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29th of Mar. 2010

The Pay Wall

By Yaron Schoen

References

Related links that inspired or helped me create this article.

Disclaimer: this post is not about design, it is about content. Whether we like it or not, the way we view online content has to (and will) change. When I say change I mean ending the rein of free content. It’s just not going to work in the long run. It has been clearly proven that sustainable revenue cannot be produced purely from online banner ads, they simply do not pay the bills of a medium to large sized newspaper or magazine. This leads to the obvious solution of the dreaded… paywall.

Fun

So, let’s start off by agreeing that getting stuff for free is fun. Obviously I would rather go to an Iron Chef’s restaurant and eat for free than spend my hard earned cash, but sadly that is never the case and for quality food I need to open my wallet. People work hard to produce quality stuff and it is only fair they get paid for their hard work. We live in a society where everything is give and take, and without that process society would surely collapse.

Then why is the internet any different?

Don’t get me wrong

I am not against free content. I don’t mean to promote putting pay walls on every site out there. I can’t imagine adding a pay wall to my site for example, and I am sure that if I was ever to do so, I would lose many (if not all) of my readers. The decision to add one needs to be judged case by case.

Good For Democracy

Free content can be a positive thing. There’s even something philosophical about having free content/knowledge accessible anywhere at any time. I believe, to some extent, that it is the natural evolution of democracy. Wikipedia is the best example. Knowledge there is produced for and by the people. I would go so far as saying that adding a paywall to such establishments would be going a step backwards in our democracy. 

Bad For Democracy

Having said that, journalists need to be paid. A newspaper or magazine cannot live on charity, and we cannot rely on blogs to provide us with our news. Without money, how would a newspaper send a journalist to cover the war in Afghanistan or uncover secrets hidden to us by our government. That means, not having a paywall, would hurt our democracy as well.

That’s All Great But How Does This Affect Us As Designers?

Lets take this conversation and put it into a micro-cosmos of our own small web design world, associating it with recent events. Many of you may have noticed a few days ago, that Smashing Magazine decided to pull down their content and in place put a splash page promoting their new book. I am not really sure if this was because they are in financial distress or simply because they wanted to promote the book. Never-the-less the move got me thinking about the pay wall, especially when it hit so close to home. Seeing that notification got me worried. If our largest online webdesign magazine cannot sustain it’s web presence, we’re really screwed no?

So What Should We Do?

The way I see it, we need to combine both the world of paid content, and the world of free content. To be honest, this doesn’t seem like a hard thing to do. Why not take the 37 Signals subscription approach? They provide users with a free plan, that basically doesn’t do a lot, but you still get to use their web app. If you need more features you can simply upgrade to a paid subscription. Why are the content providers so scared of this approach? 37 Signals seem to be doing just fine with it.

Why not simply have 2 channels:

Premium (content behind the pay wall) - Articles that are created with depth and thought. They are revised again and again, until the article is perfected (i.e. opinions / interviews / tutorials / ect).

Free (fast food content) - Mediocre articles that mainly fuel the needs and impulses of our quick modern life styles (i.e. 10 ways to be an amazing designer / 30 Free social media icons / and all that crap).

Combining both worlds is the only solution I see. The Wall Street Journal is doing it in their own way. Some content is free, some isn’t. Usually the more in depth / interesting articles are hidden behind a pay wall. Breaking news is usually open to the public and so are the older articles that become irrelevant after time. This system is working just fine for them. They may have less unique visits than cnn.com, but I am sure that they are making more money, so at the end, does it really matter?

I am not trying to be pretentious by saying that I have the solutions, but one thing I can say for sure… Content does not want to be free and shouldn’t be (well, at least not quality content).


Comments (22)

So what do you think? The world wants to know!


Trent walton
March 30, 2010

Well written-  I think this is a conversation that needs to be had.  Sorting it out will be a sloppy mess, but you’re right - it has to (and will) happen.



John Kakoulides
March 30, 2010

Companies don’t give content away freely. They give away content that is perceived to be free. You pay for your use of network television by watching commercials. You pay for your use of news sites by downloading ads. You pay for your use of free tools on corporate websites so that they can market to you.

What some media corporations are finding is that their business models on the web are breaking down. If ads on news sites were profitable enough, news periodicals would continue to offer free access indefinitely. It turns out web advertising isn’t profitable enough, as we are seeing more news publications, such as NYTimes.com getting ready to charge for online content.

