Business·Analysis

The problem with paywalls

'Free' remains the online world's ethos, even as more and more publications scramble to build paywalls. But just because something is free doesn't mean it has no cost, Don Pittis writes.

Publications learning about the hidden costs of free

I'm giving it away free, and that makes me a winner. That's my theory, anyway. Walt Mossberg, Paul Krugman and Eric Reguly used to give it away free too, but not any more. That's because the papers they write for all now have paywalls. After a few free samples, you have to fork over cash to read on.

But just like the previous experiment with free, we still don't know if the new new way of distributing online content will be a success. Charging people to read your online articles seems to be the latest fad. But which is the fad? Free? Or not free?

In his 2009 book, Free, The Future of a Radical Price former Economist writer and Wired editor Chris Anderson told us free was the future.

The future is free

"The trend lines that determine the cost of doing business online all point the same way: to zero. No wonder the prices online all go the same way," Anderson wrote.

As if to prove his thesis, I found that quote not by buying or borrowing Anderson's best seller, but by searching it up on Google books. The identical phrase is also in the 2008 Wired Magazine article that inspired the book. That article, a time saving substitute for reading the longer work, is still available, free, on Wired.com.

"A decade and a half into the great online experiment," says Anderson with the hyperbole permitted to gurus, "the last debates over free versus pay online are ending."

At the time the prediction did not seem so far out. The year before, he notes, the New York Times had gone free and, "This year so will much of the Wall Street Journal."

Of course the debate is still far from over. The New York Times, the paper that publishes Paul Krugman's columns, started charging for content in 2012. Walt Mossberg's publisher, The Wall Street Journal, is the successful example quoted by every publication that launches a paywall. Eric Reguly's paper, The Globe and Mail — despite an unbearable advertising campaign — is hoping to find the same success.

But despite the recent trend, it is still far from clear which side will win in the end.

There are many flaws in the gospel of free. One being that the concept is as much rhetorical as it is real and can be easily deconstructed. For example, just because something appears free to the user, does not mean it has no cost.

For all its wonderfulness as a benevolent global community project, Wikipedia, the poster child of free, still depends on donations of cash from users in periodic fundraising campaigns and on the donation of time by hobbyists. Charity is not free. Nor are government services that are paid for through taxation.

Chris Anderson didn't work for free. Neither did Paul, nor Walt nor Eric. They have to pay for their groceries like everyone else. So to clarify, whether something is free to you depends on whether the people offering you those "free" services can find somebody else to stick for the grocery bill.

This kind of free is not new to the world of news, nor is it unique to the internet. In fact the newspaper industry itself was founded on getting advertisers to foot most of the bill, a tradition continued today in commuter newspapers, like the Swedish chain Metro distributed free of charge in bigger cities around the world.

The golden age of radio was free, paid for by interspersing programming with jolly jingles for soap or the local hardware chain. The televison most of us grew up with was all free in the same way.

The special thing about news on the internet is not free-ness, but wide access to alternatives. Less than 20 years ago, if people wanted to read an interesting feature article on say, gun control, or paywalls, they were restricted to what was available at the local news stand.

As I write, a Google news search for gun control offers you "about 16,200,000 results." And they are not just junk. Credible, and free, sources in my search include CBC at the top, The New Yorker, New Scientist, Huffington Post, Forbes and Business Week.

On a more obscure topic, like paywalls, it is very possible the local news stand would have nothing. But a little poking around on the web would find this fresh and comprehensive investigation of the subject by Joy Blenman, a fourth year journalism student from King's College in Halifax.

The Globe's seemingly ubiquitous paywall screen. CBC

As Blenman articulates in her November article — and demonstrates by the article's availability — the problem with asking readers to pay is that there is so much free and good quality competition. Our CBC business unit subscribes to the Wall Street Journal, but as someone who reads the online version regularly, I am not at all sure I would pay for it as private citizen. Reuters, Bloomberg and other free sources provide comparable coverage.

For less specialized news, the sources are teeming. When I moved back to Canada after a decade in the British sphere, my online newspaper to keep up with things in the damp islands was the fairly middle-of-the-road Times of London. When its paywall went up, I switched to reading the Telegraph and the Guardian. When the Telegraph put up a wall this year, I was left with the Guardian.

It was like a fish trap or funnel, I didn't especially ask to be a Guardian reader. But that's where I ended up. I have even become addicted their movie review show that breaks all the rules I have ever learned about making television.

At the CBC we have subscriptions to the New York Times and the Globe and Mail, but it is a bother to log on and I feel like a thief when the screen pops up telling me I have reached my limit. I used to use them both regularly, but unless there is something specific I need, it is easier to go to the Guardian, the CBC or some other free source. Less often I will find the articles I want in a back-door way that sneaks past the pay wall.

And this is why I think free may still be the future rather than the antediluvian past. In the world of free, the size of your audience makes a lot of difference. That is why Gangnam Style earned the Korean performer Psy $8.1 million for his "free" music video. In that world clicks still mean paying customers.

Advertising model broken

Online advertising is still learning its way. I chuckled when an ad for pellet stoves followed me around for a while after doing a bit of research; I live deep in the middle of one of the largest population concentrations on earth and have no need of a pellet stove. I despise flashy things at the side of the screen while I am trying to read. I click away in terror when a tedious ad comes on before a clip that I really don't need to see.

On the other hand, when an ad comes up at the end of a Ted talk, I often watch with my leftover concentration. When a fresh tech ad fades up to the middle of the screen on Wired.com, I stay to watch it through, sometimes from a strange sense of duty. I feel good about advertisers with banners at the top of my screen, knowing they are paying for my news. Occasionally I will click on an especially enticing rollover ad. I often click on ads I think will give me useful information. I am pleased to watch ads that are fun and interesting.

As the experts Joy Blenman quotes tell us, pay walls are no panacea for the struggling news business. They still only pay a small fraction of the costs of reporters and foreign bureaus.

However, it may be that by driving away the mass traffic of free, paywalls are cutting news organizations off from a very lucrative future. It is well known that advertisers are willing to pay well for the right kind of audience especially if it is big.

Literate, thinking people have money to spend. Paywalls, by directing that mass audience into a smaller and smaller group of alternatives, are making it more and more lucrative. And when the advertising market figures out how to do the job properly, it is the free holdouts who will have the advantage. The gospel of free may not be dead yet. To prove it, when you are rebuffed by a paywall, come and visit me. I'm giving it away free.