Online debate hits the wall

A funny thing happened to my column about pay walls in The Wall Street Journal last week: it was blocked by a pay wall. Many interested readers and linkers couldn't access the piece, and since those who could were paying online subscribers, it was very much like giving a sermon to the choir with the church door locked.

Here’s an unblocked reprint, followed by some spirited comments that turned up in various publications and blogs about the vexing question of how well newspapers will fare in charging for content online . . .

WSJ: By Peter Funt

Major media companies have finally learned something about whether consumers will pay for content on the Internet, and it's this: The answer won't be found through endless debate. At long last—due in part to economic stress—significant strides are being made to take "pay models" out of the conference room and to the public.

The Gannett company has erected pay walls at three of its newspapers in medium-size markets to determine under what arrangements readers might be willing to pay for online content that until recently was free. The San Francisco Chronicle, meanwhile, is now the largest U.S. regional paper to require readers to pay for key stories via either the print or Web editions, or wait at least 36 hours to read them for free online. In January, the New York Times will begin a heralded test in which readers who are not paid subscribers will be allowed to access some number of online articles for free, after which they must pay.

The Wall Street Journal has been in the vanguard of paid online publications. This month, its parent News Corp. implemented the same approach at one of its other papers, The Times of London. Readers who don't subscribe to the print edition must pay a fee for online access or be blocked out.

In the video arena, Hulu, the major supplier of television shows via the Internet and backed by Fox, NBC and ABC among others, recently introduced a paid subscription service. Viewers now pay $9.99 a month for a package of recent network-TV offerings, while other Hulu content remains free.

These are but a few examples of marketing gambits currently underway, and with each have come howls of disagreement among analysts about which approach, if any, will work.

Yet often overlooked is the fact that virtually all trend lines in recent communications history have moved, with success, from free distribution to some form of pay model. The viewing and listening public has demonstrated repeatedly its willingness to spend for content, so long as there is some degree of perceived value.

Until Home Box Office emerged in the mid-1970s, the notion that people would pay to watch a television show was unheard of. As technology improved in the early 1980s, HBO and its imitators became enormously successful by offering programs uncut and without commercials. Much of the fare, such as recent movies, concerts and high-profile sporting events, was unlike anything available on "regular" TV. Over time, with millions of paying subscribers in the fold, HBO's lineup expanded to include series that had much more in common with free TV offerings, yet were still exclusive and required a fee.

Over the course of the '80s, the public was sold on the idea of owning copies of movies and some TV shows on videotape. When DVD technology took hold in the '90s, this business exploded. Why would viewers so willingly spend anywhere from $10 to $100 for collections of vintage shows like "I Love Lucy" that had been broadcast for free thousands of times? The answer is that the pay model included convenience, commercial-free viewing, high video quality, plus various "bonus" features that created perceived value.

An even more startling development came in 2001 when XM Radio began selling radio content via satellite. The essential attractions were the same: high-quality audio, largely free of ads, with a vast array of channels to please many tastes. There are now roughly 20 million paying customers for radio content that previously seemed unsellable.

For newspaper companies to jump into this digital pay arena, the main hurdle is convincing readers to spend money for material that to date has been so readily dumped online for free. But if free TV could become pay TV, and if free radio could become pay radio, then it would seem to be easier for pay printed newspapers to become pay online newspapers.

Many additional challenges face publishers in this belated effort—among them the proliferation of free sites that summarize, categorize and even plagiarize material. And there is legitimate concern about how much advertisers will spend online versus in print.

But the central question on which industry observers seem to dwell—will consumers pay?—has already been answered many times in media history. Yes.

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On the Journal’s own site, Alex Geshwind wrote: “I have to disagree with the basic premise…The biggest issue is the massive amount of free, independent content available online. If I want to read local news, I have nearly limitless options…free of charge.”

PF: I’m guessing Mr. Geshwind lives in New York or another major city. In most of the U.S. meaningful local news coverage is very hard to come by, hyped local-TV newscasts notwithstanding. In most markets, local news remains the exclusive content of the local newspaper.

Glenn Patterson added: “Mr. Funt misses some basic points. With cable, you pay one fee and get hundreds of channels. You don’t pay a separate fee to CNN and ESPN.”

PF: But you do pay a separate fee for HBO, Showtime and other pay channels; and you pay for the NFL package, the NBA and MLB, etc., etc.

Mathew Ingram wrote on his blog GigaOm: “...the flaw in this argument appears in Funt’s own description of why HBO succeeded in charging viewers for TV content: He says that ‘much of the fare, such as recent movies, concerts and high-profile sporting events, was unlike anything available on ‘regular’ TV.’ In other words, it provided something completely different, and thus worth paying for…Both XM and its former competitor Sirius Satellite Radio paid millions of dollars to radio jocks and commentators such as Howard Stern to get them to appear exclusively…the content was unique and different — and satellite radio also arguably offers convenience of access and higher quality compared with terrestrial radio (DVD versions of TV shows could be seen in this way as well). Can we say any of those things about the paywalled content offered by newspapers?”

PF: I’d argue that The NYT offers more “unique” material than, say, XM Sirius — from Bob Herbert, to Frank Rich, to David Carr, to…well, the list is very long, much longer than any list with Howard Stern on it. It’s true the Times failed with its original pay wall, but that was primarily because it hoped for new online customers, when, in fact, the goal for newspaper publishers at this point is to retain a base of paying subs (in the NYT case about a million), and to do that requires protecting the unique content by not giving it away free.

In the blog TeleVisual, Aymar Jean Christian writes: “Citing the examples of HBO and cable, then VHS and DVDs for TV and film, and finally satellite radio, Funt says consumers will pay for content, which is true. But there’s a bit of folly in the argument that media naturally tends toward pay models and greater concentration. The truth is, up until our recent digital conversion, television has remained at least somewhat free — HBO, after all, is just one channel, and pay-cable, while never-more-popular, is still a minority interest…Translating this logic to new media is also a bit wrongheaded. Cheap and open access to web content — which encompasses most media — has been a hallmark of its revolutionary nature. The threats to this model are varied, and they’re not all bad per se — subscription-based web video is bound to happen, and, like HBO, won’t be the end of culture — but we should be aware of the changes.” And, in conclusion: “A free Internet may be a myth, but it is a myth worth fighting for.”

PF: It’s not a myth, it’s just part of the picture. I believe many newspapers will succeed with fully-paid sites, while others will serve communities with ad-supported, free sites — and papers that can’t successfully convert to either model will go out of business. But “cheap and open access to Web content” for, say, bloggers, is not threatened by newspaper companies that might determine that publishing for free doesn’t work as a business.

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