Very good sentences

by on March 3, 2013 at 7:45 am in Economics | Permalink

…the more formidable the paywall, the more money you might generate in the short term, but the less likely it is that new readers are going to discover your content and want to subscribe to you in the future. Amazing offline resources like the Oxford English Dictionary and the Encyclopedia Britannica are facing existential threats not only because their paywalls are too high for people to feel that they’re worth subscribing to, but also because their audiences are not being replaced at nearly the rate at which they’re dying off. The FT, for instance, has discovered that its current subscriber base is pretty price-insensitive, and has taken the opportunity to raise its subscription prices aggressively. That makes perfect sense if Pearson, the FT’s parent, is looking to maximize short term cashflows, especially if it’s going to sell off the FT sooner rather than later anyway. But if you’re trying to build a brand which will flourish over the long term, it’s important to make that brand as discoverable as possible.

That is from Felix Salmon and here are other good sentences too.  You can, by the way, check out our MRU class on the economics of the media here, class-specific link here.

Orange14 March 3, 2013 at 8:34 am

I think the problem is the difference between the three websites. The FT has fresh content everyday and one make the case that this content is more important than either the OED or Britannica. I love the OED but am not about to pay the money for a subscription given that I would not use it that much. Those in academia get a big advantage here as many institutions have licensed it so it can be used by faculty and students without directly paying (I don’t know if GMU licenses it or not maybe TC can tell us). When the OED first went on line several years ago, I sent them a note arguing for a much smaller individual license fee commenting that they would make up the difference in terms of large volume of subscribers (they obviously didn’t listen to me). I’ve contented myself by subscribing to the free OED word of the day and am still waiting for the subscription fee to come down.

FWIW, the annual subscription is $295 and I suspect that the real price point in terms of generating subscriptions is $40 or so. It’s really too bad that they have kept this wonderful resource from wider exposure.

JWatts March 3, 2013 at 11:21 am

“I suspect that the real price point in terms of generating subscriptions is $40 or so.”

I’d be shocked if even $40 was a long term viable number. Since Google is very close to free.

Ashok Rao March 3, 2013 at 8:43 am

All the discussion of a paywall usually concerns who’s willing to pay for subscription, not really discussing authorship. In the previous era, journalists and columnists would have loved to write for FT, NYT, WSJ, or the Post because of the huge prestige factor associated with these publications.

It’s okay to have a smaller audience in NYT than USA Today because you have a much more esteemed and distinguished audience. You’re writing for the world’s greatest newspaper.

FT has similar prestige, and can create that effect of a strong, thinking, community. But soon that appeal will erode as extreme prices (vis-a-vis anything else in this world) suffocate a reader base. When the new generation of ‘intellectuals’ stops reading this paper.

At that point you’d rather become a guest columnist on a famous and acclaimed blog – available for free. You’d rather make your own mark entirely outside of a newspaper.

Bob Knaus March 3, 2013 at 9:24 am

I used to think that the WSJ and the NYT had an “esteemed and distinguished audience”, and that by reading them I was a member of the thoughtful elite. When they added comment capability to their articles, I changed my mind.

TMC March 3, 2013 at 6:25 pm

I’m not normally a fan of anything more than a +1, but you get a +10 on this. WSJ took a hit, but the NYT crashed almost to the bottom. I like a number of their articles, but really hope the comments represent the bottom 10% of readership.

RZ0 March 3, 2013 at 10:06 am

FT subscribers are price insensitive because they get it through work, so the company pays for it.
I’m convinced the middle-class mass media will take off when someone figures out the enormous economies of scale to be gained from a low subscription price, like $2.99 a month. If someone like the NY Times charges that, it would have 10 million subscribers, maybe more. But at $15 a month (what it costs after the teaser rate expires), I’ll just thank them for reminding me I need to delete my cookies.

Millian March 3, 2013 at 2:18 pm

“soon that appeal will erode as extreme prices (vis-a-vis anything else in this world) suffocate a reader base. When the new generation of ‘intellectuals’ stops reading this paper.”

There is no evidence that this is happening, yet. It may well do so in the future. If most FT readers have their access paid for by their employers, there’s no reason to assume new readership will cease in a generational manner. If you’re 25 and your boss reads the FT, you probably need to read it, too.

As of now, there’s no blog that covers economics, finance, and politics, AND covers all the ideological bases of rich people. Unless, like, Zero Hedge is your idea of a serious news source.

