Tear down those paywalls: A better solution is possible

Paywalls are going up all over the internet, hurting both publishers and readers. A better solution is possible, but no one is offering it. TBR can describe the solution but cannot explain why the market is not working to produce it.

The internet is smothering publishing

Online reading is harming both print and online newspapers and magazines, reducing the number of journalists and the available volume of news and analysis. Online advertising revenue is increasing, but most of the increase is going to a small number of social media companies. The remainder is going to content-creation companies, that is to say publishers, but to a decreasing number of them, all large successful sites such as The New York Times, The Wall Street Journal and The Washington Post.

This leaves smaller publishers — whether local, regional or specialized — in an increasingly difficult position. For years, small publishers have been reducing costs by cutting back on writers, but this makes their content less desirable, consequently reducing readership and thereby revenue. To compensate, these publishers have allowed an ever-expanding volume of increasingly obtrusive advertisements to be placed on their pages, reducing usability and consumption. This is a vicious cycle. Publishers have tried to attract new readers by allowing their content to be used on social media sites, but most readers simply consume the content on the social sites and do not follow the articles back to their sources.

Publishers are building walls

Increasingly, especially in 2019, content-creation sites have erected paywalls, requiring paid subscriptions to consume their content. This works well for large, popular sites, bringing in additional revenue and creating a relationship with readers. However, paywalls are a forbidding barrier to entry for smaller, more specialized publishers, as occasional readers often choose to skip reading the content that would otherwise have brought them to the site.

Some publishers allow readers to view a limited amount of their content through a free subscription, enabling them to connect with readers while still controlling their access. This also imposes a barrier to potential readers, albeit a much lower one, as many readers choose not to create another new account, manage another new password, and deal with more promotional email.

TBR believes paywalls will hurt most publishing sites and their potential readers. The vicious cycle will spin faster.

A solution is possible

What can be done? A solution, or at least a partial solution, is available. It would benefit publishers, readers and, most important, the business that creates the solution. TBR can find no evidence that anyone is pursuing the solution, and the reason for this failure of the market is not apparent.

The solution could be described as pay-per-view option for published content. Readers would each have a single paid account across all member publishers, with a balance to which they could contribute, and publishers would offer content for which users could choose to pay, on a per-item or per-issue basis, with the cost debited to their account. Dave Winer, a software and internet giant, likened such a system to E-ZPass, where drivers can pay tolls across the interstate system from a single account.

In addition to enabling payment for content, such a system would allow publishers to get to know their readers and offer attractive packages that would increase both readership and consumption, including subscriptions. The business running the pay-per-view system would collect a fee for each view or subscription and would manage the entire process. TBR believes consumers are already experiencing subscription fatigue from online publications and over-the-top (OTT) video services. A single point of contact for at least a subset of their content providers would lower this barrier to increased consumption.

It is not clear why such a service has not emerged. Content bundling is common in video OTT services, but the patchwork of offered content is frustrating to users. Apple acquired a text content consolidation service, Texture, last year, and is now offering it as News Plus. This is similar to video OTT services in that the bundle is not comprehensive and that the revenue to the individual publishers is necessarily small, as the total monthly fee is only $9.99. In addition, the content is isolated from internet links and searches and is not available on Windows.

The pay-per-view content system would not be a bundle; it would not provide unlimited access to a collection of publications, but available content would be constrained to the member publishers. For publishers, however, there would be no visible downside. They would set the prices, so the system would not cannibalize subscriptions. It would not be exclusive, so that publishers’ content could be distributed through other consolidators and, at their discretion, through social media. There would also be little downside for subscribers to the service. It is likely that the service would use a “freemium” method to attract users, and increments to user accounts could be used for a variety of online incentive programs.

There would be a cost to starting up the service, and any system involving financial transactions and user accounts requires strong security. User privacy is also a concern. These problems are well understood at this point in the evolution of the internet. The service would have to create a critical mass of both content providers and users before it started generating revenue and profit, but much higher startup costs are typical in the current business climate. Once a service is established, potential competitors would be challenged to sign up already satisfied readers and publishers.

A pay-per-view system could be set up by an independent startup, but it could also be established as part of an existing business. Companies with many individual publications, like Condé Nast, could begin by offering their own publications and expand the offering to others. Bundling companies like Apple that already have relationships with many publishers could add the pay-per-view system to their offerings. Large publishers like The New York Times could also create such a system, demonstrating that they do not fear it would cannibalize their thriving subscription business. Lastly, large online retailers like Amazon could leverage their large user bases with pay-per-view content offerings.

Similar solutions have been tried and failed

When the internet first became available to the general public, several companies attempted to address the issue of pay-per-view content through what was known as micro-payments. IBM created IBM Micro Payments in 1999, but it was never made generally available. iPIN was a 1998 startup that intended to add charges to user’ ISP bills; it never made it to market. Millicent (a pun: milli-cent) was a Digital Equipment Corporation project that also did not reach the market. NetBill was a project at Carnegie Mellon University that had user accounts like the solution proposed here. It eventually became part of PayPal’s portfolio, and PayPal does support relatively small payments, but not as small as is necessary for content distribution.

TBR believes these systems failed because they were too ambitious. They aspired to support very small payments, or they were intended to be open to buyers and sellers without establishing accounts. For most of them, the point of failure was the connection to existing payment systems, where individual transaction costs were too high for very small transactions. The pay-per-view system described here suffers none of these handicaps.

Summing up

The diminishment and consolidation of publishing is a problem, and a solution is available that would at least reduce the size of the problem. TBR hopes the market acts to deliver the solution soon.

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