Major Media Without Walls

Mike Masnick: We absolutely agree that doing nothing is a death sentence. Great. Where we disagree, entirely, is on what to do. You claim they're looking at customer-pays options for survival, but that only works if customers will pay. And, to date, there's no evidence that they can get enough customers to pay to survive. I'm not saying to keep the status quo. I'm saying that putting up pay solutions that aren't based on scarce value won't last.

You say there are "fewer and fewer players" to compete with and I think you're defining the market incorrectly. All I see is more players popping up each and every day. Sure, some of the legacy newspapers who took on too much debt and were unable to adapt are having problems. But, that's the business cycle. I think you may be too narrowly defining the group of publications and that you're looking at "newspapers." The problem is that the person looking for news doesn't care whether it's from a newspaper, a TV station, a radio station, an online-only publication or some guy down the block. If it provides what they want, they're going to be happy with it. And, yes, there are a ton of those willing and waiting to step in should "newspapers" take themselves out of the market.

NPR, now run by a former NYTsian, has said that it won't charge. In fact, it has beefed up its website, added more community features and is looking to leverage the fact that it has real feet on the ground in local communities all over the country. CNN is looking to expand its own online reporting, and has shown no sign of going behind a pay wall. Reuters has been beefing up its reporting, as well as its attempts to better connect with a community of readers. And then there are the startups. Many fail, but that's how the startup process works. Some are starting to break through and do really interesting reporting.

As for the market, you are again limiting yourself to "newspaper advertising." Yes, that's been a bad market lately, but not because of problems with advertising. It's [because of] the problems with newspapers. They've failed to build real community, so the community they used to "sell" to advertisers has gone elsewhere. Why aren't newspapers investing in real community tools? (And that means more than adding comments or tacking on a copycat social network.) It's about recognizing how people interact with news these days. They want to participate. They're not passive readers any more. They want to share the news. They want to comment on the news. They want to contribute to the news. They want to participate. A pay wall makes that almost impossible. It takes away from what people want to do, rather than enabling it.

So what should news organizations be doing? They should be enabling people to interact and participate in the news. They should be enabling their community and providing real value to the community. Not to toot our own horn, but we put together a system that pays our community to interact with companies that want their insight. We're not looking at our community as a cash register, but as an asset. And, yes, we do charge for some things -- but never for content. The model we structured was on providing scarce value...that helps enable the community, rather than limit them.

Finally, on the ability to sell the paid eyeballs -- yes, such people may be "more valuable," but it's a much smaller group, and newspapers will run into trouble if you squeeze them dry. People hate paying for something and then having to pay again with ads. Yes, they'll put up with it if there are no alternatives. But there are an increasing, not decreasing, number of alternatives.

I think that we agree that newspapers need to change. We just disagree on the right path for change. Putting up a pay wall or micropayments hastens the decline in my book. There are serious alternatives. They may not be as easy, but they're much more likely to be effective. To create a painfully strained analogy (sorry, sorry), your argument is that they're going over the cliff already, so why not try this. I just think that it's not a parachute you're opening, it's an anvil. I'm looking at ways that they should be deploying jetpacks to take them higher, rather than just looking to avoid crashing into the ground.

David Carr: Between all the talk of jetpacks, anvils and parachutes, I'd like to drop one more metaphor. The end of days. What newspapers have going is not sustainable and whether it is Steven Brill or Rupert Murdoch or the mad geniuses we have at the Times that crack the code on new, meaningful veins of revenue, I think something remarkable is at stake. And we can't wait for the web fairies to drop down and turn free into a business. Freemium, maybe, but you can't full-stop take paying digital consumers out of the equation. I think we should be clear about the fact that the current business model is not working and if we want to preserve newsgathering capacity, some things have to change. I agree that we are in agreement about that.

But many folks, including you, want to take any charging for content off the table. Really? Does that mean the FT's metered model has no value, or that Rupert Murdoch's announcement that the Wall Street Journal will charge small money for a Blackberry app is a bad idea?

