Is Free Content Just a Stage in the Internet’s Growth?


Free is a lousy business model.

The New York Times announced this week that it will begin to charge for content – again – in 2011.  The Times hasn’t mapped out a plan on how it will accomplish this, but it brings up a larger question:

Is free content just a stage we’re going through in the evolution of the Internet?

In other words – is “free” sustainable?

If we look back at the dot-com era as a guide post there’s an argument to be made that our current state of “free content” on the web might not be permanent, but simply a nascent stage in the growth of the Internet. That conclusion can be supported by evidence of what happened to online retail during the dot-com phase of the Internet’s growth.

Those were the heady days of the dot-com bubble when every product had a .com after its name and its own online store: Furniture.com, Pets.com, Toys.com, and Jewelry.com to name but a few.  Many roared into prominence with grand promises of “free forever” – from shipping to returns to products.

I consulted with a company called Intranets.com that provided free intranets to small and mid-size companies.  Intranets.com made “free forever” part of their messaging – until they implemented a monthly subscription fee.

Remember HomePoint.com?  They sold furniture on the web and promised free returns.  But returning a 82-inch, $2,000 couch turns out to much more expensive than returning a DVD.  They went out of business (and they weren’t alone).

All the promises of free this or that turned out to be a lousy business model for online retail and its already razor thin margins.  The result was the dot-com bust that rose like a mushroom cloud over Silicon Valley in 2000.  Now there were other problems for the dot-coms other than the promises of free, but the cheaper and faster mantra certainly added to their problems.

So that brings us to today and our state of free content.  Content cost money, yet the media industry – with only a few notable exceptions – has been giving away their most valuable commodity for free – for years.

And that is no longer working out very well – as the Great Media Collapse of the past year has clearly shown.

The New York Times wants to change that by charging for its content.  This hasn’t worked in the past.  The Times tried to charge for premium content a few years back and it bombed.  This time, however, they may have learned a thing or two from the failed experience.  Hopefully, they are in the process of developing a strategy that will benefit both them and their readers.  We’ll see once they roll out the details.

Will other media outlets follow them into the pay model?  News Corps seems ready to jump into the river with the Times.  Will there be others?  Can media outlets really afford NOT to start charging?  Reporting news takes manpower and manpower costs a lot of money.  You can’t afford to send reporters and photographers to Haiti, for example, to conduct in-depth reporting on the earthquake if you don’t charge readers for the content.

It’s a very simple equation.  If media outlets don’t start charging for their efforts – they will continue to fail.  That’s just the way it is.  I disagree with pundits like Jeff Jarvis who believe that web content wants and needs to be free.  Jarvis warns that if the New York Times charges its readers – its readership will shrink.  Well, no kidding.  But it’s better than the alternative – bankruptcy.

There’s another reason why free content is a bad idea.  Value.  People don’t place a premium on items they get for free.  For example, a report on NPR’s Marketplace yesterday on healthcare and unions illustrated this point perfectly.  A dentist’s office for union employees had skyrocketing cancellation rates because the union members received their treatments for basically no cost.  When patients had to pay a larger fee for canceling an appointment the cancellation rate dropped from 25 to 5 percent.

According to the report: “When it’s only $6 (to cancel), there’s very little incentive, if it’s not convenient, for them to keep the appointment.”  In other words, people don’t place a value on free items and that leads to waste and a dismissal.

The same can be said for news organizations when they give away their content.  When it’s free, it has less value.  People don’t appreciate it.

I don’t want newspapers and magazines to end up in the same boat as the failed dot-coms.

Don’t get me wrong.  I don’t want to pay for what I’ve been receiving for free either.  It hurts.  But I also understand that if I want to read excellent journalism written by professional editors and reporters – then I’m going to have to open up my wallet and pay for it.

The key is finding a paid content strategy that will actually work.

Unfortunately, that’s a HUGE challenge and no one has quite figured it out yet.  Here’s hoping the New York Times has a plan that can actually work.

What are your thoughts on free content? Can paid models work on the Internet?

Bookmark and Share

2 Responses to “Is Free Content Just a Stage in the Internet’s Growth?”

  1. The NYT Paywall will fail if they insist on using it as the portal to subsidize their physical plant. And they are not setup to cannibalize their business. Nor are they going to be able to charge advertisers premium rates in a medium which is self limiting by the subscription model.

    The idea of creating an online Fight Club and the first rule of Fight Club of not talking about Fight Club does not work on the web. Pay per View may work on a network where the pipes are controlled by cable companies, but online the pipes have no such central bottlenecks.

    This is why general news organizations will never make a paywall work, regardless of reputation.

    The trick to getting payment for content is to provide content that cannot be gotten elsewhere, or analysis of content that provides a ‘material’ benefit. ‘Material’ benefits are not always in dollars, but in large it usually comes down to that.

    The former is getting harder as so many folks are online posting in so many ways that the ’scoop’ is just not the thing that it was.

    The latter depends upon folks whose understanding of a niche is such that the analysis has a material value that can be monetized. News reporting has a few superstars but not enough to support a mass media publication. A lot of these superstars are folks who have opinions on facts, which runs counter to the ‘just the facts’ constraints placed on ‘news’ organizations.

    However subscription based writings are profitable such as niche newsletters, primarily in the financial sectors, which begs the ‘material’ value, and also validates the Wall Street Journals success in the paywall game. But the WSJ is a niche publication with a ‘material’ value.

    A good example of the upcoming paywall problem can probably seen by looking at Variety and Variety.com which has already gone to the limited view before pay model.(currently they rely on ‘cookies’ as their counting gateway, which by clearing the cookie in your browser and refusing the site to place new ones, allows you to bypass that restriction)

    Variety is using the bundle strategy, by forcing you to buy online access which also includes a subscription to the dead tree rag as well. Which is an oxymoron of the first water, as the major selling point of online media of all types, is the ability of not having paper clogging up your mail box.

    This is just as dumb as the telemarketer selling you light bulbs and including 6 free steak knives with your order. You probably don’t have these steak knives and buy your light bulbs at the hardware store like the rest of us.

    Currently the largest issue in online content paid or not is the Other Peoples Money problem, aka Advertising Dollars. This model led to the growth of media, and is contributing to its death. Subscriber based media is in its infancy with the poster child being Wikipedia not running advertising despite the pleadings and ravings from Calacanis and Mark Cuban to ‘monetize’.

    Subscriber based media has a thin line to run as subscribers also want buyin as is being demonstrated with blogs enabling conversations, like this. It is a tough road as letting the inmates run the asylum is not usually in the best interest of everybody involved.

    This is not to say that you cannot or should not allow folks to throw money at you, but it should come as an afterthought and not as either primary or secondary revenue stream.

    Being able to eliminate the ad department could move those resources to actual reporting making any ‘news, or media organization more valuable. Or at least that is the view from the peanut gallery.

  2. The Internet’s “Free” Problem is No Problem, Just Bad Logic. Read: http://wp.me/pvCdb-4Y

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 6,470 other followers

%d bloggers like this: