
Daring Fireball: Pay Walls - sant0sk1
http://daringfireball.net/2009/07/pay_walls
======
mediaman
The problem facing the newspaper industry is a similar problem facing the
airline industry. It is one reason why the airline industry has had terrible
economics since Kitty Hawk.

At first, the newspaper business model was this: there were many competitors,
and each competitor faced a mix of fixed costs (staff, printing facilities)
and variable costs (paper, ink, delivery). All was fine, because nobody would
give away product that had real cost associated with it.

But then the variable cost disappeared. No more paper, no more ink, no more
delivery. Suddenly, the only thing left was fixed costs. And all the
competitors realized they could start undercutting the next guy, while still
making some infinitesimal incremental profit on each viewer. Of course, that
incremental profit does not amount to enough to pay for all those fixed costs
(staff) that still exist. And hence the problem we have today.

Airlines face the same problem. Fixed schedules and a low cost per incremental
seat. So there are always price wars going on to "buy" seats from competitors.
But then they can't make up for their fixed costs, and they go out of
business.

Without the introduction of variable costs into web content, the newspaper
industry will resemble the airline industry: it will rarely make money, and,
on net, probably destroy most shareholder dollars invested in it. People will
keep talking about erecting pay walls, or fixing the system, but there will
always be the next guy who will be willing to provide the same thing for free
to grab all those viewers.

~~~
alanthonyc
There is a fundamental flaw in your analogy: airlines are selling actual
scarce goods (limited seats on a plane). Newspapers, as they are today, aren't
really selling anything.

    
    
      Fact: News existed before newspapers.
      Fact: News will exist after newspapers.
    

The "news industry" has never been in the business of creating anything. They
were simply in the "fact distribution" business. Facts used to travel more
efficiently via the newspaper than any other means (gossip, telephone, even
television). But now that distribution costs on the internet are virtually
nil, they can no longer make money by exploiting inefficiencies.

This is the reason that Simon's plan is never going to work. If they try it,
they'll go out of business just that much sooner.

There are publications that still make money off subscriptions. The Economist
is the shining example (I even subscribe, for a pretty substantial fee). The
value in their publication is in their __analysis __of the facts.

Everybody will __know __the same things pretty quickly. However, not everyone
will come to the same conclusions. Those __conclusions __are what they should
be charging for, not the facts.

~~~
lutorm
I disagree that papers aren't creating anything. To the extent that todays'
news industry just parrots back press releases, you may be correct, but I
definitely think there's a need for not just interpretation but investigation.

If there had been no newspapers in 1972, I don't see who would have put in the
effort of pulling at the threads until the Watergate scandal unraveled. To
take a more modern example, I don't see any bloggers that would have taken the
time or had interest in doing the few big investigative stories that the San
Jose Mercury has broken in the past few years, the one about people being
wrongfully jailed because of bad public defenders and the one about the SJ
Police's outrageously high number of downtown disorderly arrests, come to
mind.

Those are not stories that would have come out in the absence of an operation
willing to commit to long-term footwork. They certainly wouldn't have been
written by some bloggers looking for news online, because it's happening in
the real, offline, world, and you can't just "link" to it.

Without newspapers, or the equivalent thereof, these stories would not be told
and no one would keep the government honest (to the extent that newspapers
today haven't already failed at this). And I think this would be a loss to
society.

~~~
alanthonyc
I've heard the Watergate story used as an example before of a reason why news
organizations should "matter." At first thought, it sounds like there __is __a
third value proposition there (the three being fact distribution, analysis and
investigation).

Upon thinking about it more, don't you think that the value of the Washington
Post is a little over-emphasized in that story today? As much as the newspaper
itself played a huge part in allowing the story to break - from employing and
training their staff, through providing an infrastructure for doing the
investigation to publishing the actual piece - they almost had as much of a
role in __killing __the story. If the editor at the time had succumbed to the
pressure from the politicians, he may have caused the story to disappear.

In the end, it wasn't the "newspaper" who investigated it, it was two guys
named Woodward and Bernstein.

One thing I believe in is that the internet empowers __the individual __to do
things that were previously impossible to do by one person. Theoretically, I
think this applies in this situation as well.

As for the SJ Mercury News example, would that not be the same thing here? I'm
sure there at least a couple of individuals in that group that are driving
this kind of journalism. Maybe the newspaper as an organization helps foster
and nurture this type of behaviour, but so what? Couldn't an organization that
is not in the business of printing on paper do the same thing? What is the
difference between a newspaper and a blogging organization anyway? Is it the
salary? Is it the medium?

Nobody is decrying journalism, just the old (economically) unsustainable
models.

------
9oliYQjP
Honestly, I'm pretty damn sure 10 years from now my ISP subscription fee will
include a bundling of access to websites. It will be AOL all over again.

The problem with subscriptions is the way they're implemented now, not that
people find them fundamentally unappealing. It's just that, when I run up
against a pay wall for a specific story as I try to click through to it, I
don't see the value proposition in subscribing to the entire website. I just
want my damn story, and I'm not getting it. That is just frustrating.

Back in the day that AOL was a walled garden with custom content, the value
proposition for signing up was simple. They did all the work of making sure
content was available just to you, and you handed over your subscription fee
to one entity. Done and done. If AOL had been implemented as a hodge podge of
pay-as-you-go islands of content, it wouldn't nearly have been as successful.

------
lallysingh
I've subscribed to online newspapers on and off for a few years. Frankly for
the ones I read daily, $30-50/year isn't a big deal.

Outside that, all I'm missing is access to specific articles on other papers I
don't subscribe to. Couldn't that be done with per-article fees covered by
newspapers I subscribe to?

For example, say I subscribe to the NYT. With that subscription, I also got
100 article credits/year to read from the economist, wsj, etc. And visa-versa.

------
andreyf
I see a different problem: if there were a one-click paywall of $0.25 for a
single story (without ads) on NYTimes.com, given a one-paragraph "abstract" of
the content, I'd probably pay it several times a day, much more than I'd ever
pay for a single newspaper. So based on my own (imagined) behavior, I'd
hypothesize the problems of newspapers could largely be solved with micro-
payments.

