Posted by: structureofnews | December 16, 2010

An Issue of Inventory

“Move along, move along.  If everyone stayed here, where would the rest of the people go?”

OK, so it’s not a particularly funny joke.

Still, Cynthia Typaldos, founder of Kachingle, makes an interesting observation about paywalls – if they really did catch on, would there be a problem with having too many of them around?

This is the conundrum of paywalls.  By asking a small number of people to make a large inflexible non-usage-based payment the very existence of multiple paywalls will cause them all to fail.

She adds:

In case you are wondering why subscriptions worked pre-internet and why they don’t now, it’s because there only used to be a few choices — the local paper, a big city paper, a financial paper, a few newsmagazines, etc.  But now there are thousands, more likely millions of choices.  Online subscriptions suffer from the same problem as online advertising — too much inventory.

It’s an interesting question: Is there a finite number of people willing to pay for news, and will a flood of paywalls quickly overwhelm that market?  In many ways, of course, that’s an empirical question that only time will tell; market research on completely new behaviour is a tricky thing to gauge.

And, to some extent, that’s also why people are swinging over to the metered model that Journalism Online’s Press+ product is pitching.  That doesn’t turn away casual users but does try to extract cash from the people who are committed to your product/site – however many or few there are.

And it may well turn out that there are very few.  As Clay Shirky notes in a year-old post about the debates on paywalls:

Such systems solve no problem the user has, and offer no service we want. As a result, conversations about small payments take place entirely among content providers, never involving us, the people who will ostensibly be funding these transactions.

It’s true, he notes, that there are some ecosystems where payments work.  But they often involve an area where someone or some group has a quasi-monopoly, such as the buying and selling of virtual goods in a multiplayer game universe, which is controlled by the developer.

Still, there is a vast difference between needing a huge number of users to cough up a bit of money each and finding very specific niches where some customers will pay a lot of money for specialized information.  Wedding announcements may be a fun read for many people – I confess I’m a fan of the NYT wedding page – who would never pay for the privilege.  But perhaps real estate agents, financial planners or others with an interest in generating sales leads for businesses geared towards new families might pay a premium for that.  Ditto car accident stories, which might be of interest to insurance salesmen or repair shops.  Or tracking the progress on pending bills in the state legislature, and lobby groups that will want to pay for that.  And so on.

It’s the 80-20 rule: We only need 20% of the customers to really stump up cash, if they stump up enough.  And sometimes that takes creative thinking to try and figure out what’s of value to select groups, rather than to the public at large.

So much of what we’ve tended to focus on is broad influence – and that makes sense in a newspaper/broadcast world.  Alan Rusbridger, editor of the Guardian, expresses it nicely in this interview when asked about how his paper is doing vis-à-vis the Times of London’s paywall. 

We have reached a real fork in the road now where, on The Times’ figures let’s say their subscriber base is now somewhere in the region of 30,000 to 50,000, we can’t really be sure, and this month The Guardian will declare a monthly readership of about 37 million. So they’re two completely different ideas of size, scale and ambition.

I can see where he’s coming from – and I don’t think the Times’ numbers are impressive – but given that the Guardian was haemorrhaging cash at last report, I’m not sure that’s a great ambition either.  The trick has to be to find some middle ground – building audience, and serving a public interest, is important.  But so is coming up with products that some – not all – people will pay for. 

Being caught in a debate about free-vs.-paid, influence and reach, isn’t all that helpful.  Nor are attempts to try to restore the status quo of monopoly publishing business models.  As Clay Shirkey notes: 

What matters at newspapers and magazines isn’t publishing, it’s reporting. We should be talking about new models for employing reporters rather than resuscitating old models for employing publishers; the more time we waste fantasizing about magic solutions for the latter problem, the less time we have to figure out real solutions to the former one.

Amen to that.

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