Are Paywalls the Answer?

When Rupert Murdoch announced in August that his company News Corp intended to “charge for all our news websites,” those in the news business may be forgiven for a reflexive “Hurrah!” The idea seems appealing at first glance, especially for the hundreds of print media employees thrown out of work by the Internet-driven metamorphosis of the news industry.

In an article in the American Journalism Review, Paul Farhi carries the concept one step further, suggesting that all news providers follow Murdoch’s example, retreating behind a “paywall” and pulling up the drawbridge behind them, forcing readers to either pay steep rates for online access or go back to the retro print product.
News Corp’s flagship paper, The Wall Street Journal, has been following a pay model for a while now. In part it works, because the Journal offers unique financial content and analysis that readers would not get elsewhere. But general interest newspapers like the New York Times have flirted with subscription services, only to give up and make their content available for free when readers abandoned them.  News gathering services like the Associated Press reserve their ire for large aggregators like Google News and Yahoo reasoning, quite rightly, that it would be practically impossible to go after the millions of smaller sites that flourish on borrowed information.

Why was the Internet able to dismantle the venerable institution of print news so easily? The fundamental problem is that news has been considered a for-profit undertaking in the United States. And like any other for-profit ecosystem, it is subject to the laws of supply and demand. Newspapers sprung up in every city and town to take advantage of the monopoly of location, and ignored value creation in the process. Once the Internet demolished the competitive advantage of location, a correction was bound to occur. And the first casualties of the Internet age have ben the print media who coasted on the regurgitation of news.

While the new paradigm is a tragedy for those whose livelihoods depend on the industry, it is wishful thinking to believe that the genie can be put back in the bottle. News organizations will have to come to terms with the fact that basic news is now freely available, courtesy the Internet. To survive they have to provide either content or services that readers cannot get otherwise. Retreating behind a paywall is a quick path to irrelevance, as competitors, happy to make their profit off of eyeballs, quickly move into the resulting vacuum.

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