The danger of the wall

The European, a German online news service, asked me to write a commentary for a debate on paid content. Here it is in German. And here’s the English text:

I have nothing against charging for content, if you can. After all, I’m selling a book. But I believe building pay walls around online news is a bad business decision.

The discussion about charging for content rises from a sense of entitlement—“we deserve to be paid,” which is an emotional argument—rather than from rational economics.

Charging is an attempt to replicate an old business model in a profoundly changed media economy that is no longer built on scarcity—on publishers’ control—now that everyone can publish. The new link economy rewards openness and collaboration.

Charging is also a distraction from the real goal: profitability and sustainability. We must rethink the entire ledger of the business of news, starting with costs, which must and can be reduced through collaboration, working in networks, and through the efficiency that comes with the specialization the internet demands.

More important, charging brings many costs:

• It creates the expense of marketing (when, online, your audience will market you for free, if you deserve it).

• It reduces audience.

• It reduces advertising revenue.

• It reduces links and clicks, which reduces Googlejuice, which reduces discovery, which limits growth.

But more than any of this, pay walls curtail a news organization’s relationship with its public, with its customers. On the internet, it’s in those relationships where value lies.

The New York Times plans to charge its best customers—its most frequent readers—while enabling what Rupert Murdoch calls the worst customers—those who stop by once from a search engine or an aggregator—to get what they want for free. That might make sense if you are selling a scarce resource: those who drink the most wine pay the most. But online, content and news are not scarce. They are the magnets that draw readers to you so you can build a valuable relationship.

Online also brings new opportunities to find value there. Hubert Burda said at DLD that Focus Online is profitable not because of advertising but because of ecommerce. The Telegraph in London brought in a quarter of its profit a year ago from direct sales of everything from clothes hangers to wine. So media companies are becoming in part, retailers. Does it make sense to put a toll booth at the door to your store to keep people out?

Once you have a lasting relationship, there are more ways to serve customers and make money. Some newspapers are holding events. Some are charging for education. Some are even selling real estate. But to do this, you need to invite, not drive away more readers.

There is one more cost to building a wall, a cost to journalism. Alan Rusbridger, the innovative editor of the Guardian in London, just delivered a monumental speech arguing that charging “removes you from the way people the world over now connect with each other. You cannot control distribution or create scarcity without becoming isolated from this new networked world.”

Rusbridger also warns that there are competitors lying in wait to step in when news organizations build walls. “Let’s not leave the field.” Rusbridger said, “so that the digital un-bundlers can come in, dismantle and loot what we have built up, including our audiences and readers.”

Charging could be dangerous business indeed.

  • Max M. Brandenburg

    I agree that building pay walls around online news is a dangerous business decision. Although i don’t think building pay walls around quality research on newsfacts is a bad thing. Short news stories (snacknews) should be for free and if the readers want more depth on the topic, they should have to pay for it.

    Max M. Brandenburg
    The Netherlands

  • http://hodgen.com Phil Hodgen

    Geez. Control and entitlement. Whenever I hear business owners talking like that I say to myself that they’ve just declared themselves irrelevant. Voluntarily.

    I heard the equivalent of “We deserve to be paid” in the form of David Young of Hachette announcing with glee that his contract with Apple for putting ebooks on the new iPad had freed him from Amazon and had put the publishing houses back in control of ebook pricing.

    Uhh, no, Mr. Young. Actually, I’m in control. It’s my credit card. If you don’t like Amazon’s $9.99, just wait. You REALLY won’t like what the millions of us out here in Internetland have in store for you.

    http://www.npr.org/templates/story/story.php?storyId=123055627 (NPR story with Mr. Young’s voice in it).

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  • http://www.subhub.com Evan Rudowski

    The idea of the “wall” is a false construct, Jeff.

    Only the most foolish newspapers would build a wall entirely around their content. Do you know of a single newspaper that’s currently doing this, or has announced plans to?

    You and Rusbridger are railing against something that hasn’t happened and isn’t likely to. In reality, neither you nor anyone else know exactly what the New York Times’ paid content strategy will be when it launches in a year.

    The result of all this scaremongering about paywalls is an oversimplified debate in which the real question — how else can newspapers make money from their content or from their ability to create content? — is disregarded.

    Look at your throwaway line at the beginning of this essay: “I have nothing against charging for content, if you can.”

    Well why don’t you, and Rusbridger, and the rest of the anti-paywall contingent talk about that for a change? How might newspapers and other content creators succeed in charging for content? Any thoughts (I’ve got plenty)?