37 signals’ reason for free is completely different. They don’t provide free because of an ideal. 37 signals takes the drug dealer’s approach to free. Give users a little bit of product for free and get them hooked. They know once you start hosting your project on a free account, it’s only a matter of time before your client begins complaining that they can’t upload any images or start a new writeboard. As a result, you open a basic account.  That’s how they hook you. See page 191 of 37-signals’ book <u>ReWork</u>.



John Kakouldies
March 30, 2010

Add some bottom margin to your #comments p ;)



Brett Sinn
March 30, 2010

Let me preface this by saying, I agree completely. The internet’s sustainability and growth depend on it.

However, it’s easy to pay for something tangible like Basecamp for instance. I know what I’m getting. I’m getting a project management system that effects my bottom-line.

Would a subscription model work for content that I may not need? I sure enjoy reading your blog Yaron, but does each article meet my needs every time? That’s impossible. I think it’s a small reason why newspapers and magazines are failing. It takes a diverse amount of information to remain relevant to every person and bring value.

What WOULD I pay for? I’d pay for convenience. I bought an iPad, how do I easily get that information on my iPad? I bought a Home Theatre PC, now how do I easily get the shows I want? Whether it be the publishers, developers, journalists that deliver…I don’t care. Convenience has real value.



Yaron Schoen
March 30, 2010

@ John - This is exactly what I am saying. Since companies do not provide content for free, and their banner ads do not provide enough cash, they will need at some point to resort to the pay wall.

I think 37 Signals is the perfect system exactly for the reason you are stating. If you would provide free content that teases the user to the better more thought out content then you may have readers subscribe more. Just like the WSJ does.



Christopher Meyers
March 30, 2010

That two tiered idea is a good one, but I can’t help think that you said more with the “fast food” analogy.

So many people who are unwilling to pay for content. will end up anemic of information. Or diabetic, or obese, (or however the simile should go) due to consuming massive amounts of low quality information.

I know very little about running a newspaper, or even a Smashing Magazine, but I think those examples are two very specific ones. It might be helpful to find some online content providers that are making money at what they do, without charging, if, in fact, any exist.



Dave Rupert
March 30, 2010

I know that TutsPlus (http://tutsplus.com/) has this same model.  A free open to the world version and then “Subscriber Only” posts.

The irony is, I don’t need the paid posts because it’s likely that information is elsewhere on the internet for free (or something similar).  So I’d be interested in how that model is working for them.

But I think you raise a lot of good points.  I would love to discover a sustainable model for web content… maybe more specifically I should say “Good Web Content”.



John Kakoulides
March 30, 2010

News corporations are in an especially tough spot when it comes to the Internet. It there is always someone smaller and nimbler wiling to give it away for free.



Christoph
March 30, 2010

Hm, I wouldn’t dismiss advertisement as an option, the system just needs to be improved.

But let me start somewhere else.

USA Today costs 50 cent per issue. Wired costs 10$ for a year subscription. Time magazine is 20$ for one year (52 issues), plus 6 more months free if you subscribe by credit card.

I bet that amount of money barely covers paper, printing and shipping. So the content is essentially free.

Online, that distribution cost falls away.

So magazines really make money by selling ads. Those are custom ad deals and each ad was created by a (hopefully) professional ad agency. Those ads are taken serious and that’s why there is money to be made.

Online, ads aren’t taken serious, neither by users, nor by publishers or advertisers.  Why can’t online ads be as beautiful as print ads? I bet, if such a system existed, ads would work out financially for everybody involved. The Deck is the closest example of such a system that I can think of.

Paywalls, to me, are artificial in the realm of news/magazines and sound more like a desperate attempt at making money, rather than being part of a holistic strategy.

So I’d bet my money on ads, as much as I dislike them.



Ian
March 30, 2010

As it applies to designers/developers - I think the quality of the content and the professionalism of the individual is really what matters in regards to pay content.

I believe the people that bark the loudest at content you have to pay for are the same people who pirate their software, charge super low rates and don’t really know what they’re doing when it comes to their design/development job. In contrast, when you come across a true professional they realize the value in paying for something that can help them do their job better/faster.

If I need to learn a technique for something that I’ve never done before or I need to understand better, I’d be more than willing to fork over 10 bucks for an online tutorial that’s going to save me a few hours of time on a project.

Take a look at motionworks.com.au they provide a blog with some great articles and discussions, and then they provide premium in-depth quality tutorials that are so much more than just ‘Click this, change value x to 5, hit enter, presto your done.’