Certain content is far more expensive to produce and has a broader civic value. The community that you speak of is very powerful and can do amazing things, but it can't produce Walter Pincus' deconstruction of a new four-year national security plan in the Washington Post, or easily replicate David Leonhardt's relentless coverage of the meltdown and the aftermath at my shop. To refuse to innovate around the traditional business models that have sustained that kind of reporting is inviting a future of lesser ambitions and reduced accountability.

And although I am the MSM dad in the basement at the digital party in this argument, I just wanted to say how much I enjoyed kicking the ball back and forth. A pleasure to be talking about the future instead of moaning about the past.

Finding Some Agreement

Mike Masnick: I'm quite enjoying this as well...

Yes, we absolutely agree that the current model is unsustainable, but I think you're building up a strawman and projecting it on me. I don't want to take charging for content off the table. If you want to do it, go do it. I've said it before: go for it. My point, however, is that it's a bad idea and it will not do what you think it will do. It will not save newspapers. It won't even help them. It will hurt them. It will hasten their demise. Telling you something is a bad idea doesn't mean I'm taking it off the table or somehow trying to shut you down. It just means that I think it's a terrible idea, and there's an awful lot of economic history that supports that idea.

I think where we run into trouble is you seem to think that there are three options:

1. Continue down the current path
2. Charge users
3. Wait for the web fairies (or perhaps that's in combination with number one)

We agree that number one makes no sense. We disagree on whether or not number two makes sense. And, most importantly, we totally disagree on number three. There are things that can be done today: It's called adding more value to your community, bringing in more users and providing them more direct value. But that's not what's being suggested. What we're hearing is that you'll just toss up a pay wall and the people will magically start paying. But they won't. At least not enough of them to matter, and certainly not enough to cover the loss in ad revenue.

We agree that today's model isn't sustainable. Done and done. But I fail to see how putting up a tollbooth and denying readers what they want is any better. I see it as significantly worse. You're shrinking your market and taking away value at the same time. I can't fathom how that is any better.

The other point you make, which is not what I said, is that I'm taking paying consumers out of the equation. I'm not. But I am saying they won't pay for content in significant enough numbers to make it worthwhile. They may pay for other things. We just ran an experiment and got our readers to give us quite a nice chunk of money -- but it wasn't from selling our content. It was selling scarce goods -- things that can't be "copied" online, but that were made valuable thanks to our content. Those are things that can't be copied, and for which there is no real competition. Things that don't block what the consumer wants to do, but enables something else that they couldn't get or do elsewhere.

As for the FT and the WSJ model, I think both are long-term mistakes, and will eventually be looked upon as such. But, first, both are unique situations, where they're providing direct economic value to many readers who are willing to pay for it, because to them, having that information sooner can be directly translated into money. I think it highly unlikely most others will do well following their model.

That said, I believe that the fact that both lock up their content provides an excellent opportunity for newer players in the space to step in and offer similar content for free, and monetize it elsewhere. There are players who are beginning to enter that market who will cause both the WSJ and the FT a lot of trouble in the future.

Finally, I never said that "the community" would do all of the reporting. I was quite clear in stating that, while there is a role for participatory journalism in helping with the process, I am very much talking about professional journalists. I recognize that others in the space may talk of the community replacing journalists. I am not one of those people.

But here's the thing, if you put up a pay wall, and very few people pay and it kills off whatever ad revenue you had left, then who's going to pay Walter Pincus? That's my question all along. You keep saying that the reporters need to get paid, and we agree. But putting up a pay wall doesn't do that. It does the opposite.

Mediator: This has been a great discussion. One thing I'd like to point out is that you both bring up valid points on each side of the argument, but you both also fall into the trap of making each other into caricatures. David says Mike is depending on "web fairies" for a new business model and says Mike is opposed to pay content; and Mike is saying David wants pay walls around all content.

Can you guys break out of the old paradigm in this debate and find a center that includes free and paid content (and maybe even micropayments)?

