When Paywalls Aren’t Enough

May 19, 2009 at 2:26 pm Leave a comment

By Eric Pfanner May 17th, 2009

PARIS — Will May 2009 mark the beginning of the end for the free, unfettered Internet?
From all the wailing on the Web — and the fist-pumping in some old-media redoubts — it might seem so.

In recent days, Rupert Murdoch, chief executive of News Corp., declared that he would end what he called a “malfunctioning” business: the free online newspaper. Other publishers, including The Guardian Media Group in Britain and The New York Times Co., which owns the International Herald Tribune, said they were examining ways to get readers to pay for digital news.

Then, lawmakers in France approved the most dramatic measures yet in the fight against the unauthorized sharing of digital music and movies, passing a law that threatens copyright pirates with the loss of their Internet access. Many in the content industries would like other countries to do the same.

So, is it time to say goodbye to no-strings Web surfing, to pay up and behave?

I wouldn’t put my money on it.

Why? Let’s start with newspapers. The case for charging online readers seems pretty clear, if only because publishers have relatively little to lose if they don’t. Few newspapers generate even 10 percent of their revenue on the Internet, even after years of double-digit growth in advertising. Now online advertising has gone into reverse.

But “pay walls” alone are not going to save the industry. Even The Financial Times and The Wall Street Journal, whose Web sites are perhaps the best examples of paid-for digital news, generate only small fractions of their budgets from Internet subscriptions. For general publications — which, according to surveys, will have a harder time getting online readers to pay — pay walls may just be a transitional step. To develop more viable online business models they will have to take a broader look at where money is actually made on the Internet. E-commerce sites like eBay and Amazon.com aside, there are two main sources: Search engines, which sell billions of dollars’ worth of advertising, and Internet service providers.

This is where the music industry can be instructive. It has been trying for years to get consumers to pay for music online, largely without success. Ninety-five percent of the music on the Internet is still pirated, and record industry sales are still falling at double-digit rates.

Now the music industry is moving on, rejecting online pay walls and embracing new services that give people free music, or something that looks like it. They package unlimited music with advertising, broadband subscriptions or mobile phone purchases, for example.

The French law, even if it attracts imitators, seems unlikely to stop that trend. Few analysts expect it to result in more music purchases, or to result in large-scale disconnections of Internet users.

What it could do is encourage Internet service providers and media companies to sit down together and come up with legitimate offerings that consumers actually want to use — no, not like the Apple service iTunes, whose growth has ground to a halt, but like the free, unauthorized services they favor.

If all of this were bundled into a contract with an Internet service provider or subsidized by Google’s search ads, it would be an even easier sell. And then, the Internet of the future would look a lot like the free Internet of today — with a slightly different division of the spoils.
© 2008 The New York Times Company. All Rights Reserved

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Entry filed under: Music Industry, Piracy. Tags: , , , , .

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