Error 402: But How Do We Pay For Content?

Journalism

from the paywall-fails dept

Over the past few weeks of our Error 402 series on the history of web monetization, we talked about the rise of the commercialized internet, and how it enabled transactions online, leading to the original dot com bubble around e-commerce. But, as we noted, nearly all of that was based on using the internet as a kind of glorified mail order catalog to order something physical, rather than something digital.

The path to paying for digital content took a very different route. As we highlighted last week, some news industry veterans decry the decision by many news providers to put their content online for free as the “original sin” of the news industry in the internet era. The argument, in short, is that by putting news online for free, we trained consumers to expect online content to be free, and made it impossible to charge.

Both ends of that equation are somewhat suspect, however. First, in the early days of the web, neither the infrastructure nor the culture was really set up for paying for content online. Most of the earliest attempts at doing so failed miserably. On top of that, over the past few years, we’ve seen that some sites (including news sites) have worked out successful strategies for getting people to pay to support them, though, as we’ll explain as this series goes further, the reasons they have been successful, and what lessons can be learned, have been widely misunderstood.

Indeed, there were early attempts to get people to pay for content online using various forms of paywalls that mostly did not succeed. One of the earliest news “paywalls” was launched by Microsoft, which created Slate as a site that wanted to charge a $20 annual fee for access. It did offer content for free for a couple years before launching the paywall in 1998. However, by the end of 2001 it decided to drop the subscription fee, saying that it resulted in “sluggish growth.”

Salon had a similar experience, charging users $24/year initially for some “premium” content, though by the end of 2001, it had switched nearly all of its news to be behind the paywall. A year later, recognizing that its subscriber base had stagnated, the company started experimenting with “day passes” for users who agreed to first watch an advertisement. By 2009, Salon finally dropped the paywall, admitting it was a mistake. Former Salon editor Andrew Leonard noted that, at its peak, Salon’s paywall brought in about $2 million, the costs were just too high, and the company was out-competed by news organizations that provided equivalent content for free.

Leonard made an important observation: “locking your stuff away in order to charge for it means that you are usually making it less valuable at the moment that you are asking people to pay for it.” What he was highlighting is that, in the internet world, sharing content is almost as important as accessing it, and making it more difficult to share is a real limitation.

It’s also one of the things that more modern paywalls have gotten much better at dealing with, which we’ll get to later in the series.

The NY Times, whose modern paywall is considered one of the gold standards of media paywalls (though even it has many limitations) also tried and failed with an early paywall. In 2005, it launched TimesSelect, the first version of its paywall, focused mainly on its opinion columnists, op-ed section, and business stories. The thinking going into it was that these sections were the parts that were unique to the Times, and not easily replicable elsewhere (or regarding the business section: timely, and mostly read by those with budgets to spend). However, it was seen as a failure and was shut down after exactly two years.

As Vivian Schiller, then the Senior VP and General Manager of the Times, noted at the time:

Since we launched TimesSelect in 2005, the online landscape has altered significantly. Readers increasingly find news through search, as well as through social networks, blogs and other online sources. In light of this shift, we believe offering unfettered access to New York Times reporting and analysis best serves the interest of our readers, our brand and the long-term vitality of our journalism. We encourage everyone to read our news and opinion – as well as share it, link to it and comment on it.

Basically, the competition (from blogs and social networks) was getting stiffer, and the ability to share and comment on content became critical to being deemed a part of the wider conversation. By 2009, Arianna Huffington had declared “the paywall is history.”

In short, the “original sin” was probably a necessity, rather than a mistake in development. Later in this series we’ll look at more modern paywalls that have solved some (but certainly not all) of the problems of the earliest paywalls, as well as other methods of paying for content online.

That’s not to say that all paywalls were a disaster. The Wall Street Journal was actually somewhat successful with a paywall in the mid-90s. The “Interactive Journal,” came about in early 1996, charging $49/year (or $29 if you had a paper subscription). While the then CEO of the paper, Peter Kann, chalked it up to his own “ignorance,” the reality probably had more to do with the uniqueness of the WSJ’s business content, and the value to business readers of having ready access to it.

Next week we’ll dive into an even bigger reason why paywalls failed: online advertising was just a way more lucrative means of supporting online content.

Filed Under: error 402, history, journalism, monetization, news, paid content, paywalls
Companies: microsoft, ny times, salon, slate