Mike Masnick: Fair point -- though I really did not mean to imply that David supported putting pay walls around all content. I think he was quite clear of that at the beginning, and my apologies if I suggested that in my responses.

Now, in an attempt to find that middle ground, I will note a few things. I actually very much like the idea that the New York Times was apparently considering recently of offering value-added tiers that focused on scarce access, rather than content.

So, I think some of the debate comes down to a bit of semantics, but I think they're important. I'm not opposed to giving people a reason to buy things -- in fact, that's become something of a mantra on Techdirt. We highlight case study after case study of those embracing the digital era, while still giving people a reason to buy. The problem is in thinking that the content alone is a reason to buy. History has shown that it's just not a very compelling reason on its own to buy, and not very sustainable. That's because all it does is open up an opportunity for others to come in and provide similar content for free.

But there are things that the content itself makes much more valuable -- scarce things, such as access, events, convenience, tangible goods -- that can be offered. But to do that right, you want to make sure that the content itself works to make those things more valuable, and I believe you do that by freeing up the content itself, providing tools to build out the community, and then connecting that community to those scarce goods. That provided them with real reasons to pay. I thought the early New York Times proposal needed some work around the edges, but was a big step in the right direction.

But any proposal that focuses on blocking what users want to do, and making the content itself less valuable seems like a non-starter to me. Perhaps it works for a little while, but it only invites significant competition.

So, it's not that I think people won't pay for stuff. It's just that I think they won't pay (at least enough to matter) for content. And I think focusing on getting people to pay for content actually makes all those other business models more difficult.

David Carr: I love tiers of service, especially because it preserves a free product that is SEO-ed on the web and always allows a point of entry for new or casual readers. And sorry about the web fairies crack, which I didn't mean to aim at you, Mike. What I was trying to get at is while there is what one of my bosses Jon Landman has referred to as a spiritual or religious belief on the part of journalists that people are just dying to give us lots of yummy money for our work, they are not. There is also a kind of magical realism that infects always-free folks that suggests if we just continue to build audience, a business model will find us. It's a little like the nascent dot-com that is always going to go into the black "next year." Next year never comes.

I think much of what divides us is words rather than values, as Mark points out. Journalism is going to have a blended, hybrid future where the consumer assembles the content they need and then decides what is worth their hard-earned lucre, regardless of platform. My only hope is that the informational market they shop at is a robust and thriving one.

*****

Thus ends the Great Debate on Micropayments and Paid Content. If Masnick and Carr can agree that paid tiers might have a future, that some paid content can work (if scarce and unique enough) but other content should remain free, then maybe dogs and cats can lie down together, and the world will live as one. Or not. How do you see the future of content online? What content do you pay for, and what content would you not pay for? Share your thoughts in the comments below.

Mark Glaser is executive editor of MediaShift and Idea Lab. He also writes the bi-weekly OPA Intelligence Report email newsletter for the Online Publishers Association. He lives in San Francisco with his son Julian. You can follow him on Twitter @mediatwit.

Newspapers need to start charging for online content to survive. If newspapers charge for content, it will hasten their extinction. These are the opposing views in the very heated debate going on among newspaper publishers, editors, journalists and new media mavens. While pay walls for newspaper content have had mixed success -- with the Wall Street Journal Online being the major shining example -- the idea of micropayments for news stories is once again gaining supporters.

One such supporter is David Carr, the Media Equation columnist for the business section of the New York Times. He wrote a column last January titled, Let's Invent an iTunes for News, blogs as part of the team at Media Decoder and tweets as @Carr2n on Twitter. According to Carr: "The opinions he expresses are his own and he has no specific insights into the New York Times business strategy, including, but not limited to, whether consumers should pay for content."

On the other side is Mike Masnick, who runs the tech insight community Techdirt, and who has savaged the idea of micropayments for newspapers. Masnick launched Techdirt in 1997 and is CEO of Floor64. He has worked in business development and marketing at Release Software, an e-commerce startup, and in marketing at Intel.

