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In defense of (the existence of) paywalls

To paraphrase the conventional wisdom: “paywalls suck”. Even when they appear to be working - and for working read ‘generating as much as or more revenue than advertising’ - the haters remain unpersuaded.

The main argument against paywalls, and the least compelling, usually takes some variation on ‘mainstream media is doomed so why bother’ or ‘sure it works for [examples here], but that doesn’t mean other people should try it’.

Here’s a classic of the genre, by Matthew Ingram in a piece at GigaOm - which, ah, has a paywall for premium content - called ‘If a paywall is your only strategy, then you are doomed’:

the reality is that virtually no one has been able to make much of a business out of selling online content. While it’s true that publications like the Wall Street Journal, the Financial Times and the Economist seem to have managed it, this isn’t a strategy that every newspaper is going to be able to duplicate, since those outlets have a very targeted readership (and therefore higher-value advertising). Even the New York Times arguably falls into a separate category, since it is a leading brand not just for national news but for international news.

In a more recent piece - responding to this one by Ryan Chittum at CJR - Ingram appeared to take a slightly different tack:

But what about a membership model, the kind that some smaller sites such as Talking Points Memo or Pando Daily are experimenting with? This is something close to the “reverse paywall” or velvet-rope approach, where loyal readers are encouraged (and in some cases even volunteer) to pay for things.

My response to this, with my Econ 101 hat firmly in place, is: why take money off the table?

And that is where the debate gets far more interesting than other commonly wheeled-out anti-paywall arguments (especially the one about ‘you only need a paywall because your costs are too high’).

The most interesting argument against paywalls is that they exacerbate what is known as the information divide, and increasingly as the digital divide.

Here is John Gapper, writing behind a very high paywall at the Financial Times:

the fading era of advertising-subsidised newspapers and free-to-air television was at least democratic. At relatively low cost, everyone could be well informed. In the future, the information superhighway will have both fast and slow lanes.

This is a societal problem, one that is very real and largely ignored by the members and invited guests at the country club.

As Amy Resnick put it:

There should be an equivalent to TVs in the store window...big news needs access to wide audience

But it is not - again, with the Econ hat firmly in place - the immediate problem of the publishers building these paywalls. Publishers’ immediate problem is figuring out a business model that can support their cost structures while growing their audiences. Societal inequity is much, much further down the list.

And so I ask the question, which is worse: that some people don't have access, or that no one does when biz fails due to lack of $?

Where is Pareto when you need him.

With thanks to The Wall Street Bull, Volatility Smile, The Ana_lyst, Georgi Atanasov and GH, whose spirited ripostes to my arguments forced me to clarify my thoughts.

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