How I Learned to Stop Worrying and Love the Paywall

Well, the New York Times has finally announced that on March 28, 2011, they are erecting their digital wall.  However, unlike the Berlin Wall, the Times seems to have taken time to develop a fairly sober and considered approach to stopping its own massive hemorrhage.  Basically, the Times has figured out that the best solution is to let it flow.

Here’s a breakdown of what the post-wall NYTimes.com will look like:

• Everyone gets 20 articles per month for free.  After 20 articles, users will be asked to pick a digital subscription package.
• On the mobile apps, the Top News section will remain free.
• The NYTimes.com homepage and all of the section front pages will remain free.

But the real kicker is the gigantic loophole built right in:

• Readers who reach Times articles through links from searches, blogs and social media will be able to access those individual articles, even if they have reached their reading limit.

Basically, the Times has adopted the model used by Wall Street Journal and Financial Times.  If there’s ever a Times article you’re blocked from, you can just copy and paste the headline into Google and get to the article for free.  Or if you hit the limit imposed on Google, just head over to Twitter or Facebook and click on the link posted by a friend or the article’s author.

In a sense, the paywall has been intentionally designed to leak like a sieve.  And that’s exactly what will save it.  As I’ve asserted hundreds of times before, news distribution roughly obeys the laws of supply and demand as it would exist in a competitive market.  Because news can be repeated and retransmitted digitally with marginal costs approaching zero, news can and will be transmitted for a corresponding price: free.  In fact, the transmitter of the news gains feelings of appreciation and worthiness that is associated with digital sharing, so there is a positive return to sharing.   The news is like any other kind of digital content; because digital content is more or less inherently uncontrollable, if it has any value at all, it can and will be made free through sharing.  The best that digital content creators can often hope for is a donation or a tip in return for each additional copy downloaded to cover their fixed costs.

With such a porous paywall, it seems as though the Times‘ management actually understood that good news is made to leak.  Everyone will know that the news will flow with or without their contributions.  With innumerable online outlets for summarizing, sharing, reblogging, reposting, or otherwise recapitulating facts not subject to copyright, users can basically access the news with only a minor hurdle in their path.  The subscribers that the Times does garner will join in because those users (or their businesses/academic institutions) gain enough from the Times that they are willing to contribute to the costs of news gathering.  Subscribers can therefore enroll in subscriptions on a more or less voluntary basis to subsidize the kind of content they enjoy or directly use in their own business as a matter of supporting their preferred content creators.  The Times therefore is asking people to pay for convenience, and not the news itself, and so the subscriptions constitute a persistent reminder and/or excuse to more or less voluntarily chip in.

Unlike the facts themselves, the convenience and synthesis aspects of the products that the Times produce is a wholly more protectable aspect of news production and distribution, and has been so since the 1918 case of the International News Service v. Associated Press.  The Times can charge for editorials or for crosswords or for producing the news in a regularly formatted and delivered basis, even though it can’t really charge for news itself.  But because the collection, editing, and delivery of the news constitutes a positive externality (whereby the dispersed public benefits more than the equilibrium of supply and demand can account for), news outlets have always had to obtain other subsidizing revenue streams, whether that’s print advertising, television/radio station cross-ownership, or test prep services (e.g., the Washington Post’s parent company ownership of Kaplan).

And in other news news, the House of Republicans Representatives has voted to defund National Public Radio.  The proof of the largely symbolic nature of the defunding, aside from the fact that it has a snowball’s chance in hell of passing the Senate, is the fact that NPR does not rely much on public funding:

Most of NPR’s revenue comes from the private sector; 22 percent from sponsorships and 34 percent from station programming fees. Only about 7 percent of its revenue is generated through grants and contributions.

NPR stations, however, rely more heavily on federal and state grants. CPB funding constitutes 10 percent of their funding; federal, state and local government funding constitutes about 6 percent of a station’s revenue source while 32 percent comes from individuals and 21 percent from businesses.

The ones who would suffer, had the bill actually passed, would have been the local NPR member stations that provide services such as local news reporting, traffic reports, and outlets for civic engagement (all huge externalities where partisanship plays almost no role).  But NPR is a perennial political pariah, a pawn used to recast news reporting as the products of a liberal bias and partisanship.  Of course, NPR ardently strives as much as anyone to appear balanced precisely because of those accusations and assumptions that it has a liberal bias.  Ironically, its inevitable and unchosen political involvement may be one of the best arguments in favor of defunding NPR.  If NPR could just get out of the controversy business already, it could concentrate on doing what it already does: reporting the news accurately and directly as a free public service, while relying on voluntary contributions to make up the cost.  If they don’t, the New York Times might give them a run for their money.