The following is an edited email exchange that took place over the past few days.

Micropayments or Paid Apps?

Mediator: David, you wrote about micropayments as a possible option for newspapers online. How do you think a system like that would work, and are there parallels in other systems that have worked?

David Carr: Micropayments sound so ancient and debunked. Can we look upon them as payments for news applications instead? Facile, I know, but I think part of what the publishing industry confronts is a problem not only of precedent -- news not only wanted to be free, it has been -- but of nomenclature. If we look at payments for content as a way of accessing applications that animate the devices we stare at all day, they make more sense.

A while ago, I talked about an iTunes for news and I got clobbered because I missed the point that "21 Guns" by Green Day will have much more enduring value than say, the media column I wrote for Monday. But that doesn't mean my column is worth nothing. If it were bundled with an array of other content from the same vertical, along with alerts for same, it might begin to have some nominal value. And if it were attached to archives, relevant videos and aggregation of other similarly themed content, would it have monetary value? OK, maybe my column is a bad example.

I think that innovation in presentation and delivery of news customized to specific devices with features that serve not only to inform the user, but convenience them as well have value. Not all news content is worth money -- much of it is commoditized and should live outside pay walls and be free for the scraping, or to serve as context for all kinds of cheap network ads. But as we move into verticals, there are precedents, including the Wall Street Journal. I could lever my way to almost any story on that site through specific search approaches, but I choose to pay because I want archival access, alerts, and the ability to move freely in serendipitous ways across the entire site.

I pay for Consumer Reports, I have contemplated paying for access to the database of recipes at Cook's Illustrated. I'm not much of a sports guy, but I know people who pay for sports information, either to make them killers in their fantasy league or because they can't get enough about their offline heroes. Are there other publications or kinds of content I would pay for in their digital versions? Dunno, most of them haven't tested my level of interest. Most of the web is and should remain free, but professionally assembled content curated by editors who share either my sensibility or interests might pull some, not a lot, of money out of me.

And while I don't want to make a need-based argument, the ad-only model will clearly leave newsgathering in a very diminished state, regardless of economic recovery. If nobody is paid to make phone calls and report, the data stream will attenuate to the point where consumers might be willing to pay for something besides thin, generic gruel.

And lastly, if charging for content is such a non-starter, why was Google one of the organizations that submitted proposals to the Newspaper Association of America to enable micropayments? Yeah, it was off-the-shelf technology so far, but those guys aren't dumb and they must see that the consumer will eventually pay for some specific kinds of content.

Mike Masnick: First off, thanks to Mark for putting this together, and to David for taking part. I'm a big fan of your work, which I do find valuable, though it doesn't mean I'd pay for it.

And that leads me to my first point of response. You talk about value and price as if they are one and the same, but they are not. In economic terms, price is the intersection of supply and demand in a competitive market. Value, from the buyer's perspective, is simply a piece of the demand curve. But in a market, the buyer has choices, and different things have value to the buyer -- but it doesn't mean he or she will pay for all of it. Instead, they make decisions, and if there are reasonable alternatives -- even if not quite as "valuable" -- they'll drift towards those alternatives.

It doesn't mean that your writing isn't valuable. It just might mean no one will pay for it. That's how economics works.

So, what will people pay for? They pay for true scarce value. The problem is, as much as you or I wish to believe that our own writing is so perceptive and brilliant that it's scarce, it's not. We need to learn to live with that. You talk about what you do pay for, and what struck me was that it was never really the content that you were paying for. It was always some other sort of value: with the WSJ it was the real-time alerts (you're paying for timeliness and convenience), with Consumer Reports you don't say why exactly, but as a fan of CR's work, I would guess it's the fact that it saves you time and money (two scarcities).

Most news content doesn't provide anything scarce like that.