For online publications, I think usage plays a big part. If I am going to read the WSJ every day. Then clearly it’s valuable to me and shouldn’t I pay them for that? Isn’t that how commerce works? They provide a service/product and I purchase it. But, if I’m paying you… I don’t want to see your advertisements. However, If I’m a casual users and I see an article that peaks my interest . I don’t want to have to pay for reading just one article every few months.  If I was required to have an account with WSJ Online, couldn’t they keep track of the articles I read? Maybe I get 3-4 free per month. If I’m going to read more than that, then lets start charging.



Christopher Meyers
March 30, 2010

The more I think about this the more I feel you have chosen some bad examples. Just because the newspaper industry has not been able to convert its business model over to a new medium, does absolutely not mean there is a problem with the predominant business model of that medium.

And as far as Smashing Magazine goes, in addition to it being a very specific example, its also the last place I would look for a product that people should be willing to pay for. I fail to see the value in most of their posts, and am not surprised that they might have had trouble making money at what they do.

Are ads a viable business model? I bet if you *Google* that question you’d have some very interesting answers, many of which would come in the form of the actual ads that are Google’s primary source of revenue.



Yaron Schoen
March 31, 2010

@ Christopher The business model of the online newspapers is non-existent. That is the problem. They still have not adapted to the change and it seems like they are only improvising. With the rise of the internet they lost 2/3 of their profits (subscriptions & news-stands) and left only with ads. I agree that with a major revolution in ads maybe they will be able to get those 2/3 back, but I think it will be just too hard. Wouldn’t it be easier just to go back to subscriptions or what we call… Pay wall. If not that than something else since ads are just not working.

The reason that this article was written was actually Smashing Magazine’s move to take down the site and promote their book because of their financial issues. Their approach was something I havent seen before and one that I do not agree with. That is the reason for the example and for the post to be honest. I would not pay for their content either but many of their readers would.

@ Brett You could say the same about cable as well. You still pay for it even though you do not watch all the shows. That said I actually do agree with you. I believe that a paid subscription like iTunes, but instead of paying for one song, you would pay for an article, could work. I would pay for an article if it cost me 20 cents. Or maybe even pay for a category such as sports…?

I like this, we got a conversation going here. Very nice!



Bernie Russell
March 31, 2010

This is a serious issue for anyone working in online media. The post and the comments have cleared a lot of the smoke.

The key is to define ‘free’. This is already a messy concept in the UK because of our health and welfare system, where ‘free’ means that someone other than the user pays the bill.

As @John_Kakoulides has pointed out, there’s the same confusion with online content. The user doesn’t pay, but somebody does. There are lots of models here: ad-funded sites; sites that use content as a loss-leader; sites funded by donation; there’s even the UK’s BBC model, whose site is funded by a compulsory national levy.

The user-pays sites seem to have at least two models: the WSJ, which provides need-to-know-now information; and sites like http://www.economist.com, which is free, but makes deep and archived content available to magazine subscribers.

There’s also a debate about whether the iPad and tablet PCs will create an iTunes-style model for news and magazine publishers.

So, yes, quality content needs to be paid for; but there isn’t one clear revenue model out there.

My gut feeling, though, is that the paywall won’t work. I’m not sure brand loyalty translates to online content?

Would it guarantee quality? The price would have to be so low that I wouldn’t notice - which means it could tumble over into a pile-it-high-and-sell-it-cheap model.

Also note @Ian’s point about the pirates. One thing paywalls will bring is an army (well, maybe a brigade or two…) of hackers working on ways to scale or breach the wall.

I also like @Yaron’s point about how newspapers have struggled to come to terms with the web.

Haven’t we all? ;-)



Tim Print
March 31, 2010

I’m just going to take the example of newspapers and assume that your statement that content should be paid for somehow is correct.

I think it’s partly to do with percieved value. 2/$2 per week seems a lot when you have been getting the same thing for free for the last x years. Maybe charging a tiny amount per article would soften the blow. 2-3 pence/cents per article, you get a couple of sentence intro for free and if you want to read the rest then you pay up. At least then the perception is you are only paying for things you are actually interested in.

Nobody is going to read the whole of the NY Times online everyday so why would I want to pay for the whole thing. I might read 3 or 4 articles at lunchtime though so I could scan for ones I’m interested and just pay to read those.

Of course this would depend on a really slick experience. You don’t want something popping up to make you authorise a payment every time you click a story. The payment system would have to be very clear and trustworthy but otherwise fairly invisible. Maybe a monthly bill like you get with iTunes.

