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Rupert Murdoch, never one to shy away from controversy, has stirred up the Internet in recent weeks with his declaration that he’s planning to move all his online properties behind a subscription paywall, and that he’s considering blocking Google’s access to the sites. Of course, this is unheard of in an era where we’ve constantly had it drilled into our heads that visibility is paramount, that traffic equals revenue, and Google is the lifeblood of any publishing venture. Not surprisingly, when the news broke, the usual new media pundits reacted with outrage, portraying Murdoch as a crazy old dinosaur who just doesn’t get it:

Rupert Murdoch has it backwards. You don’t charge the search engines to send people to articles on your site, you pay them.

This one is impressive as well:

Rupert isn’t a technophobic loon who will send his media empire to the bottom of the ocean while waging war on search engines. Instead, he’s an out-of-touch moustache-twirler who’s set his sights on remaking the web as a toll booth (with him in the collector’s seat)

Once the furor from the “information wants to be free” crowd died down, and once word leaked out that Microsoft was in discussions with Murdoch about making Bing the exclusive search engine allowed to spider his content, he wasn’t looking quite so backwards after all. Other publishers are starting to show interest in the same sorts of deal. Erik Sherman took a look at the numbers and concluded the following:

Too many are sustaining themselves on wishful thinking, not real analysis. . . . It’s a case of where much popular opinion is based on a vague sense of how things “should” work in the new world. But as happened during the tech bubble, the value of new economic and business models may have been over-sold, and the insight of cold fact under-appreciated.

Despite what you’ve been told, traffic does not equal revenue. Sherman notes that for as little as $100 million (pocket change to Microsoft), they could completely subsidize all of the ad revenue Google sends to the top 50 news publishers. As Murdoch himself notes:

The fact is there’s not enough advertising in the world to go around to make all the Web sites profitable. And we’d rather have fewer people coming to our Web site, but paying.

This is really the key here. Having lots and lots of traffic does you no good if you can’t monetize it. It’s just extra bandwidth costs. Having a massive drop in readership can actually help save a publication, and here’s a case where that was exactly what happened:

Web traffic plummeted from about 15,000 views a month to about 8,000. . . . It was a success because the Hobbs News Sun’s website went from losing money—it generated no revenue and occupied employees for hours each day—to making enough money to sustain itself.

The author of the post notes that their strategy only works in particular situations:

To succeed with paywalls, then, publishers need not only an established monopoly on something valuable (local news, scoops, reporting quality) but also a plan to translate that into advertiser interest. Paywalls alone, unless they are ridiculously expensive, just won’t be enough.

The question, then, is whether search engine subsidies would be enough to allow a major publisher to overcome these hurdles. Mark Cuban (sometimes it takes a crazy billionaire to understand another one) notes that newspapers have very little to lose here, and that there’s a strong potential for gain for both Bing and groups like AP and Reuters.

Thinking in terms of scholarly publishing, most journals do indeed have an established monopoly on something valuable, and our paywalls have succeeded (some would argue that this is because they are ridiculously expensive, as so far online advertising is failing to pay the bills). But I’m surprised we haven’t seen more interest in dealmaking like this from the open access (OA) crowd, nor from the creators of community database resources. It seems like there should be some common interests here. OA-supporting researchers and publishers want to find ways to make their publications freely available. Search engines thrive on giving away products for free and using them to sell advertising. Currently, many important community resources are in danger of disappearing due to lack of funds. The author-pays business model has not shown itself to be sustainable for low-volume, high-editorial-oversight publications.

Could an exclusivity deal with a search engine or an advertiser be the missing link here to making these things viable?   It’s an interesting possibility. We’ve seen many contenders trying to become the search engine for scientists. Are any of them well-heeled enough to subsidize exclusive content?

There are the obvious worries about independence and conflicts of interest.  It’s also unclear if traffic to science journal articles and database entries would generate enough advertising revenue to make a subsidy profitable for a search engine.   Even Google seems to have admitted that there are some areas where advertising can’t cover the costs of content acquisition.  It seems like blocking access to particular search engines would be anathema to the philosophy behind OA. And, since a journal must attract authors, having limited visibility might make for a tough sell. But it’s important for publishers of all types to think about alternative business models in such revolutionary times.

And as Murdoch’s moves are proving, challenging the common wisdom might not be so crazy after all.

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David Crotty

David Crotty

David Crotty is the Editorial Director, Journals Policy for Oxford University Press. He serves on the Board of Directors for the STM Association, the Society for Scholarly Publishing and CHOR, Inc. David received his PhD in Genetics from Columbia University and did developmental neuroscience research at Caltech before moving from the bench to publishing.

