Unbiting the apple: five reasons why paid-for internet news is doomed

It’s the worst kept secret in journalism, but still it’s stirred up a maelstrom of excitement: Rupert Murdoch’s thoroughbred titles, The Times and The Sunday Times, are to charge internet users for their content. Readers will have to pay £1 a day, or a bargain price of £2 a week, to read The Times and The Sunday Times online. The logic seems to be: if you’re bored of reading today’s news on the BBC or another free service, you can now spend money catching up with what happened yesterday. Many commentators assume that other newspapers will follow suit, largely on the reasoning that if Rupert Murdoch is doing it, it must make sense. But if this is the much-trumpeted opening salvo in Murdoch’s assault on free internet content, it will fail. Here are five reasons why paywalls for news content won’t work.

1. Once bitten, forever smitten

Newspaper veteran Alan Mutter coined a telling phrase last year when he described the decision by newspapers to let people read their content online for free as the ‘Original Sin’. On the same blog, back in 2004, he wrote: ‘If a newspaper gives away its costly and valuable product for free on the Internet, it may win friends and influence people in cyberspace, but it won’t gladden the advertisers who pay the freight back here on Mother Earth.’ Yet the phrase ‘Original Sin’ says far more about the attitude of print veterans than it does about the nature of new media. It implies that the solution to the industry’s woes is to go back to the busted business model of print: advertisers paying a premium for a limited amount of space, with the income being used to fund an extensive newsgathering operation. The internet is seen as very much playing second fiddle: a few ‘teaser’ articles published for nothing, the vast majority hidden behind a paywall, forcing readers to either pay for it online or (and this is what proprietors such Murdoch would really like) going back to the newsagent and boosting print sales, thus restoring the former value of his cherished advertising space. In reality it’s not going to happen. Readers are used to getting their news online for free and if it’s not available from Murdoch’s outlets they’ll simply go elswhere. This trend can’t be reversed, any more than Eve could unbite the apple and hang it back on the tree – which is what makes ‘Original Sin’ such an unwittingly appropriate metaphor.

2. They’re not worth it

Alan Mutter’s other mistake is to describe news as ‘costly and valuable content’. Costly it certainly is (or has been); valuable it isn’t. Newspapers acknowledge this in their cover prices – that £1 or 40p you pay at the kiosk represents a tiny fraction of the cost involved in bringing the news to your doorstep. Readers, in effect, pay only a token amount for their daily paper; the vast majority of the income is generated by advertising. Perversely, the real value of the cover price is not so much in the income generated (though it doesn’t hurt), but in promoting brand loyalty among readers. It forces them to choose one product out of the many on offer rather than just harvesting them all up indiscriminately – and people being creatures of habit, they’ll tend to select one and keep going back for it day after day. Once you’ve bought your newspaper, it’s a done deal – which suits advertisers, who can then sell their wares to a clearly defined audience. The online world is much messier than that – there’s a huge range of news sources out there, and they’re accessible without leaving your chair, making brand loyalty almost impossible to establish. Charging people for your services is more likely to drive them away than attract them. So the value of internet news has to be evaluated in a different way. The first hurdle that executives need to clear, though, is to understand that news in itself never was, never is, and never will be, profitable.

3. It’s been tried before, and it didn’t work then either

Time Magazine tried with paywalls in the early days of the internet. In the UK The Independent, rather entertainingly, tried charging its readers for its comment pieces (‘we’ll fill you in on what’s happening for nothing, but if you want to know what Bruce Anderson thinks about it, you’ll have to cough up, mate’). Even the New York Times, now reported to be ready to follow Murdoch’s lead and start charging for content next year, abandoned a previous paywall scheme, TimesSelect, in 2007. None of these schemes overcame the fundamental problem with charging for internet content, which comes back to advertising. Online advertisers rate websites by the amount of traffic they receive – whether this is measured in clicks or unique users, it amounts to the same thing. Put up a giant obstacle to people wanting to access your site in the form of a paywall, and surprise surprise, the numbers plummet. By turning away readers at the gates, these news websites were cutting off their oxygen supply.
‘Ah-hah’, say the experts, ‘but if a top-notch newspaper like the NYT charges for its content, it becomes a niche product and people will be happy to pay to become information-rich citizens. The problem here is that general news can’t be a niche product. It’s not inherently valuable enough and in any case it’s far too amorphous. The Financial Times paywall works because business information is specialist and enormously valuable. Learning something five minutes later than your competitors can be hugely costly. Moreover, news in the business world is perishable: once a deal has been sealed, the opportunity to make money by speculating on it has passed. But if you miss the Times’s latest scoop on Jordan and Peter, or Manchester United’s fortunes, you’ll have plenty of chances to catch up through other news outlets in the next few hours, by which time the story – if it’s any good – will have become far more interesting anyway.

4. We’re not in the subscription habit

Here’s another thing about Time and the NYT: in America (as in several European countries, such as Holland and Germany), there are two main ways to buy newspapers: cash at the kiosk, or through direct subscription with the newspaper itself. In Britain this second option hardly exists – if you have a regular newspaper on order, it’s probably with your local newsagent. Attempts to foist the subscription habit on the British public, such as the short-lived Scottish title Business AM, have mostly foundered. If paywalls were a viable model, you’d expect them to catch on first in those countries where readers were already used to buying the product direct from the supplier. The dire news is that so far, they haven’t. And if even the Germans can’t be persuaded to hang their beach towels on the paywall, it’s hard to see how British readers will be any more receptive to the idea.

5. Facebook is breaking out of the trenches

The media sections – those incestuous bits of the newspaper that only journalists read – have been excitedly pitching Murdoch’s move as the first shot in a trench war against Google’s news service. But there’s a problem here: Google is no longer the force it once was. Yes, it’s still a hugely powerful search engines, but the threat to its standing doesn’t come from other search engines, as was revealed with the news that Facebook is now the most popular website in the US. And if the search engine model is losing ground to social networking, it means that Murdoch (along with anyone who follows him over the top) is investing vast sums of money fighting last year’s battle. With hindsight, the power of social networking is no real surprise – I’m far more likely to value a link that’s been recommended by someone I know, and whose opinion I value, than on one spewed out at me by a computer that thinks in algorithms, however fast its processor. Thanks to Facebook and Twitter, there are far more opportunities to pass on news content from person to person than there were until very recently, and it’s much more diverting than slogging through Google search pages. And Facebook presents another problem to the paywallers, namely the issue of how you keep your content secure, as illustrated by Nestle’s recent PR meltdown. It’s one thing to stop a small number of hackers from reposting your content, but when every Joe Bloggs can copy and paste their favourite articles to their Facebook pages in a few clicks, how on earth are you going to stem the tide? As Nestle learned to their cost, the internet is no place for battle-hardened veterans of the trenches. It’s more like urban guerrilla warfare, where the enemy is smaller than you and constantly on the move, and a nut with a handful of explosives can wreck your sledgehammer.

2 comments

  1. Generally spot-on, but are you sure about this bit:

    > Readers, in effect, pay only a token amount for their daily
    > paper; the vast majority of the income is generated by advertising.

    ?

    I’m sure I remember the figure being something like 50:50 (a few years ago, anyway).

    • It’s hard to get clear stats on this, but Newspaper Association of America (NAA) figures for 2004 show advertising expenditure of $48bn against circulation expenditure of £11bn. So that’s a ratio of about 4.5 to 1, though it doesn’t show how much of the money actually comes back to the newspaper.

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