The recent trend for news corporations to start charging for online content is risky. The success of which relies on the competitors to follow the exact same business model. This is not usually how business competition works. For the user, if something is free for several years, and the next day it will cost money, then unless they have a necessity for the product will not have an incentive to use it anymore. Especially if one can get the same or similar content for free elsewhere, then the user will make a decision to visit the cheaper site, and online, as Chris A. says, ‘there is no cheaper price than free’.
One thing will definitely happen, the free sites that remain free will have an increase in readership and advertising value, as well as a bigger share of the market.
The sites that do not stay free but have a ‘loyal’ user base, are in effect are closing themselves off to the outside world.
The potential for new readers to trial their content is reduced, as some sites are planning on disallowing spidering from Google. The news site will become closed off and this in turn will confuse consumers as they try to decide which news site is best to subscribe to given the imperfect information. I predict the onset of a few paywall comparison sites that would scrutinise every article behind the closed doors and judge which is best value for money.
The news sites will have a constant advertising revenue and user base of millions, suddenly drop to zero, then increase slightly. If the increase is not strong enough, they will have to open up again to the advertising based model, otherwise the revenue will not be good enough to bring in good journalists and articles, and therefore death spiral down to nothing. In some ways, adding a paywall is like shooting yourself in the foot whilst trying to get to running speed again as fast as posisble.
Niche vs Commmon
FT.com is a ‘niche’ financial based news site, and it is having moderate success from the paywall business model. AFP, Reuters, Bloomberg are the main sources which FT.com takes the articles from, which all currently do not charge for content.
Common sites such as Guardian, Times, The Sun etc.. are not niche sites, in that they all provide the same news headlines except with a slightly different style, political slant and aim for slightly different user bases. Switching from one to the other as long as they are free will not affect normal users, in that people are not devoted readers to a common news site.
BBC
Most people in UK pay tax money and are indirectly paying for BBC online news services, and BBC news is the most popular online news site in UK. Viewing from other locations, there is advertising to offset the bandwidth costs. It is very likely that the BBC will remain a free news site. Therefore, if all the other common sites add paywalls, the BBC will not have to follow suit and therefore it becomes the odd one out thus breaking the paywall model dependency.
Freemium model
In Chris Andersons FREE audiobook, he states that if 1 person pays for content it should be able to fund 15 other free users. Thus leaving the content free, and later charging for extra premium features would maximise revenue. The free users will still read the articles and the advertising revenue stream is still there. The paywall model is cutting off the 15 free users for the 1 reader, in the hope that it becomes more.
Chris A. also states if there are two things one which is free one that is not, the price will gravitate towards the free business model, whether by itself or by external intervention or circumvention. The paywall is a contradiction of this statement, and it is uncertain what this business model offers in terms of profitability or longevity.
I recommend listening to the 7 hour free FREE audiobook by Chris Anderson: http://itunes.apple.com/us/podcast/free-the-future-radical-price/id325694782
Current news on paywall:
http://news.google.co.uk/news/search?aq=f&pz=1&cf=all&ned=us&hl=en&q=paywall
