How Paywalls Work

The Great Content Debate: Free Versus Paid

In 2008, Wired magazine editor Chris Anderson made a fairly bold, though not inconceivable, statement in his in book "Free." He declared that "a decade and a half into the great online experiment, the last debates over free versus pay online are ending" [source: Anderson]. A year prior, The New York Times had abandoned its efforts to get people to pay for access to its leading opinion columns, The Wall Street Journal was planning to release many more of its online articles for free and Google continued churning out free applications as merrily as a goose laying golden eggs. After all, sites could charge advertisers a fee based on the number of people who viewed their billboard on a Web page -- a unit referred to as costs per impression, or CPM -- to make money. The more popular the site, the higher the CPM and everyone could go home happy.

Rewind 24 years prior and futurist Stewart Brand was saying essentially the same thing at the first Hackers Conference in 1984. Brand coined the phrase that "information wants to be free," and he stands behind that notion -- for the most part. In a response to Apple co-founder Steve Wozniak, Brand noted that the need to be free dominates the information superhighway, while a certain cache of information -- the innovative stuff that can't be replicated, such as a handy app -- does not [source: Siklos]. On the contrary; that kind of quality knowledge demands a high premium, which explains why The Wall Street Journal didn't unbridle all of its financial market content to the teeming masses. For people deeply involved in that industry, they'll pay for the inside scoop.

Anderson's "Free" premise recognized this tension between information that wants and doesn't want to be free. Nowhere has that tension been more hotly debated than with The New York Times' metered paywall. Months before it even went live in March 2011, a host of tech pundits, bloggers and journalists had declared it dead on arrival, while many others also held out hope that the site would turn a profit and signal a new era in online business models. In spite of the diversity of voices tossing their two cents into the paywall debate, most echoed a common cluster of pro and con arguments:

  • Pro: People should have to pay to access quality content because news doesn't report itself, and the online advertising model can't support print publications for the long haul.Conclusion: Paywalls can save the publishing industry.
  • Con: People shouldn't have to pay because it drives away loyal customers, and they'll find the same content elsewhere for free or figure out a way to hop over the paywall.Conclusion: Paywalls will kill the publishing industry.

Yet, details of The New York Times previous paywall "failure" with TimesSelect indicate that the free-versus-paid debate isn't quite so black and white. While the site removed TimesSelect two years after its inception, it wasn't a total flop: The service reportedly earned $10 million per year and had 227,000 paying customers [source: Arthur]. However, since digital advertising rakes in at least $300 million annually for the company, its decision to remove TimesSelect and focus on ads appears to have made fiscal sense [source: Cervieri]. But with the ubiquity of mobile devices and the rise of tablet computing, the company now senses it's time to diversify its revenue base through subscription services.

However, that still doesn't answer the ultimate deciding factor in the free-versus-paid content war: If you build it, will they pay?