Here cometh the pay wall: the countdown begins...

So the Times Online will be charging for news content from June 2010... News International is just one of several news organisations (some big, e.g. NY Times, ABC, etc.) which have plans to erect pay walls and develop subscription based models imminently. Love him or loathe him (well, most people loathe him), you have to respect Rupert Murdoch's pit-bull instincts in leading a growing number of content providers to erect – or at least consider the erection – of pay walls. Murdoch knows that most of the content industry wants to see the proliferation of pay walls. In fact, pay walls are their only saviour. Certain death awaits them otherwise. James Harding of The Times said as much in an interview today: "It [charging for Times Online access] is less of a risk than continuing to do what we are currently doing".

The trouble is that few yet have the gumption to do it. Murdoch, I suspect, is one of several who thinks that once there is a critical mass of high profile content providers implementing pay walls then there will be deluge of others. And I think he is probably correct in this assumption. After all, subscription can actually work. The FT and Wall Street Journal have successfully had subscription models for years (although they admittedly provide an indispensible service to readers in the financial and business sectors). An additional benefit of pay wall proliferation will be the simultaneous decline of news aggregators (which Murdoch has been particularly vexed about recently) and 'citizen journalists', both of which have contributed to the ineffectiveness of advertising as a business model for online newspapers. The truth is that the future of good journalism depends on the success of these subscription-based business models; but the success of this also has implications for other content providers or Internet services experiencing similar problems, social networking services being a prime example.

If you take the time to peruse the page created by BBC News to collect user comments on this story, a depressingly long slew of comments can be found in which it becomes clear that most users (not all, it should be noted) have a huge difficulty with subscription models or simply do not understand what the business problem is. And largely this is down to the fact that most ordinary people think:

1. That content providers of all types, not just newspapers, are a bunch of rip-off merchants who are dissatisfied with their lot in the digital sphere;
2. That content providers generate abnormal profits from advertising revenue and that their businesses are based on robust business models, and
3. That free content, aggregation and 'citizen journalists' fulfil their news or content needs admirably and that high quality journalism is therefore superfluous.

My opinion, for what it is worth, is that most users simply don't recognise that businesses require business models, nor do they realise that many of the services they use on the web day in and day out are either unprofitable or are losing large amounts of money. It's always good to receive something for free; however, someone somewhere has to pay. This reality is inescapable. Traditionally this has been advertisers, partly because Google have been good at it; but what do you do when advertising doesn't bring home the bacon??? Many users dismiss the implementation of pay walls by telling us that they will get their news from a free sources or blogs. The reliance on free or citizen journalism is disappointing, but more than that it is dangerous for democracy. Such sources simply do not have the resources (financial or intellectual) to deliver high quality, reliable news. They don't have the training, or the new connections, or the international correspondents, or the access to the information required, nor do they operate within recognised ethical boundaries or present facts and stories objectively and with appropriate sources or evidence. Often they are motivated more by communicating with like minded readers, perpetuating gossip or untruths.

The real truth of course is that newspapers are losing tremendous amounts of money. It seems to be unfashionable to say it – even the great but struggling Guardian chokes on these words – but free can no longer continue. Newspapers across the world have restructured and reinvented themselves to cope with the digital world. But there is only so much rearranging of the Titantic's deck chairs that can occur. The bottom line is that advertising as a business model isn't a business model. (See this, this and this for previous musings on this blog). Facebook is set to be 'cash flow positive' for the first time this financial year. No-one knows how much profit it will generate, although economic analysts suspect it will be small. What does this say about the viability of advertising as a revenue stream when a service with over 500 million users can barely cover costs? But what are Facebook to do? Chris Taylor conducted an unscientific survey with some International MBA students last week, all of whom reported positively on their continued use of Facebook to connect with family and friends at home and within Liverpool Business School. The question was: Would you be willing to pay £3 per annum to access Facebook? The response was unanimous: 'No'.

Sigh.