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Discussion

18 Thoughts on "When Less Is More: The Upside of Paywalls and Delisting from Google"

Hard to say what outcome you wish given your argument. Isn’t the aim of publishing to get information to people? Shouldn’t that be the starting point? Or is this blog all about protecting the status quo?

Different publishers have different aims. Some publishers are commercial entities who are in the business solely to profit (and I would think Rupert Murdoch falls into that category).

Regardless of your aim as a publisher, you have to find a sustainable way to do what you do. If you can’t stay afloat, then your aim doesn’t really matter as your venture will cease to exist. The outcome I’m looking for is finding new ways for publishers to continue achieving their aims.

Ryan – read any of the previous posts and it’s pretty easy to see what side Mr Crotty comes down on.

As far as Old Man Murdoch is concerned, even if he did “monetize” his very loyal Fox News following, eventually those people will unsubscribe. Attrition is simply a fact of life. Now, where are his new subscribers going to come from to take their place?

Of course, all this speculation above is moot since Google is now offering newspapers an option to specify a number of clickthroughs from Google News before sending them to the subscription page.

I do try to stay consistent–it’s important to be practical and to be able to pay your employees and feed your family if you’re running a business. Wishful thinking about how things really should be will only get you so far. New technologies and ways of communicating are great, but they don’t run on wishes or unicorn tears. We need to find ways to make these activities sustainable, rather than just pipe dreams. You’ve knocked me in the past for just being negative and shooting down bad ideas, at least here I’m trying to come up with a positive suggestion. Publishing to a smaller audience that’s willing to pay for your efforts is one workable possibility. And, if search engines are making a fortune using the content of others to sell ads, perhaps they’d be willing to help pay for the development of that content, particularly if they had exclusive rights to exploit it.

As for attrition, I’m not sure what difference that makes here. How does any business that doesn’t give its product away for free find new customers? Better to sell to a loyal audience now and figure out how to replace/increase that audience later than to sell nothing now and go out of business immediately. And as Mark Cuban points out in one of the linked articles above, if things don’t work out, you go back to Google, and you’re right where you started with nothing lost.

And I’m not sure the point is moot. Google’s new offering is nice, but I’m sure in Murdoch’s mind, a huge pile of cash from Microsoft is preferable.

Lots of strong opinions here, and I would personally love to see a showdown and a clear winner.

I think Microsoft and Murdoch (and Cuban, who should know better) are discounting user opinion a little too much, though.

I also don’t think Mark Cuban’s right about “nothing lost”. If things don’t work out, you might not be able to get back to where you were. What if they were to ban Google and nobody really noticed aside from the Fox News diehards? How would they even justify their existence if the subscription-only thing didn’t work out?

How would they reclaim the lost goodwill?

As far as the huge-pile-of-cash from Microsoft, well, I hope it lasts. The last time exclusive deals rather than user relevance determined search results was back in the 90s, and that didn’t turn out too well.

The thing is, the WSJ site has been a money maker for years because of subscriptions. That’s not theory on Murdoch’s part. And if you work the numbers, the amount they get in ad revenue is likely chicken feed to the company – not even a good rounding error. Good will only is something worth keeping for a business if it’s actually going to lead to a tangible benefit. If the whole benefit is to keep people coming for freebies, then it’s probably something deserving a write-down by the accountants.

I do agree that Murdoch is mostly full of it–his views on fair use are bizarre, and Cuban always needs to be taken with a grain of salt.

That said, I think Erik hits the nail on the head in his comment above. Is there any value in goodwill from freeloaders? Also, I think you’re looking at this on too deep a level–is the average Glenn Beck fan or WSJ subscriber really going to drop Fox/the paper because Murdoch has a spat with Google? Would they even notice?

You’re right on the questionable lasting value of this strategy. But there seems to be a common interest here. So far the relationship has been one-sided–the content companies give up their content to Google because allegedly they need Google more than Google needs them. But search engines need content to spider in order to exist. If all the quality content goes away, what happens to the search engine? Google has spent hordes of money creating map content, why not spend money creating news content? How much do they spend hosting and serving YouTube videos? Could they spend a tiny fraction of that to host and support the Arabidopsis Information Resource?

That kind of attitude from Murdoch is exactly why I hope they drop out and fail. They’re not freeloaders, they’re potential customers that they’ll need to replace the current subscribers with. Goodwill determines to what extent they’ll convert.

There’s way more journalism being done than the market can support at the current profit levels. Something has to happen, and if Fox wants to give up their marketshare, it would make a lot of people very happy. They’re not going to all disappear, so I wouldn’t worry too much about Google.

They’ve been threatening this for almost a year now. Do it already!

