installing AdBlockPlus, I'd get ads for Kansas businesses when reading The Times, since I'm reading it in Kansas, not London), in fact, had the opposite effed: it allows ad blocking software to easily detect and suppress advertising, since it's being inserted dynamically. So, online advertising is less valuable than paper advertising, since you can't be sure the reader will see it, and advertisers expect to pay less for it as a result.

    If news sites just "typeset" the advertisements as part of the html for the page, they will be seen--and advertisers will in short order realize this. No, The Times won't get revenue from Kansas advertisers, but it would get more from British advertisers who know that when the page loads, their ad will load and be seen by readers.

    Of course, a paywall for premium content, esp. coupled with the return to old-style advertising I advocated above, probably works as a business model. If the online version of the newspaper were available for free, but extra, say multimedia or super-indepth, news content were behind a reasonably priced paywall (cf. The Wall Street Journal), esp. if besides subscribing, one could get the content on a pay-per-view, or better pay-per-download, basis, people would pay.

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