Wednesday, January 20, 2010

The Return of the Pay Wall

Today the New York Times announced that it will reconstitute a pay wall for its online content, something it tried unsuccessfully to do years ago. Here's the plan:
Starting in early 2011, visitors to will get a certain number of articles free every month before being asked to pay a flat fee for unlimited access. Subscribers to the newspaper’s print edition will receive full access to the site without extra charge.
According to the Times, the pay wall that existed from 2005 to 2007 attracted 210,000 subscribers paying $50 a year. Considering that the paper has a monthly readership of 17 million, that's a highly insignificant number of people who are willing to pay for full access. However, the original pay wall applied only to certain content, notably Op-Ed pages. Perhaps readers will be more willing to pony up for the full assortment of articles and archives, but that stuff is free now, and Felix Salmon has already attempted to break down the economics of the idea to show that the article gate (which closes after the ambiguous "certain number of articles") is an unwise proposal. But the Times is giving itself a year to figure out the logistics.

For those that don't follow the ongoing discussion about online news, the problem is not that people are no longer reading the news -- 17 million unique visitors is material -- but that online advertising brings in only a minor fraction of what print advertising does. Readers are just too finicky online, and don't page through news like their hard-copy counterparts. So newspapers will have to start getting compensated by their online viewers somehow or else significantly scale back their reporting efforts. The Wall Street Journal and Financial Times both have pay walls in place already, and seem to be doing ok. But theirs are niche business readers with similar interests, income and levels of sophistication. The Times' audience is assuredly more diverse and harder to target ads to.

I share the conviction of others I've read today that a pay wall as it is currently imagined will probably drive large numbers of readers to other news sources that are free online, or perhaps look to bloggers to post longer source quotes. Even if these alternative sources are of lesser quality than the Times, their substitution is understandable in some ways. Subscribing to a bunch of newspapers and magazines is tedious to keep track of, and differs from our experience with other types of media. When we buy a book, movie, CD, or iTunes mp3, we are purchasing an experience that can be repeated or at least drawn out. But buying news is closer to the transient experiences of cable TV, magazines, and the internet: we are paying for a constant stream of new content with a relatively short shelf life, to be experienced and then discarded. As such, people are less inclined to make impulse buys. That n+1 article which suddenly requires a subscription would have to feel awfully valuable for me to buy it.

Since most online content seems to have this transient feel, viewers and readers may be more inclined to pay if the payment mechanism was closer to a utility bill, like cable and internet. Rather than taking an a la carte approach, media providers could create or support media "utility companies" that allowed for monthly budgeting, bundling, and billing. For instance, maybe I decide that I will budget $60 per month for major newspapers, and that grants me access to any article at the NYT, WSJ, or FT websites as well as delivered to my tablet reader. And then I put up another $20 for magazines, and I'm given the choice of any articles from 10-20 magazines that month. And so on to get access to TV networks' full series, movies on-demand, etc. But all of it would be allocated and paid for through a single entity. The goal is to pay for the convenience of constantly refreshed net content, like we pay to have things piped into our TVs and cable modems -- with an all-in-one budget -- instead of managing dozens of individual subscriptions.

Such an approach would require cooperation between and within industries, and already we have seen coordinated efforts to build new viewing and payment platforms in the cases of Hulu, iTunes, and the ongoing effort to make DVD purchases portable. Tablet readers and similar viewing devices will also make the digital reading experience much more pleasurable and comparable to print. The point, then, is that a combination of a new payment mechanism and technology (devices) can force a rethink for consumers about how they consume digital media. (The iTunes example shows that with enough convenience and quality consistency, people will gladly pay for what they used to expect for free online.) Newspapers like the Times should work with competitors and technologists to build a platform that improves and redefines the experience of digital content, smoothing readers' transition to paying for it.

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