But if your site is one like Fox News, or the NY Post, where you don’t offer online subscriptions, what exactly are you selling those “customers”? And if they see everything on the WSJ for free, what is the incentive to become a paying subscriber?

I do agree that the market is overloaded with news sources (the 24 hour news cycle has massively damaged quality) and we’re likely to see a sharp reduction in the number of outlets, and in the cost of production from those outlets. Either they find a way to do their job cheaper, or most of them disappear and the few left use the scarcity to drive a subscription-only model.

And I’m with you, enough threats, let’s see some action, let’s see if anyone can put a dent in Google’s so far invincible armor. It has to happen sooner or later….

I think they could drop the whole “get the scoop” mentality and focus on telling better stories and putting things in context like only a journalist bathed in the news daily can do. Give some historical perspective or cultural background information, that sort of thing.

Two sites I’ve paid for, Metafilter and Flickr, provide useful examples.

Metafilter presents stories about news, sometimes timely, sometimes not, but always interesting, and the follow-on discussion is the best part. What do you have to pay for? Not to read, but to participate and contribute. To count such interesting people among your peers. It’s totally worth it, no paywall needed.

Flickr is just a textbook example of the freemium model. Some sites would do well with this, too. They could provide some material for free, and some resources for pay. Hasn’t NPG been doing this for years?

Thanks for the link. Unfortunately, I suspect that the down side will be many publishers going out of business. Whether because the revenue opportunities are no longer large enough to cover the operating costs or because publishers are too mired in old ways of doing business that they can’t undertake the changes necessary, it’s hard to say.

You’re probably right, and we’re due to see a winnowing of the field. But if all the newspapers go away, what happens to Google News? If all the scholarly journals go under, what happens to Google Scholar? Isn’t their some mutual interest here?

On the subject of news, by the way, Cuban has an article claiming that Google has already lost that battle–Twitter and Facebook are where people go for breaking news these days, not the glacially-paced Google.

First up, Murdoch is being… inconsistent with his views. Here’s a breakdown of the Murdoch owned websites that do precisely what he is accusing Google and the others of doing: http://www.techdirt.com/articles/20091111/0049546883.shtml

Second point here is that I do not understand the noise over Google First Click update – Google previously said that for them to index paywall content, you 1) had to let them in and 2) had to let each landing page page be viewed by a user coming from Google. Their change is minor in that they have said that you can limit the number of inbound visits from one person in one day if you wish. I think you could have done that anyway by the way. They’ve just been explicit about it. I think they are actually trying to say “Um, all that inbound traffic we’ve been sending you – perhaps you want to put a call to action up on your site when they arrive?”. Some of us Scholarly publisher have been doing that for a while and it give useful data.

Especially for Scholarly Kitchen Readers I went to The Times (London), the Sun and the news of the World websites to look for subscription options… I did find an option for the Times (eventually – the lack of emphasis was notable) but couldn’t find any options for the the other two. And (shudder) I did look. So much for that then. If Murdoch cannot be serious about trying to convert web visitors into print subscribers (he doesn’t actually seem to offer a web subcription to the UK papers from what I can see) then his argument (such as it is holds no water whatesoever).

The problem with newspapers is simply stated and has been pointed out repeatedly by smart people for a while (and David, you’ve quoted the point) – If you don’t provide unique valuable content then you don’t have a monopoly and economics dictates what happens to commodities… The sad truth is this, most content in a newspaper is of zero value. This is why you find them scattered on the floor of the tube in London. The message for publishers of scholarly content is this. Fight the perception that most Scholarly content is of zero value. You want to see innovation in newspapers? go look at the Guardians work with datasharing of their content. Monetizing the very thing that Murdoch is complaining about.

Final thing: I watched the video of his interview (all 40mins). The comments you quoted about him being out of touch, are perceptive. It’s an uncomfortable video to watch. Especially when he struggles to bring any organisation to his argument, or cannot recall the name of “that video site” (Youtube- where Murdoch owned organisations post video interviews of their boss).

I agree–Murdoch is way off the mark on much of what he says. His opinions on fair use, as one example, are completely bizarre. In essence, this is a money grab on his part, an attempt to flip the balance of the search engine game to a more equal setting instead of the current state where the search engines have all the power and get all the revenue. It’s a smart move if he can pull it off, but much of what he’s saying is just posturing in order to further this effort.

And creating a quality product that people are willing to pay for is the key to survival in the digital age. Newspapers have dug their own grave by lowering quality and relying on wire reports so much so that they’re all pretty much interchangeable. Put one behind a paywall and it’s easily replaced with the next one. Scholarly journals at least have the advantage of having unique irreplaceable content.

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