Owen March 3, 2013 at 8:54 am

I’m still not convinced that the tipjar or porous-paywall model is ever going to work for any non-alpha blogger, someone who’s not Andrew Sullivan. I think part of the reason that paywalls have not worked very well is that they’re so fragmented– nobody wants to have to decide to pay for the Dish, and Slate, and Ezra Klein, and the Economist. As long as each paywall operates independently of the other, they’re all too small to be worth the hassle. Here’s an analogy: the way we consume Internet news and opinion, current, is like a buffet. You want a bit of everything, and we’re currently getting everything for free. If the chicken fried rice suddenly cost $5, but you got an unlimited supply, all but the most-dedicated consumers would switch to lo mein. If, however, the restaurant offered us the full buffet for $20–a little bit of everything–we would either have to go hungry or cough up the money. So my ideal paywall system would be:
1. Get 20 or 30 well-respected blogs and news sites on board.
2. Use Andrew Sullivan’s model for the most part: the home page is free, “read more” links cost money, and you get 4-10 of those before the paywall comes up. I’d get rid of free unlimited RSS access (can you do personalized RSS feeds per subscriber?), but keep the free-clickthrough exception, since sharing is so crucial to promoting blogs nowadays.
3. Users buy packages of “read-mores”-$5 for 15, $10 for 40, $15 for 75, something like that. These apply to every site included in the paywall package, and you could have a meter on your own site (or a Chrome extension) showing how many articles you have left. Sites would set their own quantity of free articles before you hit the meter, and they get to decide where to put the readmore button. Every click costs the same across all sites, and sites get paid proportionally according to the number of clickthroughs they get. The administrator of the paywall takes 5% off the top to cover expenses (or a site membership fee, or something).

This allows a whole bunch of sites to benefit from a one-time payment from the consumer; the consumer doesn’t need to make lots of micro-decisions about how much they value an article (in reality they do have to make such a decision, but I have the feeling that because the money is already spent, there will much less agonizing over whether this article is really worth 1 credit). The challenges I see, beyond the existential question of whether people will ever really pay for Internet content, are technical/privacy-related, and possibly legal (since you’re arguably fixing prices). What am I missing, though? Why hasn’t someone at least tried this?

maguro March 3, 2013 at 10:29 am

I’m not even convinced that it’s going to work for Andrew Sullivan. Is his content that unique? He can tell you that the Republicans suck and Obama is brilliant, but a lot of people can tell you that for free. Personally, I can’t imagine paying for political opinionating of any kind, given the amount and quality of free content that’s out there.

TMC March 3, 2013 at 6:28 pm

Andrew Sullivan is a very odd choice to highlight as content worthy of pay. Can only think of 1000 others, for free , of higher quality.

The Original D March 4, 2013 at 10:10 am

I imagine paid subscriptions to political opinion, like membership in the NRA and ACLU, goes up and down based on which party controls the White House.

Rahul March 3, 2013 at 1:20 pm

In short, cartels?

Owen March 3, 2013 at 2:36 pm

Yes, basically. You’re not going to get significant quantities of people willing to pay for content unless the supply of high-quality non-paywalled content shrinks significantly… it may still fail even then, but it will definitely fail otherwise. I have no idea about the legal ramifications of trying to organise something like this, though. There are relatively low barriers to entry into the political news and opinion market, which would seem to limit both the illegality of such an action and its potential success. David Simon had a proposal somewhat likes, specifically about traditional newspapers: http://www.cjr.org/feature/build_the_wall_1.php?page=all

Steve C. March 3, 2013 at 9:03 am

Ultimately, media/authors are going to be paid a nickel at a time. Similar to music, through an intermediary such as ASCAP. There will always be a market for subscriptions, they simplify. “Did you like this piece? Would you like to pay the author $.05? Click here.” Maybe Facebook? They already have the LIKE button.

JWatts March 3, 2013 at 11:40 am

That looks like the right pricing structure. Your average user would probably pay around $0.05 to $0.10 per article. Maybe a good quality site could consistently get $0.25 per article, but even that seems unlikely.

