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.