And that brings me to my big problem with micropayments. They're based on this false belief that people will be willing to pony up a small amount for content when there's so much competition out there that will be free. You suggest it's paying for the "news application," but that's not true. An application worth paying for is something that adds real value. My complaint all along about claims about charging for news is they all seem to think that if they put up a pay wall people will pay. None of them -- that I've seen anyway -- talk about adding additional scarce value to make it worthwhile. The micropayment idea is a punt. It's putting up a tollbooth on a 50-lane highway where the other 49 lanes have no tollbooth, and there's no specific benefit for paying the toll.

Your argument that an ad-based model won't work is also a bit of a red herring, as it assumes that there really are only two options out there: pay wall or ads. I'd argue that's not true -- that there are many other models, including hybrids. Also, it ignores the flipside of the equation, which is that some of the new models have very different cost structures.

Finally, you point to Google's pitch to newspapers. I wouldn't read too much into it. My (admittedly cynical) take on it is that (a) with all the newspaper guys complaining so much about Google, the company felt it needed to offer something to show that it was "helping"; (b) that [this] "help" is really designed to just get newspapers to try a micropayment solution as soon as possible to learn how it's a monumentally bad idea. It's helping newspapers out of their misery, rather than helping them adapt.

And Google has gone down this road before. I don't know why everyone forgets, but Google bet BIG on people paying for video content when it launched Google Video. It was mainly a pay site. And it failed miserably and YouTube took over the online video world, eventually leading to Google shelling out almost $2 billion. Google makes a lot of mistakes when it comes to paid content.

David Carr: Why so serious, Batman? We're only talking about the future of content and (gulp) how I buy groceries for my posse. And I am saddened to learn that my work can have value, but it may not be the kind that people might pay for.

Mike, I think you're right in that easy often trumps something with more perceived value. As Clay Shirky has told me enough times so I am finally beginning to understand, good enough is frequently good enough. MP3s won not based on their audio quality, but for other properties, like being, um, mostly free and eminently shareable. But there is a business under file sharing in CDs and increasingly, vinyl. It's a niche business, but I think that reading high quality news is increasingly a niche business, albeit mass niche.

I say that because people already pay the New York Times hundreds of dollars for daily access to the print product and the Times Reader. It is a matter of public record that more than 800,000 people have subscribed to the newspaper for more than two years. Isn't there some kind of digital business on the margins of that based on a much lower cost delivery structure? Quality papers like the Times could leave generic news out front free for the scraping, and [build] a leaky wall like the Wall Street Journal to allow the rest of the content to remain visible and, after a fashion, findable. I don't know what the price point is, but I bet a bunch of people would pay some kind of access convenience charge for the whole magilla. And even if people will only pay for "scarcities," as you call them, those can be created; and by the way, the market seems to be creating some informational scarcities on its own.

Putting up a big dumb wall is doomed, so I'm all for the kind of hybrids you flick at in your post and think those models are just beginning to be worked out. Providers of professionally produced content can have a hierarchy of readers and an array of services, from free to highly customized and pricey.

And your point about Google is well taken. They've succeeded, wildly, in one business -- paid search -- and have wandered around like the rest of us in other content models. But with the introduction of Fast Flip on Monday, I think you are beginning to see the outlines of a non-media company really working on the issue of presenting content and making it pay.

The Prospect of Collusion

Mediator: With so many newspaper publishers looking at pay walls, micropayments, etc., the usual argument is that if they all decided to start
charging at once, there would be less cheap alternatives. The 50-lane toll-booth you mentioned might have 45 people taking tolls and just 5 not taking tolls. At that point, people will be enticed to start paying something. What say you, Mike, to that argument that a possible antitrust exemption would allow the publishers to work together even closer?

Mike Masnick: The collusion argument is a fun one, because it sort of highlights the actual problem. The second a bunch of newspapers collude (legally or not) to put up a pay wall/micropyament system at the same time, the happier every competitor in the world just became. Collusion like that only works if those colluding control the market. In this case, as much as they want to believe they do, they don't. That 50-lane highway turns into a 500 or 5,000 or 500,000 lane highway overnight, and those 49 tollbooths get ignored. The thing is, everyone has their own steamroller/paver machine right now. And, no, I'm not just talking about "participatory journalism" or "citizen journalism," though that may be a part of it and may represent quite a few lanes.

