Clay Shirky on News sites' 'Paywall Economics'

Another trenchant bit of thinking from Clay Shirky.


The “paywall problem” isn’t particularly complex, either in economic or technological terms. General-interest papers struggle to make paywalls work because it’s hard to raise prices in a commodity market. That’s the problem. Everything else is a detail.

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.

One way to escape a commodity market is to offer something that isn’t a commodity. This has been the preferred advice of people committed to the re-invention of newspapers. It is a truism bordering on drinking game material that anyone advising newspapers will at some point say “All you need to do is offer a product so relevant and valuable the consumer is willing to pay for it!”

This advice is well-meaning. It’s just not much help. The suggestion that newspapers should, in the future, create a digital product users are willing to pay for is merely a restatement of the problem, by way of admission that the current product does not pass that test.

Most of the historical hope for paywalls assumed that through some combination of reader desire and supplier persuasiveness, the current form of the newspaper could survive the digital transition without significant alteration.

Payalls, as actually implemented, have not accomplished this. They don’t expand revenue from the existing audience, they contract the audience to that subset willing to pay. Paywalls do indeed help newspapers escape commodification, but only by ejecting the readers who think of the product as a commodity. This is, invariably, most of them.

via The Times’ Paywall and Newsletter Economics « Clay Shirky .