~~~
Derferman
The problem I see with a setup like this is piracy. It only takes one person
to pay $0.25 and put the text up on github/scribd/pastie or any of the
hundreds of services available.

~~~
natrius
Google indexes the internet in near real time. Pay Google to monitor for
copyright infringement for you.

Regardless, I don't think the random copies are that big of a deal. The only
time something material is lost is when a copy gets posted to reddit or digg
instead of the original. Few people are going to come across random copies of
articles in obscure corners of the internet without direction.

~~~
chollida1
> Google indexes the internet in near real time.

Technically Google only index's top sites in near real time. CNN might be
walked many times a day, but if you think that every blog or torrent site gets
walked even close to a fraction as often then your mistaken.

~~~
natrius
I'm assuming many newspapers are among those top sites.

------
zach
Since cable was mentioned, it got me thinking. Is there no service in the US
that will provide you cable TV channels over the internet? ...Okay, after
searching, there seems to be backspace.tv which is sketchy as anything. Anyone
heard of this? Does this happen in other countries?

A custom-picked lineup for $20-$30 a month over Boxee or a Slingbox or a
Roku/Netflix box, etc. would compare well to $50-$60 plus endless taxes for
channels you never watch and a clunky set-top box. Maybe you could start with
sports or foreign channels to avoid vertical collusion problems from channel
providers.

Okay, but maybe we should wait until Verizon rolls out fiber optic to more of
the USA before cutting them off at the knees like that. They are depending on
everyone to buy overpriced TV service to pay for all that fiber, after all.

~~~
mcav
I'd love to be able to pick a couple channels (Discovery, History Channel,
SciFi[1]) and pay for them as online streams. I have no use for 60+ channels;
I only like a few.

[1] "SyFy", I guess now, which just seems strange.

------
olefoo
One thing that has struck me about paywalls is that the implementation of them
for newspaper websites is almost always entirely backwards. Usually even the
most fanatically subscription driven news organizations offer some of their
content for free to potential subscribers as a taster. And it's usually the
most recent items. It's always seemed to me that the right way to set up paid
access is to charge for the freshest articles and leave the archives open with
ads and various longtail merchandising. I think that would make more sense to
most people, if they click to a site and can browse the archives at will, but
when the try to read todays headlines they get the "This story will be free to
the public in $d days $h hours and $m minutes."

------
dlevine
One BIG problem with charging for online newspaper access is that it's
currently given away for free. Once you give something away, people react very
badly if you start charging for it (eg Jot). This mistake has killed a number
of software companies over the years. Look at TimesSelect - that was a
stunning failure.

If they want to subscribe, the newspapers need to figure out how to sell
something that they haven't already given away for free. Wish I could tell you
what that is, because they already give everything away. The only other option
would be to figure out a new way to make money off their content.

------
Empact
David Simon needs to read "The Innovator's Dillemma." This sort of approach is
exactly what dooms most established companies to bankruptcy in the fact of
disruptive innovation.

Information, particularly mass information is now cheap, and those high
margins are completely and irreversibly gone. Money is still there to be made,
as the many full-time bloggers can tell you. But it won't be enough to staff
the newsroom floor. That work will be distributed.

------
omouse
_It would just make things worse. If the Times and/or Post were to erect a pay
wall, I see things playing out as follows: they lose most of their readers_

Why? People pay $$ for the content that just happens to be in newspaper form.
They also pay for content that just happens to be on the TV. Why wouldn't they
pay on the Web? OH THAT'S RIGHT! Because everyone expects everything for free!
We're all a bunch of freeloaders that don't even want to pay for valuable
content.

~~~
andrewtj
They would not pay because by and large the content on the sites in question
is available elsewhere in one form or another for free.

That doesn't indicate that the readership are "freeloaders" (which implies
they're somehow taking advantage of the newspapers generosity) — that's people
deciding they'd rather not give away their money.

It's a value proposition - the newspapers who do not make money on the web do
not offer something unique to their readership and hence their advertisers.

------
wendell
"What feels like a fair price for a copy of a web page, on the other hand, is
nothing. They’re just ones and zeroes."

Really? Mac OSX is just ones and zeros. Does Gruber think that, along with all
other forms of commercial software or anything else that can be digitized, be
free?

~~~
allenbrunson
I don't think Gruber was arguing from his own position there. He's talking
about the way most people think.

