Here Comes the Paid Content
Consumer Reports provides a fascinating counterexample to the conventional wisdom that people won’t pay for content on the web, as reported by CNet (in some sort of vague collaboration with the New York Times). The author goes to great lengths to enumerate the unique factors that are enabling them to succeed with this model while other high profile purveyors of online paid content like the New York Times, the Economist and the Wall Street Journal have either eliminated their paywalls or are considering doing so. And indeed, I wouldn’t expect this article to change most people’s minds about the viability of charging for content on the web because it’s so easy to paint Consumer Reports as the exception that confirms the rule rather than a harbinger of things to come.
Yet there are many reasons to doubt that all future media will be financed by advertising. I’ve touched on this topic many times, notably in a March 2005 post in which I cited the ease of blocking online ads, among other things, as something that might motivate publishers to fall back on the more transparent mechanism of direct payments. The factor that led Consumer Reports to take this route, namely independence from corporate interests, is another that we might hope would be taken to heart by more publications. I mentioned one more the other day: it’s unclear that there is enough ad money out there to finance the entirety of content production as it moves online.
In the aforementioned piece from March 2005 I cited the arrival of mobile reading devices as one of the main triggers that I expected to force a shift in business models from advertising to paid content. This is starting to come true, most prominently with the Amazon Kindle, which famously embraces this approach even for traditionally free content like blogs. I’m not sold on the idea of a dedicated reading device, but I’m undeniably reading less and less printed pages now that the iPhone provides me with a usable portable device for consuming content online.
The main reason why publications like the New York Times broke down their paywall is that there is too much free content for readers to turn to rather than reaching for their wallets. The problem certainly isn’t that people are unwilling to pay for content: Consumer Reports proves that, as does the paradoxical success of the ring tone market, which has flourished in the absence of a free alternative. That’s why I hypothesized a tipping point in my musings on this topic two and a half years ago.
Here’s how this might pan out. More and more people will start to wonder, like me, why they pay to subscribe to the Economist when they can read the whole current issue online on their iPhone or other mobile reading device. As a result, publishers will see their overall revenues start to fall and will react by raising their advertising fees. Advertisers will take the hit for a while, but eventually they’ll start to fall back on other marketing techniques and use the savings to lower prices. Big web successes like Amazon, Google and Facebook don’t advertise, after all. Every newpaper and magazine out there will then find itself in the same position as Consumer Reports today, with no choice but to find a way to make paid content work. And the more publications that jump on this bandwagon, the less reason there will be for others to hold back.
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