Paywall vs ‘Freemium’: why Parris, Finkelstein et al may rue Rupe’s decision

by Stephen Tall on July 27, 2010

Will The Times’s paywall work? It’s the question that’s been asked ever since Rupert Murdoch’s News International announced its intention to place The Times and The Sunday Times websites behind a paywall, blocking any user not prepared to pay a subscription for access.

Last week saw publication of early unofficial statistics which were extrapolated at length in The Guardian and suggest The Times’s website now attracts somewhere between 84,800 and 195,700 daily unique users – compared with c.1.2 million daily unique users pre-paywall.

It’s stating the obvious to point out that’s a huge drop: after all, the point of the exercise is to make money from the few, not be free to the masses. So far, it’s understood there are 15,000 paying users – though whether that figure includes those who signed up for cheap one-month trial offers is not certain – in addition to 12,500 iPad users.

Assuming The Times can retain all those paying customers (which is a big assumption), it’s estimated the paywall could attract revenues of £1-2m a year. I’ve not yet seen, though, a reliable figure showing what the cost in lost advertising revenue associated with a fall in online circulation will total – which make it difficult as yet to work out if News International will generate an immediate net profit from the paywall. That, after all, would be Mr Murdoch’s ultimate response to the naysayers.

What I don’t understand is why News International decided to go all out for the paywall at The Times without at least first testing the market by adopting a ‘freemium’ model, making basic content available free, but charging for premium content. Well, I do understand – this model is already being tested by Mr Murdoch at the Wall Street Journal – and so he is trying out different models across his media empire. To that extent, the new media world should be grateful to him for taking risks with his large, diversified company which smaller, tighter organisations can ill-afford to attempt.

But what is missing from the new paywall model is any reason for folk like me to return to The Times. For example, I still visit the freemium model PoliticsHome – far less than I used to when it was completely free, for sure, but I still have reason to return as some of the site is free to access. By retaining my return custom (albeit without me handing over any cash), it’s just possible I might eventually decide the site’s value to me is sufficient to pay up to access its full-monty version, PoliticsHome PRO.

I now have no similar reason ever again to visit The Times – because I know there’s nothing there I can see without paying. Nor do I ever link to Times stories, either here on Lib Dem Voice, nor via Twitter or Facebook – both because I’ve not been able to read them myself, and because I wouldn’t recommend my online friends to read something they’ll have to pay for.

As a result, The Times has completely dropped out of my online consciousness: which means the chances of me ever deciding that I actually should fork out for a subscription are pretty much zero.

Chris Anderson at his The Long Tail blog made the point a few months ago that certain news-providers – “premier titles, which can credibly claim to be papers of record and thought leaders” – should be charging: they’d be crazy not to, as there will always be “a class of readers who will pay what it costs to get that content”.

But what they shouldn’t do is cut themselves out of the social media conversation which has the potential to attract new and returning eyeballs. His answer was the freemium model, which offers:

… a backdoor to free content for another class of consumer: the social media maven. Paying subscribers could make content free to others by clicking on an icon that created a URL for a free version of the story that they could use for blogging or to submit to sites such as Digg or Yahoo Buzz.

The deal was essentially this: these often influential word-of-mouth generators could trade reputational and attention credits for free content. The content would be part of the online conversation, not walled off behind a paywall, and presumably some fraction of those who followed the links to free content would recognize the value in the premium content around it and subscribe. A very nice Freemium model, in other words.

Perhaps News Internation and Rupert Murdoch will prove everyone wrong, once again. He has a canny knack of doing so, though his online record is far more patchy.

But it’s a long time since I last read what Matthew Parris or Daniel Finkelstein had to say. Their proprietor may not care about this unless it’s earning him a buck. I suspect they do, though: a commentator is only as powerful as the influence they wield. And their influence has just been cut by 90% in a month.