Paywalls and cannibalization

By Felix Salmon
January 31, 2011
Lionel Barber, in his Hugh Cudlipp lecture today:

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I’m surprised, but pleased, to see this coming from FT editor Lionel Barber, in his Hugh Cudlipp lecture today:

For those publications adopting pay walls, the strategy represents a big leap into uncharted territory. Those which remain free or substantially free, have another kind of hope: that the very large audiences they are able to garner through freely available content will boost sales – or at least slow the decline of the print edition.

This is the first time that I’ve seen an advocate of online paywalls admit that they don’t boost offline subscriptions, and that newspapers which give their content away for free online have every hope that doing so will result in increased print sales.

This makes conceptual sense, of course: the paper you choose to buy at the newsstand is likely to be the same one you read every day online, so boosting the latter audience by making or keeping your content free is likely to boost the former audience as well.

Most publishers, however, have not historically thought this way. Turning their solipsism up to 11, they have reasoned that people buy newspaper X because they want newspaper X’s content in particular, and that if readers can find that content online for free, then they won’t subscribe to the paper or buy it on newsstands.

The truth, of course, is that people want news, not newspapers, and they will find a preferred venue for that news both online and in print. Newspapers aren’t competing with their own websites: they’re competing with everybody else’s news websites, not to mention all the other types of media and entertainment out there. That’s why Barber says that he “was pleased to see that the BBC has at last begun to recognize the economic threat that BBC online poses to newspapers” — there’s little point in getting rid of your own free website if there are lots of other free websites out there which can cause your paper just as much harm.

Barber’s speech comes just as fiwords.com launches — a website of financial definitions attached to a book with the same content, co-written by Chris Roush of Talking Biz News. Roush asked me to be on the advisory board of the site, but I started pushing back when it launched with a high and impenetrable paywall.

The site’s content is useful, and the site itself is very well designed, so one would think that the most natural thing in the world would be to make it free. It would rapidly rise to the top of many Google searches, it would become a loved and much-used resource, it would be able to crowdsource help with tricky definitions, and it would be a sought-after advertising venue for many financial-services companies. Instead, Roush and his publisher have put up this paywall, on the grounds, he told me, that “we’ve put all of the content from the book, and more, onto the site, so if we gave it away for free, no one would buy the book“.

That’s silly — and just as solipsistic as those newspaper publishers who fear cannibalizing themselves. If people want to look up financial terms online, they’re going to do so whether or not fiwords.com is free. If it is free, they’ll use it; if it isn’t, they won’t. They’re not going to buy a fiwords.com subscription on the off chance that the definitions there turn out to be substantially better than the definitions elsewhere.

More to the point, they’ll be more likely to buy the book if they regularly get a lot of value out of its content online. The experience of publishers who have put works up for free online is very consistent: print sales go up, not down.

Barber’s point is an interesting one: that putting up a paywall can make sense even in the knowledge that staying free would probably mean a higher print subscription base. Essentially, he says, the FT has made the strategic decision to maximize total subscribers — the loyal readers who come back many times per week or even per day, and who are highly valuable to advertisers. By putting up a paywall, the FT manages to corral, count, and sell such subscribers online, just as it does in print.

But I’d bet that even Barber, the paywall advocate, would be puzzled by the fiwords.com strategy. Both the book and the website are pretty obscure, right now; what they need more than anything else is visibility and a widespread reputation. And they’re not going to get that by putting up a paywall at launch.

Comments
7 comments so far

>> By putting up a paywall, the FT manages to corral, count, and sell such subscribers online . . .

Hmmm. The FT can do that without the paywall, through a combination of IP addresses and tracking cookies. Everything but names, and I believe they could probably even get those if they wanted them enough.

Posted by Curmudgeon | Report as abusive

I would support Felix’s argument except: I canceled my newspaper one-and-a-half years ago and don’t miss it, as I can satisfy my information needs online.
And I don’t have a stack of papers to toss out every week.
Oh, and I used to be a newspaper reporter.

Posted by RZ0 | Report as abusive

But here’s the thing, RZ0 — if your newspaper stopped putting its content online, would you immediately resubscribe to it, or would you turn to other online sources?

I can’t say for certain, but it seems likely to me that as long as free quality reporting is available online, you’re going to stick to that.

Struggling print publications aren’t really competing against their own content on the internet. They’re competing against the collective existence of internet news sources. In other words, the internet reduces overall willingness to buy something in print. But even though I’m less likely to buy print material, my criteria for doing so hasn’t really changed: I’m still going to gravitate towards sources I know and trust.

Posted by WHS | Report as abusive

Besides the paywall issue, a second important issue is the obsolescence of the 24-hour newspaper cycle (which may or may not include weekends).

For the most part, newspapers generally remain stuck in the single output per day, crises & weather events excepted.

Besides moving to free access online, they must move to a business model of continuous news updates 24X7. Otherwise, they will lose their online readership as well.

Posted by Lilguy | Report as abusive

I remember growing up in the 60′s and 70′s listening to the Indy 500 on radio. The owner, Tony Hulman, for years prohibited the live broadcast of the annual race on television, thinking that if people got it for free, no one would fill the stands. He sure left a lot of money on the table all those years.

Posted by friez | Report as abusive

I’m surprised that newspapers have not come up with their own version of groupon, something like newpon, and offer their readers great deals.

Posted by SWARMtheBANKS | Report as abusive

The iPhone was missing a significant video camera and its particular the processor is lower versus the additional cell phones, however ?t had been successful! Why does you consider iPad’s going to reduce? . -= sebin’s continue website… Crank up your own apple ipad tablet with the Apps! =-.

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