    All of this energy spent in opposition to paywalls that aren’t being built is energy that could be applied constructively elsewhere. Rusbridger’s monumental speech defending journalism from imaginary paywalls is accompanied by monumental losses (£100,000 per day!) at his newspaper. Talk about going down with the ship.

    Kind regards,
    Evan

    • Andy Freeman

      > How might newspapers and other content creators succeed in charging for content? Any thoughts (I’ve got plenty)?

      Where can we find out more about those thoughts?

      • http://www.subhub,com Evan Rudowski

        Andy,

        Come to our SubHub website — we talk about this all the time.

        Kind regards,
        Evan

  • http://hodgen.com Phil Hodgen

    Asking how a newspaper can make money from its content is backwards. The better view is to ask “Why is my content valued at zero by my customers?”

    The point isn’t extracting money from readers in the form of pricing (whether for a pile of paper or for access to a website). The point is to pump value INTO readers until they vote for you with little dollar bills in appreciation.

    The problem that the NYT is facing is that its customers may just be telling it that — in the customers’ eyes — the content value = zero. And the NYT brass are afraid the customers may be right.

    Value is always determined by the customer and never by the merchant.

    I for one welcome the spectacle of a NYT paywall, for purely scientific observational purposes if nothing else. Let’s test a few hypotheses. Let the NYT be the crash-test dummy. I’m sure many of their competitors would love to have the NYT put its corporate butt on the line and learn vicariously.

    • http://N/A Newsie

      “Value is always determined by the customer and never by the merchant.”

      Nike charges $100 bucks for shoes because that company creates value through branding and advertising. The same good (pair of shoes) can be purchased for a fraction of the price (including free if you are resourceful) yet Nike commands high prices by signaling quality and then charging accordingly. As if anyone uses Nikes for professional athletic purposes!

      We pay for brands. Quality media brands like the NYT and WSJ can charge for content because people trust their brands and dont trust the cheap, free sources.

  • michkon

    Lets put it this way. Good journalism is worth to get paid for. Especially if there is an overflow of information you will be happy – even to pay for – getting things getting straight, to get explained strange things, to have investigative research. But the question is, who is financing it. Perhaps readers of strong media brands as long as they deliver top quality.

    But why not new media producers. New small and nimble projects like Huffington Post, but why not great media suppliers like Vodaphone, Deutsche Telekom, Verizon, AT&T etc. Why not other strong brands which invest more and more in own media like Red Bull. Perhaps one day investigative research is daring – and therefore interesting for Red Bull.

    Let’s think it that way. If publishers are making money selling wine, DVDs, pans ets. Why not getting quality journalism from strong consumer brands. They are loosing their direct contact to distributors like Amazon, Google etc. Why not win this back by delivering top quality journalism.

    Good journalism costs money. But the question who pays is still open. Perhaps not the customer. Think of the past. Owners of print machines tried to get their machines run for longer hours. So they established newspapers and magazines. All big media houses started that way. Why not the other way around.

    In the digital age everyone can be a publisher. Everyone can produce top notch journalism. Cumbersome individuals or big brands. And media brands not necessary only madia brands…

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  • http://direwolff.wordpress.com direwolff

    while i haven’t kept up w/the latest stats, it seems that the WSJ has found a way to make paywalls work w/a slightly blended model, so evan’s comments resonate well w/me.

    what irks me most about this conversation however, is this need to pigeon holing around what the publishing businesses is and which companies are such businesses. what i mean by this is that at yesterday’s iPad announcement, in the introduction Jobs referred to Apple, a company I have grown up knowing as a computer company, as a mobile devices company. it was as though he just chucked out the legacy view of what Apple has represented and embraced what it has become. it goes w/o saying that how we use computers has evolved into more of a mobile activity, and Jobs is identifying w/this shift. this reminds me of the old adage about how the railroads missed the fact that they were in the transportation business, not the railroad business.

    all online businesses are basically publishers as they’re all using HTML and javascript on a screen. their distinctions come primarily in what business model they are focused on. whether monetizing through the advertising or teh sale of goods and services. the walls that need to come down for the “traditional” publishers are those they maintain about their identity. this stubborn hold on a long gone identity affects their ability to see the business model opportunities beyond those that they have so fondly controlled until the advent of the open online content distribution.

    it’s clear that there’s no single answer to this issue, but it’s also clear that none of the incumbent publishing companies will exist in their current form 10 yrs fm now and they need to get comfortable w/that and evolve or die.