I'm talking about other professional news organizations with professional journalists who can see ahead a few steps and recognize that many of their biggest competitors just took themselves out of the market. If I'm running a major newspaper the night that everyone starts to charge, I'm dancing for joy because my competitors just stepped out of a huge market and left it to me. And don't think there aren't news execs who get this.

So, sure, go ahead and charge. Collude away. It just hastens their irrelevance.

And, David, that kind of suggests the problem with your last statement: sure some people will pay. But, how many and for how long? You say it's a niche business, and it's very, very niche -- and unlikely to grow that much. [Steven] Brill [of Journalism Online] talks about getting 10 percent to 15 percent of the current readership to pay. Newspapers should be thrilled if they get half that. I'd be amazed if many of them got 1/10 of that.

In the meantime, it may be true that other business models have been slower to develop, but newspapers have always been about building a community and selling that community to those who want to reach them (usually advertisers). Putting up pay schemes turns away that community and makes it that much harder for newspapers to build out their own core business ... They've never figured out how to be sustainable as a consumer-pays entity, what makes you think it'll suddenly work now?

The problem remains: putting up a pay wall/micropayment solution is economically inefficient (you are limiting a resource, rather than increasing value). That only works when you have a monopoly. Even with collusion, the newspapers don't have a monopoly.

David Carr: Mike, let's talk about "economically inefficient." Take the Washington Post, a pretty well-run, well-led outfit. They lost $143 million in the first six months of the year. Pay-for-content critics always talk about the folly of the turn toward the consumer; but I say, as opposed to what? Sticking with the current paradigm will have a tendentious end for those who fail to innovate significant new lines of revenue.

A broad swath of newspapers are not looking into pay content as a matter of collusion, but survival. You talk about being the lucky newspaper that bystands a move to paid and then jumps in on all the free ad dollars. Who might that be? With each passing month, there are few and fewer players and I think it behooves publishers who are acting in the interest of their shareholders and readers to experiment with different hybrid models.

Most newspapers have re-engineered the cost side to the point of damaging the asset and have to look at revenue. Should they look to Web display ads for salvation? Please. Inventory more or less doubles every year, which means they've no ability to create scarcity, no leverage on price. And Web ad buys and prices are down across the board. That "huge market" that has your theoretical publisher hugging himself hasn't been so huge lately. And when they step into that market with the legacy costs and relatively high costs for professionally produced content, they are competing in a market where hits are hits and the victory goes to the one who is selling ads the cheapest.

Yes, newspapers should have invested money in new technologies and approaches back when their margins were in the 20 to 30 percent range, but they didn't and now their backs are against the wall. The turn toward readers makes sense at this point. Newspapers can find out their true value in the marketplace and come up with a business to fit that going forward. In a sense, it is an old story. Newspapers have always used two pedals to lever their way through difficult times. When advertising dipped, they have always turned toward readers. This is different in that they are taking something that has always been free and are trying to charge for it, which is daunting, but it is not without precedent. Water and MP3s come to mind.

Just a word about community. The newspaper that manages to come up with a hybrid of free and paid will end up selling many eyeballs that have paid for the privilege of being there. And that "wantedness," a hoary old magazine concept, will once again allow publishers to start selling premium audiences for premium prices as opposed commoditized eyeballs.

*****

Thus ends Part 1 of the great debate. Continue on to read Part 2, in which the Mediator gets the two parties to find some common ground.

Photo of Mike Masnick by Dennis Yang via Flickr. Photo of tollbooth by Foggie Gee via Flickr. Photo of Washington Post newspaper by Mike Avery via Flickr.

Mark Glaser is executive editor of MediaShift and Idea Lab. He also writes the bi-weekly OPA Intelligence Report email newsletter for the Online Publishers Association. He lives in San Francisco with his son Julian. You can follow him on Twitter @mediatwit.