More Proof That 'Free' And 'Online' Doesnt Work

IF NEWSPAPER bosses keep their promises, the next few months will see a decisive retreat from free news online. This summer senior figures at big media firms such as News Corporation, Axel Springer Verlag and MediaNews Group have all threatened to start charging. Companies representing more than 700 newspapers have expressed interest in the online-payment platforms being developed by Journalism Online, an American start-up.

It will not be easy. For ten years readers have been enjoying free news online, and the BBC, public-radio stations and commercial television-news outfits such as CNN will continue to supply it. A newspaper that tries to charge will jeopardise online advertising, which often accounts for 10-15% of revenues. But if the obstacles are many so are the potential solutions.

The simplest approach, favoured by a small but growing number of American regional newspapers, is to erect a pay wall around virtually all stories. Print subscribers are often—but not always—allowed to read articles free of charge. Everybody else must pay, often quite a lot. The Newport Daily News, a small Rhode Island newspaper, recently began charging $345 per year for online access to stories.

Few opt to pay such sums. Fully 170,000 people buy the Arkansas Democrat Gazette every day compared with just 3,500 online subscribers. “It does not justify itself as a revenue stream,” admits Walter Hussman, the paper’s publisher. In fact, the Democrat Gazette’s pay wall is more of a revenue dam, intended to stop the flow of readers (and, thus, advertisers) away from print. Since 2002, when the paper began charging online, its average daily circulation has dropped by less than 1% a year—rather better than most.

The newspapers that have built successful pay walls tend to hold virtual monopolies over news in their region. Grupo Reforma, a Mexican newspaper outfit that has attracted some 107,000 web subscribers, is an important exception. It serves them not just news but exclusive job advertisements. Along with a weekly society magazine distributed only to subscribers to the printed version of Reforma in Mexico City, that helps the title cultivate an air of exclusivity.

Some publications have tried charging for a digital simulacrum of their print editions, with a more familiar design and layout than their websites, which can often be downloaded as a single package. The Süddeutsche Zeitung sells an “e-paper”, as does the New York Times, in the form of the elegant Times Reader. The latter is also one of the many papers that have created applications for Apple’s iPhone, Amazon’s Kindle and other mobile devices. Many publishers hope that people will come to accept the idea of paying for mobile news, as they pay for text messages. But the line between computers and mobile devices is blurring as new gadgets of varying sizes appear (see article).

Another option is to charge for just some content. In Britain, where fierce competition between national dailies probably rules out all-encompassing pay walls, newspapers nonetheless charge for crossword tips and participation in fantasy sport leagues. German newspapers commonly charge for articles from the archives, which may not be all that old. The theory is that a person who tracks down an out-of-date article or a crossword clue probably cares enough to pay for it.

The greatest exponent of the niche approach, with more than 1m online subscribers, is the Wall Street Journal. Roughly half of its articles—generally financial news and insiderish business reports—sit behind a pay wall, although they are free if accessed via Google News.

This approach is much harder to emulate than it may appear. Between 2005 and 2007 the New York Times charged a subscription fee to read the paper’s most popular columnists online. It ended the experiment because it seemed to be cutting traffic to the site and harming advertising revenue. The Los Angeles Times dropped an attempt to charge for arts coverage for the same reason. A newspaper that wants to follow the Journal must produce copy that is both narrow in its appeal and useful.

The Financial Times (part-owner of The Economist) keeps readers on a meter, by charging those who look at more than ten articles a month online. This model has one big advantage: it is easier to adjust than a pay wall. A newspaper might, for example, respond to a buoyant market for display advertising by allowing people to read more free articles each month.

Lurking in the background are methods that have been discussed more than tried. The first is to charge readers for individual articles. This works in music. Experiments with “micropayments” have been held back by the fact that stories are much more perishable than songs, and by transaction costs. But small payments are becoming cheaper and easier to process. Both the Journal and the FT have hinted that they will test micropayment systems.

A final approach is to harry online aggregators such as Google News, which indexes stories, for a share of their advertising revenues. That would at least bring some emotional satisfaction.

http://www.economist.com/businessfin...ry_id=14327327

Hopefully this will be a step in the right direction for more companies (read as adult webmasters) to realize that offering content for free isnt a sustainable business model that is going to work.

Im sure a lot of these online newspapers that start charging for access to them will see a drop in traffic initially but im also sure that after a few months, these traffic levels will start to increase again, hopefully as more and more online newspapers start charging for access to the information inside them.

I really do hope this marks a turn in the way online content is delivered and signals the start of the death of giving away the horse and the cart when it comes to online content.

Regards,

Lee