  • http://jeffsonderman.com Jeff Sonderman

    This is the most important point: Charging “curtail(s) a news organization’s relationship with its public.”

    You can treat your users as either collaborators or customers, but not both. Collaborators add value. Customers extract value.

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  • Josh

    I don’t think we should be taking business advice from Rusbridger, given that he runs a paper that’s haemorrhaging cash like it’s going out of fashion. Without a charity pumping in the money, the Grauniad would have been wound up by now.

    But as Evan mentioned above, the well-paid editor of the loss-making Guardian – and Jarvis – are arguing about a man made from straw. Is anyone seriously suggesting the models that are getting the blood of these two gentlemen boiling, or are they making up a position to argue against?

    Jarvis comes across as an ideologue wedded to the idea that pay walls are bad and he’s unwilling to brook any discussion that involves looking at how they might work, despite his qualifier that he’s not against charging.

    My gut feeling is that Jarvis is ideologically opposed to pay walls because they’re bad for Google. A worst-case scenario is that pay walls work and all MSM take their content away from Google.

    And since Jarvis makes a living cheering on Google, that’s a very bad thing.

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  • Eric Gauvin

    Jeff,

    Here you say,

    “But more than any of this, pay walls curtail a news organization’s relationship with its public, with its customers. On the internet, it’s in those relationships where value lies.”

    But I don’t think you can accurately call them “customers.” That’s the problem. They aren’t customers. And real customers are where a valuable relationship lies.

    Your other main argument is that those attempting to establish a paid content business model will quickly be overtaken by those with a free content business model. That’s just an absurd statement that has nothing to do with business concepts whatsoever.

  • http://www.cornfieldconsulting.com Chris Turner

    Jarvis has oversimplified the discussion, as several other posters have mentioned. Paywalls are not necessarily black/white, in/out but can be used intelligently to discover exactly what people value enough to pay for. ‘We deserve to be paid’ is not an emotional argument, it is the proposition that every business puts to their customers every day, McDonalds, Tesco, BMW, Ford, Apple, yes, even the mighty Google. It is then up to the customer to decide if they agree or not. If enough agree, hurrah, if they don’t, you follow Woolworths, Zavvi, Maxjet and the rest out of business. Online content is no different in terms of establishing value, its just easier to steal.

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  • http://cevremuhendisleri.net Alex

    […] The danger of the wall « BuzzMachine “Charging is an attempt to replicate an old business model in a profoundly changed media economy that is no longer built on scarcity—on publishers’ control—now that everyone can publish. The new link economy rewards openness and collaboration.” (tags: paywalls paidcontent newspapers businessmodels google jeffjarvis advertising) […]

  • A.J.

    Why didn’t you publish you book online for free? Wouldn’t you have gotten more value out of the “link economy” by making the entirety of your book free for everyone? Wouldn’t that have increased the “Googlejuice” of the world.

    The New York Times has plenty of long form, analytical journalism similar in nature to your book.

    Why didn’t you make your book free if you’re asking others to do so. It’s all content, right?

    • http://www.buzzmachine.com Jeff Jarvis

      you can read the book for free at harper collins’ site.

      • Eric Gauvin

        Nice try, but that’s not at all what he’s talking about, Jeff.

        You’ve been relentlessly selling the physical book — not the obscure, free, online version thats languishing in some dark corner of the internet…

        • http://www.buzzmachine.com Jeff Jarvis

          Shame on me. Shame, shame, shame. Where’s my hairshirt? Oh, I sold it.

        • Eric Gauvin

          Nice try again, Jeff. No one’s shaming you. Calm down and stop being defensive and distracting.

          I think he was suggesting that you might like to explain how your book and its sales success (which is clearly a key part of your credentials as an expert about the many things you talk about) interplays with your strong opinions about free content. It’s a valid criticism, which you typically have sidestepped with you’re charming expression, “dog’s gotta eat…”

          Here’s a non-threatening question. Please answer it.

          When was the last time you linked to the free copy of your book online?

        • http://www.buzzmachine.com Jeff Jarvis

          I’ve answered it often. I answered it in the book. I posted that comment and this from a phone and don’t have the link handy. As the man says, use Google.

