Wednesday, December 7, 2005

Head of European Publishers Council Head Fans Copyright Fires: Filling the Gap Between Free and Subscription Online Content

The Associated Press picks up on remarks by Francisco Pinto Balsemao, the head of the European Publishers Council at a recent conference in Brussels in which he backed strongly AFP news' $17.5 million suit against the Google News search engine's searching of copyrighted news content and called for a shift to more paid online content. The remarks have quite generated quite a stir of online comments, including these collected by CNET News. Mr. Balsemao may have some legitimate concerns, but given the success that many news organizations have had in leveraging the power of search engines, weblogs and other sources of online links to their Web sites, what is the real solution for people trying to assemble news sources from a variety of online sites? Do we outlaw search engines and herd people back to the mainstream news portals to consume content behind paid subscription walls?

It seems as if the hybrid model being championed by the TimesSelect experiment may be a better compromise for publishers. paidContent.org notes that there are about 330, 000 subscribers to TimesSelect as of the end of November, about half of which were paying as online-only subscribers. At $50 a head that's about $8 million, roughly 4 percent of the $200 million in revenues this year to date from The New York Times online operations. There was a 19 percent growth rate in TimesSelect membership from October to November so given the strong attraction of new online revenues there's reason to think that this could represent at least ten percent of online revenues for them next year - enough to help pay for improvements to the product that can further improve product quality.

Then again, if you have a local paper and are trying to wall out non-local "clicks" for local advertisers a fully walled site can make sense to some degree if there are no immediately available substitutes. American Journalism Review recounts how the Spokesman-Review in Spokane, Washington went back to all-subscription and stabilized online readership at 1,000 paid subscriptions. But this model doesn't bode well for attracting new usage - it's more of a solution for publications that have saturated their market already.

The real question to be answered is how newspaper and other established media are going to bridge the revenue gap between relatively low online ad rates, driven by an abundance of inventory on non-traditional sites, and relatively high paper-based rates. "Walled gardens" may attract higher quality audiences but they are not going to address the fundamentals of what determines online ad rates for sites of general interest. Worse still, as more sophisticated advertising and marketing tools reduce reliance on subscriptions as a qualifier for quality conversions, making your walled garden too big can reduce the likelihood that these tools will be exploited aggressively.

The solution is not to blame the newcomers to publishing but to learn how to adapt to a new landscape that will not have much tolerance for paying for things just because it suits outdated business models. If publishers believe that quality is worth paying for, then go ahead and charge for it. As Times Select has shown it is possible to be profitable and to coexist with search engines. But be aware that the perception of quality in the eyes of advertisers and audiences is not likely to change just because you want it to. If audiences find satisfying legal alternatives to established products then respect their wishes and compete with those alternatives more effectively.
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