Shirky: <em>Times</em> paywall is pretty much like all the other paywalls

Clay Shirky’s latest essay, “The Times’ Paywall and Newsletter Economics,” examines all the ways in which Rupert Murdoch’s Times paywall is pretty much like all the other paywalls, and failed like pretty much all the other paywalls.

The classic description of a commodity market uses milk. If you own the only cow for 50 miles, you can charge usurious rates, because no one can undercut you. If you own only one of a hundred such cows, though, then everyone can undercut you, so you can’t charge such rates. In a competitive environment like that, milk becomes a commodity, something whose price is set by the market as a whole.

Owning a newspaper used to be like owning the only cow, especially for regional papers. Even in urban markets, there was enough segmentation-the business paper, the tabloid, the alternative weekly-and high enough costs to keep competition at bay. No longer.

The internet commodifies the business of newspapers. Newspapers compete with other newspapers, but newspaper websites compete with other websites. As Nicholas Carr pointed out during the 2009 pirate kidnapping, Google News found 11,264 different sources for the story, all equally accessible.* The web puts newspapers in competition with radio and TV stations, magazines, and new entrants, both professional and amateur. It is the war of each against all.

None of this is new. The potential disruptive effects of the internet on newspapers have been observable since ClariNet in 1989.* Nor has the business case for paywalls changed. The advantage of paywalls is that they raise revenue from users. The disadvantages are that they reduce readership, increase customer acquistion and retention costs, and eliminate ad revenue from user-forwarded content. In most cases, the disadvantages have outweighed the advantages.

The Times’ Paywall and Newsletter Economics