Friday, November 2, 2012

Online paid content: Back to the future

It's amazing to see just how thoroughly the newspaper industry's attitude toward charging for content online has changed since Farhi's article in 2008. In that piece, he has to preface the idea of charging for news with the description that the guy in favor of it "sounds like a man from another century." It just wasn't something that could be proposed without invoking eyerolls.

Today, just less than four years later, it's gone from almost unspeakable to the default strategy for major metro newspapers in the U.S. Reading between the lines, it seems as though newspaper publishers bought the idea that the future was online (which is true, at least in part), and responded by jumping onto the free-web philosophy full-bore, without putting much thought into how they were going to make money off of it. It took most of them a few years, but they've all realized that the business model just isn't there yet (and that's a key word), and they have to do something to make it feasible financially.

So I think what we're seeing now could be the best of both worlds -- an approach to the web that's aggressive about finding genuinely innovative ways to inform and engage audiences, along with a realism about what it takes financially to sustain that kind of quality, and an approach (charging for online news) that matches that realism -- all without walling themselves off from the web. As much as paid content's critics might call it a retrenchment, it does seem like a way forward, at least for the time being.

Tuesday, October 30, 2012

Pay for compelling content? Why not?

Anderson’s model for the future newspaper industry “paying people to get other people to write,” as he mentioned himself, stemmed just from his personal experience. Moreover, the model seems to be limited to the economics of media down to “hyperlocal level.” Amateurs who are organized and taught by professional journalists and write for non-monetary rewards may be good at covering their own communities. However, it’s a different matter with “news content” to my mind. Information is one thing, news is another. I am not sure, for example, how much one who works as a civil engineer by day and write about something he/she loves by night can gratify the desire for in-depth stories and differentiated content of audiences. The 'Free' information itself does not make money at all without advertising. In addition, although ‘GeekDad’ is making some money from advertising, I don’t think the model can be appropriate for the future of news media industry.

A study (Peitz and Valletti, 2008) compared the degree of market failure arising in two market structures: pay-tv and free-to-air media platforms. While pay-tv has two sources of revenues, advertising revenues and revenues from viewers, free-to-air receives all revenues from advertising. The result showed that free-to-air television tends to provide less differentiated content whereas pay-tv stations always maximally differentiate their content. The study also found that market failures are smaller under pay-tv than under free-to-air. The result may not always be true, but I believe that audiences are willing to pay for unique and compelling content they value.


Free vs. paid: Can't we all just get along?!?

As I mentioned in class yesterday, I fall somewhere in between Chris Anderson and Malcolm Gladwell on the debate over the primacy of free vs. paid on the Internet. I think Anderson bases his argument on a basic fact of recent technological history that is difficult to refute: The power to store and distribute information is continually getting cheaper and cheaper, and thanks to collaborative tools, more and more people are willing to produce that information for free as well.

The problem with Anderson's argument comes, as Gladwell points out, when he tries to turn this simple technological observation into some sort immutable law that's an ordering principle for the way the world should be run. In some cases and markets, economic principles based on free goods, services, or content makes the most sense. In other cases, it doesn't. Just because it works in some cases doesn't mean it's a binding (or even relevant) principle for others.

On the other hand, I do think free content/information/goods/services is a phenomenon that needs to be taken seriously by businesses, especially in the media industry. It can't just be waved off as "utopianism" or "freeloading" -- it's a real, actual phenomenon that has real, actual economic forces and explanations behind it. I think the vigorous defense of paid economies by Gladwell and many others in publishing industries is motivated in part by self-protectionism -- a desire to preserve a world in which the work that they do remains important, regardless of whether it actually is.

There's a sense on both sides of this argument that the other is living in a fantasy world: Paid says the free advocates are ignorant of the fact that someone is paying for all this "free" stuff, and free says the paid advocates are desperately trying to hang onto a model where their content/labor is worth a lot more and is a lot less replaceable than it actually is. I think both sides both have a piece of reality, and if they'd acknowledge some merit in the other's points rather clinging to their absolutism, we'd make some real progress toward a mutual understanding of how the Internet economy actually works.