        • Eric Gauvin

          yeah…

  • http://notizen.posterous.com Markus Breuer

    @A.J.: @Eric

    I bought Jeff’s book, knowing that it is available online – and where. Btw. – regarding “obscure corner” – there are services available on the internetz called “Search Engines” ;-)

    I bought it, because it is worth the price. I even bought a few dozen of them and gave them away as gifts. It is nice to have a book in your hand. I still buy a lot of printed books, ebooks too, and some stuff I read on the screen. It all depends. I guess I will read a lot more on the screen in the future, once my iPad arrives :) And I am perfectly willing to pay for them – the majority of the stuff I read I will not pay for directly, though. I will pay for it with ads, that I don’t like and by paying too-high prices for products which are advertised too much ;-)

    Considering, what Jeff said on the topic, I don’t see a contradiction with selling a book. I think he would not deny anybody the right to ask money for a printed book, ask money for an eBook or place it online for free. Each form has its value, its advantages and disadvantages and many products will bei available in all three forms.

    In the end it is the market – you, me and everybody else in the target audience – who will decide, how much content is worth in each form and especially, if it worth paying for.

    If I do not interpret the original post completely wrong, all he is saying is, that it might not be a good idea to build a pay wall around your content if you are not absolutely sure that it is “scarce”.

    News – and commentary – is not scarce on the internet!

    Publishers should be very careful, not to implement a business model which only works for scarce stuff with a product which is available in abundance- in the potential customers opinion. This opinion does not have to be true.It is enough, that the customer CONSIDERS the cheaper (or free) product comparable to ruin sales of the more expensive one :)

    I consider this good business advice. It is not a mantra, not philosophical or ideologically founded. It is just an advice on how to maximize profit ;-)

    • Eric Gauvin

      I agree with the spirit of what you say, but I think it’s very disingenuous for Jeff to give that offhand response to his critic as if to say that it really has much to do at all with the role of his book book in the world. Jeff sells his book relentlessly and I just don’t think that free version has much to do with anything. No facts or data to support my opinion, just instinct and common sense… ;-)

    • Eric Gauvin

      …there’s an extra book in there… sorry.

  • http://pupeno.com J. Pablo Fernandez

    You can listen to this blog post on http://hearablog.com/sites/buzzmachine/post/the-danger-of-the-wall

    What do you think?

  • http://woip.blogspot.com Patrizia Broghammer

    Not only the people who work deserve to be paid, they HAVE to be paid.
    Money is the reason why you work and working is the mean how to survive.
    All this walls and free and everything else.
    Since the Internet catches people with the promise of being free it is a must to change the way news are paid.
    So that they look free, but in reality they are not.
    All this calling one business in a different way, I do not charge for the news I give you, but you have to pay for the merchandize I sell.
    The problem is: if I usually buy some merchandize in a place where I pay for it, and I begin buying the same thing in a place where I pay for it and I get as a bonus free news, the one who sells without the bonus won’t sell anymore.
    What will happen?
    The news producers will go on selling news AND other things, creating some sort of monopoly.
    When they are well established, when the competitors won’t exist anymore, then, we will pay for the merchandize we buy a price which includes the news…
    I guess it is quite naive to believe that this IS NOT the actual strategy.
    I guess we are smart enough to understand that there is nothing free, not even a free lunch…

  • Josh

    You were posting from a phone?

    You didn’t have the link handy?

    Don’t you use a Nexus One? Couldn’t you Google for it then copy and paste the link?

    How will the link economy ever flourish if people can’t post links from their phones?

    • http://www.buzzmachine.com Jeff Jarvis

      It’s not easy to cut-and-paste links while walking down a snowy street (I fell once because I was doing this) with gloves on.

    • http://www.buzzmachine.com Jeff Jarvis

      Oh, and folks, search on this: “what would google do free online” and it’s the second link. You all should try this Google thing. Pretty amazing. Maybe I’ll write a book about it….

      • Eric Gauvin

        To be extra clear: I’m not trying to get ahold of a free copy of your book.

        I’m pointing out that the free copy is irrelevant and can’t be used to support your arguments regarding free content online.

        You’re a linking fanatic, but you don’t even link to your own book online. Get it?

    • Eric Gauvin

      Don’t be patronizing. We know how to search.

      The point is that the free version is pretty :-) :-) :-) ***IRRELEVANT*** :-) :-) :-).

      The physical book is truly what matters to you. The only reason the free version has the any significance is in comparison to what one would normally have to pay for.

      You strongly emphasize the importance of links on the internet. But I haven’t seen you linking to your free book at all.

      Even when you excerpt chapters in your blog, you don’t link to the free version.

      It doesn’t make sense.

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