Misguided Moralism in the Paywall Debate

Last week I got in a bit of an argument with Adam Thierer, Randy Picker, and others about the New York Times paywall. I think a paywall is a bad business strategy, but my opposition to paywalls is mostly a matter of (as I tweeted to Adam) “personal principle rather than business advice.” Adam seemed confused by that statement, so let me see if I can elaborate.

This hilarious post from the Monkey Cage, “Monkey Cage to Begin Charging NY Times Employees for Access,” captures the essence of my objection in a funny way. There are millions of people on the web competing for the attention of readers. I am one of them. I’m writing this paragraph because I want people to read it. Having readers is valuable. They yield advertising revenue, interesting comments, professional opportunities, and more. I regard each and every one of my readers—you—as doing me a favor. So thanks.

In economic terms, what’s happening is that I’m giving you something—a copy of this post—whose marginal cost to me is basically zero. You’re giving me something—your time—that is far more scarce and valuable. Since I’m getting the better end of the deal, I need to work hard to make sure you’re getting enough value out of the deal to entice you back in the future.

So I find it pretty rich when a site thinks it’s doing me a favor by letting me read its content. To be sure, the New York Times is a great website. But there is far more free, good content on the web than I could possibly find time to read. My RSS reader is full of smart bloggers I wish I had time to read. So the Times should be grateful for the time I devote to their website rather than one of the many alternatives.

I’m belaboring this point because there’s a kind of twisted moralism underlying a lot of discussion of this issue. Partisans for mainstream media sites like to portray consumers as deadbeats for preferring not to pay for online content. I think this partly reflects the general sense of entitlement among mainstream media outlets that is a holdover from the days when technological constraints made content a lot scarcer than it is today. And I think it also has to do with a point Mike Masnick made years ago: people find the number zero really counterintuitive. People find it hard to understand how you can make money giving away content, despite the fact that we’re literally surrounded by examples of companies making billions of dollars doing just that. And when people find an economic situation confusing, they often apply an inappropriate moral gloss to it.

So it’s worth saying explicitly that people who prefer free content have nothing to be embarrassed about. We’re just doing what savvy consumers in every competitive market do: looking for the best deal. If anything, it’s tacky for a media organization that’s been fortunate to receive a reader’s valuable attention to demand that she pony up some cash as well. The reader is doing the publisher a favor by reading its content, not the other way around.

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16 Responses to Misguided Moralism in the Paywall Debate

  1. Adam Thierer says:

    You use the phrase “misguided moralizing” in the title of this piece and then kick the column off by mentioning our Twitter exchange. This might lead some readers to believe I have engaged in some “moralizing” about paywalls. Nothing could be further from the truth. Instead, YOU are the one engaging in “misguided moralizing” with a “Just Say No!” call on Twitter for people not to subscribe to the NYT digital edition. Just because a good has a zero margin cost, you seem to take great offense that they would have the audacity to still try to monetize it using subscriptions. My view: Why not let them try? As I noted in our Twitter exchange, I have no idea if it will work (it probably won’t for the NYT) but what’s wrong with trying? It worked for the Wall Street Journal in some ways. Are you morally opposed to the Journal charging exorbitant rates for subscriptions to the digital versions but perfectly fine with them doing so for the print version simply based on its tangibility?

    It’s just a market, Tim. Market are messy and don’t always evolve according to the laws of physics. There are all sorts of intangible, zero-marginal costs goods in this world that are monetized using subscriptions and direct payments. I am completely agnostic about the “morality” of any of them.

    In the meantime, let’s be clear about what you are really saying here: Advertising is it. Right? You’re essentially saying these guys should forget about all those other monetization schemes that might involve direct payments or subscriptions of some sort. If that’s the case, I could REALLY use your help fighting all the anti-advertising nuts who want to regulate the only commercial mechanism left on the table to monetize intangible, low marginal cost goods / services.

    Of course, there’s always tip jars, charity, and government support. Good luck constructing the next New York Times using those.