You might have a few different journalists or editorials you like to read every day in different papers. No problem. Content is king. Not just per newspaper but per article or per journalist.

Paying for a daily edition or subscription works for print newspapers because there is no other choice, you can’t go and cut out just the articles you want. Why should the web use the same model. The whole point is it’s a different medium with different strengths.



Christopher Meyers
March 31, 2010

@Yaron These are some good points, but I guess what I really see as the issue (especially regarding the newspaper industry) is the expectation of profits.

I really doubt the market will bear the kind of profits that the newspaper is used to collecting (from both subscribers and advertisers) especially if the paywall is the method they use to collect.

Frankly, I can’t imagine anything better for democracy than the total collapse of the major newspapers. Not because journalists should not be paid for what they do, but because most good independent journalists aren’t paid enough for what they do.



Joseph Schmitt
March 31, 2010

I think there have been some very good points made. I especially appreciate John’s clarification on perceived free (or “free to me”) vs. actual free. I think that the major problem with going to a pay wall is that an overwhelming majority of the people who read online newspapers can’t make that distinction. Because it’s always been “free”, or at least free to them, they find it horrifying when they have to start footing the bill themselves. I think that’s one of the major transitions that will have to be made in this space, guiding people past phase. It’s really tough to give something and then take it away (this is why it’s always better to start off with a high price and then bring it down; people love lowered prices, but look out if you ever raise them!)

I think the iTunes store and the App store get away with murder here. Since its inception the store been a for-pay service where people are used to paying for content. It also helps that iTunes has One-click purchasing which makes payments ridiculously simple and easy (a level of ease that only Amazon.com has been able to bring as well to the the plain vanilla web in my opinion, which makes sense since they own the ridiculous one-click patent).

The fact of the matter is that the same person would have no problem paying $.99 for a fart app on the App store, but would never think of paying $.99 for a great article on nytimes.com. I think this is why the newspapers and magazines are so excited about the iPad: their customers are already trained to fork over their wallets.



Ale Focardi
March 31, 2010

I completely agree with you that content must have it’s value and creators must be paid accordingly to this.

Another great way that content providers could really start earning some good money would be following the 37 signals approach but giving it a twist for content. Instead of having premium-only sections with more information, what about putting a time delay on things?

An example would be with updated, time sensitive articles where the reader would have an advantage reading it now. here is a site that implements this successfully http://starcitygames.com/ premium content become regular content after 30 days. So far it looks this strategy has paid off since people do want to get that info RIGHT NOW!

Well those are my 2 cents, really good post.



Oren the wise
April 01, 2010

By placing a content behind the pay wall, the website is killing what is (in my opinion) the greatest benefit of the internet - it’s viral nature. 
People are no longer connecting face to face - in this day and age its only ping to ping. So if i can’t share an intriguing article that i read online or even a funny video with my friends (via Face-book, Twitter ext…), then excuse me, but you can keep your content to yourself.
Rupert Murdoch and his followers will soon learn about the real nature of the internet and its users and the declining numbers of subscribers (effecting also advertisement sales) will prove once and for all that what works in the “real world” media will not necessarily work on-line.



Christopher Meyers
April 02, 2010

Not to beat a dead horse, but Clay Shirky has some enlightening information on this:
http://www.shirky.com/weblog/2010/04/the-collapse-of-complex-business-models/



Web Design Nepal
April 02, 2010

Great! Keep it up…



David O.
April 05, 2010

There is a lot of quality free content on the internet, the problem with Smashing Magazine
is: they were spending money before they had the revenue to support it.  If Smashing Magazine puts up a paywall there are many other websites willing to take their place.  I think they should have raised the money first before expanding,  I recommend they read the book Rework. Lot of helpful information about cutting expenses.



Kevin Holesh
April 09, 2010

I have to disagree with you. The future of internet content is not putting some things behind a pay wall. It’s selling something tangible and using that content as a promotional tool.

37signals succeeds because they have products to sell, products that are useful to their design/business audience. The New York Times or Smashing Magazine have nothing to sell (a book doesn’t really count unless its useful to a wide audience, not just web designers).

Another example is http://www.alistapart.com. They serve Deck ads and I don’t know what revenue they pull from that, but it probably isn’t enough to support all the work that goes into it. I see that as a timeless website that asserts Happy Cog as *the best* web design firm around. You see well-written articles on there by industry leaders, not disintegrating list posts like on Smashing Magazine.