From Nick Carr, commentary of a study of online media that suggests that free would not have been the right strategy for online news at the outset. Gist:
Gentzcow concludes that a newspaper’s print edition and its web site are substitutes rather than complements – the site cannibalizes, rather than promotes, the paper edition. The substitution effect is quite specific: On any day that a Post reader looks at post.com, the odds of him buying a copy at a newsstand go down significantly.
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If the print and online editions were complements – the demand for which rise or fall in tandem – then a newspaper’s online pricing strategy would be pretty much a no-brainer: it would give away the online edition in order to expand print readership and harvest an added source of ad revenues. But the fact that the two products are substitutes complicates the strategy. If you rush to set the price of the web edition at zero too early, before online ad sales reach a certain level, you may sacrifice revenues from print sales and ads without making them up through online ad sales. The better strategy, explains Gentzcow, would be to charge a fee for access to the online news (or at least, by implication, some part of it valued by print readers). That way you dampen the loss of print sales and ads and maximize your overall revenues and profits. At some point, once online ads sales strengthen sufficiently, it may then make economic sense to remove the fees for accessing the site.
I haven’t read the study, and at the end of day, who knows, really. And it’s certainly (but I would have thought, obviously) true that when to take down the paywall is a very individual question. But based on Carr’s summary it seems to me that the larger point for most newspapers is not the substitutability of their own online for offline – it’s that the online news and opinion offerings of other publishers are almost perfect substitutes for their own (online or offline). With a growing number of readers preferring online to off, and with the number of those online alternatives trending effectively towards infinity, for most newspapers the real issue has not been (or should not have been) cannibalization of one’s own market – it’s been hanging on to a readership through whatever means are available. I couldn’t tell you what’s in the National Post any longer – except for Andrew Coyne’s column – I just don’t bother, so crippled was its online version. The Globe online is crippleware too, but less so, so that’s where I go for Canadian news.
Of course, the even bigger problem for most news and opinion publishers is that everything competes with everything else, now that the ‘net has exploded publishing’s traditional geographical monopolies. There are just too many publishers publishing the same damned thing; there really are just too damned many newspapers. And the problem for papers like the Globe, as well-served as it is by the Post’s obliviousness, is that there are many other publishers around the world who do what it does much better. With the exception of local, there’s not much there I can’t find elsewhere in greater depth and with better writing. And that’s the real problem publishers have. A few years from now, paywalls are going to seem like a blip, and online cannibalization of own offline is going to seem like a walk in the park. Canadian publishers have a little more time than their U.S. counterparts – we have a bit of an appetite for local cultural content and this is too small a country to offer true competition. But it’s coming.