  2. Jake says:

    It seems like you are just thrifty. I agree that it is nothing to be ashamed of, but it is hardly a rallying cry either. What are your thoughts on cable TV?

  3. Adam: I’m happy to clarify that I’m not accusing you of moralizing.

    As for the rest of it, I don’t think we disagree very much. Wearing my public policy hat, I’m happy to say: let them try! I predict they’ll fail, but they’re entitled to give it a shot.

    But my “just say no” was speaking as a consumer, not as a public policy analyst. I’m personally not willing to pay for their content and it’s in my self-interest for the paywall to fail so that they’ll go back to giving their content away. So I’m exhorting my fellow consumers not to sign up.

    It’s “just a market,” but it’s a market I participate in and therefore am entitled to have an opinion about! The Times is entitled to pursue a counterproductive business strategy, and I’m entitled to criticize them for it.

  4. Jake: I don’t subscribe to cable either, mostly because most of the content I want I can get more conveniently through Netflix and/or Hulu. I think the relatively limited competition in the cable/satellite market is one reason they’re able to charge for content. My guess is that in the long run the free Internet-based model will dominate for video content, but I can also see us winding up with a handful of firms like Netflix that offer subscription access to a ton of content.

  5. Matt says:

    You aren’t paying for the writing. You’re paying for the research, accuracy, and trusted brand.

    On opinions, I’d say blogs are equal or better. It’s easier to find niche analysis in blogs rather than papers.

    On facts, I still trust newspapers more because they have more at stake. They aren’t infallible, and I think we’ll see more and more stories from blogs, but there’s always a stronger promise of straight information from a newspaper, in my opinion.

  6. You say of your readers that “They yield advertising revenue, interesting comments, professional opportunities, and more.” For a successful blogger, these incentives taken together have a good chance of providing sustainable compensation for the work. But in the case of a newspaper, only the first reward–ad revenue–supports the work and makes the operation sustainable. Suggesting that the Times should somehow be able to operate online using the same model as you, a blogger, overlooks that crucial difference. By reading your blog, I do you the favor of increasing ad revenue, comment quality, professional opportunities, and so on. But professional opportunities and interesting comments don’t fund a news bureau. By reading the Times, the only favor we readers do them is increasing ad revenue (and at least in my case, since I use ad-blocking software, not even that). What we get in exchange is access to a tremendous news source, one which it is not difficult to argue has no peer in the industry.

    Unfortunately ad revenue alone has proven insufficient to sustain the quality and quantity of journalism offered by the Times. I don’t think that’s because the Times ad department is bad at their job; it’s because the money just isn’t there. So if you, as a Times reader, would be comfortable seeing that quality and quantity decrease, you should feel no compulsion to subscribe. Otherwise, fine–I won’t judge you morally for choosing not to buy a product. However, I might judge you morally for feeling you are entitled to a high-quality product you don’t pay for. As you and Adam say, it’s a market–but you can’t expect the market to give you what you want if you don’t give it what it needs.

  7. Zathras says:

    “In economic terms, what’s happening is that I’m giving you something—a copy of this post—whose marginal cost to me is basically zero. ”

    Why just look at marginal cost? Why not average value cost? Using this argument, record companies, book publishers, and software makers should make all of their product free for download. The devaluation of IP implied in this statement is amazing.

  8. htownmark says:

    I think you lump the times in with other fare too easily. Yes, there is plenty of great “free, good content on the web than I could possibly find time to read.” But many if not most discerning readers agree that the Times is unequaled in terms of journalistic excellence. If you disagree, I won’t quarrel with you, but I think the Times is making a reasonable gamble that enough people will not be willing to settle for less just because it is free. Certainly enough to compensate for lost advertising revenue.

    The gamble may not pay off, but we’ll see.