Millian March 3, 2013 at 2:22 pm

This will only work if the marginal cost approaches that of music, i.e. people doing it because it’s fun though completely non-revenue-generating. This may not work so well for serious journalism as it does for music.

prior_approval March 3, 2013 at 9:21 am

I prefer the time tested method that has worked so well, back in the days when Reagan was breaking new trails in the age beyond Bonzo (and while undoubtedly cashing a nice check from the AMA) –

‘In 1961 The American Medical Association hired the Gipper for a viral marketing campaign dubbed I kid you not, ‘Operation Coffeecup.’ Doing his part to scuttle the arrival of Medicare Reagan lays down an 11 minute rap explaining how Socialized Medicine can only lead to an America where men are not free. This record was then mailed out to the ‘ladies auxiliary’ (doctors wives) of the AMA in each county.’ – http://blog.wfmu.org/freeform/2007/06/the-gippers-hmo.html

The link to listen to Reagan (what, you think America hasn’t had more than 50 years experience in how to create ‘news’?) is http://blogfiles.wfmu.org/KF/reagan1.mp3

There are always people with enough money to get their message spread. Journalism as Americans knew it during the age of Murrow and Cronkite was a historical aberration.

chuck martel March 3, 2013 at 11:51 am

Journalism as Americans knew it during the age of Murrow and Cronkite was a historical aberration.

It was an historical aberration in that the interpretation of reality had become the province of three television networks .

TMC March 3, 2013 at 6:33 pm

“Reagan lays down an 11 minute rap explaining how Socialized Medicine can only lead to an America where men are not free. ”

Had we only listened.

dearieme March 3, 2013 at 9:58 am

I suspect that the FT changed the editor of the weekend Life and Arts section a few months ago. Its standard seems to have plummeted.
If they want to keep my subscription they need to keep their standards up.

sam March 3, 2013 at 10:29 am

IMO online content creators are still experimenting with methods of monetization that fit the open internet medium. This isn’t it yet.

Maurio March 3, 2013 at 10:54 am

“That makes perfect sense if Pearson, the FT’s parent, is looking to maximize short term cashflows, especially if it’s going to sell off the FT sooner rather than later anyway.”

It does not make “perfect sense” because if you maximize current cashflows at the expense of long term growth and value, you necessarily decrease the amount at which you can sell the company.

mike March 3, 2013 at 11:05 am

I think the idea is that the spreadsheet jockeys who would be the decision makers in such a purchase would just be looking at current cashflows rather than speculative “long term growth and value” that can’t really be put in the form of an equation.

bluto March 3, 2013 at 3:30 pm

That depends on how well anyone can tell that you’re done something at the expense of long term growth and value. Figuring out what makes companies grow/stop growing in the long run is a very difficult challenge.

Millian March 3, 2013 at 2:14 pm

More to the point, the FT isn’t threatened by a free alternative like Wikipedia. If writing financial journalism were as easy as compiling lists of languages in Star Wars, the FT would be under the same existential threat as Encarta.

ChrisA March 3, 2013 at 8:53 pm

The problem here is a collective action one (if there is a problem). As others mention above, the problem is that no one site is unique enough. Basically too much disaggregated competition. So prices are destined to stay at just above marginal costs, which are very low. This could be zero as many people blogging (our esteemed host for one) would blog for free). Typically these kind of collective action issues are solved by Governments. So what is clearly needed is a regulator, who can manage the industry for the benefit of all and ensure that people in the online media industry can earn a just wage………just joking, sorry. But in reality many solutions suggested here are just variations on this theme, basically how to get more rent into the industry, at the expense of the consumer.

I am tempted to say there is no real problem to solve for the general public, only the media industry. Do we really care if our providers of online content are getting close to nothing for all the work they do? There is a claim that newspapers act as a sort of auditor for society, rooting out problems and exposing them to public debate, the fourth estate model. Without a “good wage” online media will not be able to do this job. But its a bit like the debate that we had earlier on Government funding of research. Sure media can point to a few successes, but overall is this a cost effective way of auditing society? Isn’t relying on newspapers Maybe we should explicitly set up a group to do this auditing instead? Maybe Government funded, maybe funded as a non-profit?

Millian March 4, 2013 at 4:05 am

“Do we really care if our providers of online content are getting close to nothing for all the work they do?”

If we rely on them to be an informed citizenry, then yes.

The potential for wealthy interests – including governments themselves – to influence such media would be much greater than it is today.

superdestroyer March 4, 2013 at 7:57 am

Paywalls cannot survive in the long term. Too many people have set their price level at zero. Once people are not willing to pay, then, of course, your customer base is not going to grow. Of course, the flip sides appears that advertising does not generate enough income to maintain real journalism or a real publication.

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