Last week Rupert Murdoch declared war on free news content by suggesting that News Corp newspapers could start charging for online access within the year. Calling the existing business model “flawed” he said that “we are now in the midst of an epochal debate over the value of content and it is clear to many newspapers that the current model is malfunctioning”
Over the weekend the FT revealed that the Wall Street Journal is planning to introduce a “
sophisticated micro-payments service”.
Meanwhile Guardian Media Group’s chief executive Carolyn MacCall admitted that there was the
possibility of charging for some of its more specialist B2B and Media content.
Newspaper content has been free for a long time so why the sudden change of tack? Clearly the slump in advertising is having a strong effect. Jeff Jarvis, a strong advocate of the free model points out that "charging for content reduces audience, which in turn reduces advertising revenue”. When there is plenty of money in advertising, it makes sense to maximise this by having the largest audiences which come as a result of offering quality content for nothing. When this revenue dries up, the media industry understandably wants to look for other sources.
The announcents have coincided with the launch of the latest Kindle, larger than the old model and designed around larger format media such as newspapers. Partnering Amazon at the launch were the New York Times, Boston Globe and Washinton Post who were offering a discount on the device if users took out subscriptions.
There may be a latent public appetite for coughing up. A recent study of around 5,000 people in the US and Europe showed that readers were not adverse to paying for online content. Consumers would be willing to pay for coverage they where particularly interested in such as business and sport, provided there were no free online products of equal quality on the market.
And there’s the caveat – provided there were no free alternatives. On the internet there is always a free alternative, and that free alternative is only a click away. And when it comes to Free!, quality may not be as strong a differentiator as you might think. Look at the success of Metro, London Lite the London Paper compared to the “quality” paid for alternative, the Evening Standard. The Standard is under such attack that it is responding with a risky poster campaign ‘apologising’ for being out of touch with its readers. And last night, as part of the relaunch, street vendors were giving away copies – you guessed it – for free.
Wired Editor Chris Anderson has observed that the mass audiences and low costs of the internet has created its own economic rules. The Free! model has become increasingly ubiquitous, particularly as the price of adding incrimental customers falls close to zero (as it does with internet publishing).
MIT professor Dan Airely has demonstrated that Free! also has its own unique psychology – people react to free goods in a totally different way than to those that cost money. Free things are irrationally tempting even if there are peripheral costs or quality is compromised.
The difference between charging nothing and charging something is enourmous. Consider a price increase of a penny from 10p to 11p. That’s a 10% price increase. But to go from 0p to 1p, the percentage increase is off the chart – it is literally infinite!
So that is really the big question. Once media content is free can it ever go back to not being free? Has this horse already bolted?
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