    I agree that paywalls in general are bad business, but the Times isn’t just a generally good publication, one among many. It’s the Times. There’s a reason people all over the country subscribe to the Times in addition to their local paper, because it is singular. Hopefully, the Times will set a precedent in which the best publications earn the right to a paywall.

  9. You, Timothy, don’t have to fret about the cost of your Baghdad bureau. Comparisons between your enterprise and NYT’s are beyond pointless, although you’re right to say that other big orgs are making money from free content.

    Question is how many of them are in traditional newsgathering? And how many of those in traditional newsgathering are struggling financially? The sheer size and complexity of NYT’s TNG infrastructure— from Friedman to the translator in Kabul, to HQ’s power supply bill to the canteen staff— makes it hugely expensive. NYT could cut costs by doing away with bureaus and the other things required for a world class news operation and adopting a Huffington Post or The Atlantic business model, but its product would be much, much poorer (no disrespect to those two). And so would we consumers.

    Having said all that, I’ll link to their content in a way that I can get it free. If I can’t I’ll go somewhere else. I don’t miss Murdoch’s Times (of London) as much as thought I would.

  10. snowseff says:

    It’s not really fair to say that the price to you should be the same as the marginal cost of production. Fixed costs (reporting, in this example) are real and have to be funded. By your logic, movies, music (both concerts & mp3s), and the last available seat on an airplane should all be essentially free to you.

    In any case, the market of goods and services is more often organized around the concept value offered, and the price of a good/service is determined by its value and not its cost.

    In this situation, you are arguing that the value of the NYT is zero to you (or just the value of your time). This is clearly below their fixed costs, and consequently, NYT will not be in business if many people agree with you. I am not arguing that people have a moral obligation to fund the NYT or that NYT should stay in business, but I am saying that being free and being a business are mutally exclusive.

    ps I have a bone to pick with your post yesterday (which was also re-post on the Dish). You based an argument on the point that only 20% of NYT revenue funds shoe-leather reporting. But you made up that statistic.

  11. TB says:

    Lemme get this straight. NYT hires skilled people to produce content that attracts me and many others to their website. So many others, in fact, that advertisers pay a premium to have their message presented on the NYT website. So if advertising is vital, and if my visiting the site is equally vital (to attract advertisers), why should I have to pay to be there?

  12. sunil says:

    wow , amazing logic . By this logic even your cellphone company must be grateful to you and provide you free service since they dont really incur any “marginal cost” for you 🙂

  13. BP Beckley says:

    I’m personally not willing to pay for their content and it’s in my self-interest for the paywall to fail so that they’ll go back to giving their content away.

    If it’s in your self-interest to have it, then it must be worth something to you, but you’re still unwilling to pay money for it. That’s fine, but I’m hard put to admire you for it.

  14. Florence says:

    Btw – bravo on this post. Agreed totally!

  15. Dann says:

    It’s not that consumers are deadbeats.
    The problem lies with the exponential cost of media in the era of near-zero distribution and production costs.

    iTunes sells songs for about a dollar. And even at that, it’s quite expensive.
    And even by saying that, with approximately 300,000 sales, you would be a millionaire. Practically set for life.

    So when movie companies especially decide to charge 20-30 dollars for bluerays, even more for tv show seasons, it boggles the mind.
    You can stream a movie in hd for 24 hours on Telus TV for about 7 CAD.
    That’s expensive, considering an itunes song gets infinite plays to the dollar (provided you get rid of that nasty aac drm-laden format.)

    A 5 dollar discount dvd ripped and encoded to digital for personal home use is what mainstream movies should be sold for. Imagine if the latest summer hit movie was available to 100 million people for $5? That’s half a billion in sales per movie, not including toys, theatre tickets, etc. etc. (Optimistic figures, I know)
    But it just comes down to being AFFORDABLE. People do spend money when a) they think it’s worth it, and b) when they have the money to spend on it.
    Media these days generally fail to meet both points.

  16. Carlos says:

    It’s their website. They can do with it as they please. It was once free for me… Now I pay. That’s life.

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