Why Newspapers’ Websites Should be Free

Nick Carr makes a valiant attempt at defending

TimesSelect, riffing off Tim

Harford’s column on Saturday. The basic idea is that when online advertising

is in its infancy, it makes sense to charge a subscription rate for website

access. Eventually, when the advertising business picks up, it makes sense to

drop the web subscriptions and go free: that way you maximize your total profits.

If you rush to set the price of the web edition at zero too early, before

online ad sales reach a certain level, you may sacrifice revenues from print

sales and ads without making them up through online ad sales. The better strategy,

explains Gentzcow, would be to charge a fee for access to the online news

(or at least, by implication, some part of it valued by print readers). That

way you dampen the loss of print sales and ads and maximize your overall revenues

and profits. At some point, once online ads sales strengthen sufficiently,

it may then make economic sense to remove the fees for accessing the site.

But what Carr and Harford fail to do is place a value on the headstart that

a website can achieve by going free early. As one of Nick’s commenters says,

In periods of fundamental technological change & discontinuity, leaving

money on the table may well be a smart strategy…

Companies such as Costco or Southwest explicitly leave money on the

table, for example. Sam Walton (whose descendants collectively are now the

richest people in the world) pointedly refused to price the goods at the "going

rate", which a Harvard Business School prof of that time would have considered


Larry Ellison, nobody’s fool as a businessman, enunciated it thusly: in early

markets, maximize marketshare, not profits. NY Times should have become the

go-to place for news & views online. They always had the breadth &

depth of content. The fact that they let a whole lot of other sources jump

ahead speaks volumes of their failure of vision.

If they had that vision, it is possible that most respected bloggers (like

you!) would have found it profitable to channel their content through the

NY Times online site, which got, say, 50 million readers a day.

Now that’s what I call a vision. The NYT now has 43

blogs, and it pays for all of them. By contrast, HuffPo

has 1,800 blogs, and pays for a tiny fraction of them. If the NYT had got the

jump on Arianna Huffington by inviting the world’s thought leaders to blog on

its site, it could have a truly unbeatable web presence by now. Instead, it

went the other way, putting all of its opinion content behind a subscriber firewall

where no one could see it, and letting HuffPo and the Guardian steal its march.

Says Fred Wilson:

I have a lot of scars in my back and one of them is the decision we made

at TheStreet.com to charge a subscription while our competitor, MarketWatch,

went with the free ad supported model.

Free is inevitable, and the longer you put off going free, the more you lose

in the long term. The FT is not

there yet but it still has a few weeks before Rupert Murdoch officially

takes control of WSJ.com. In fact, it might have even longer than that, since

Murdoch is now making some weird

noises indeed:

Murdoch said he expected to expand digital editions of the Wall Street Journal

worldwide and launch new "vertical" sites around specific sectors

of interest. He did not elaborate.

I don’t know what this means, but it doesn’t sound like going completely free

to me. "Digital editions" is like the different versions of Vista:

there’s no point in differentiating unless you’re going to charge different

amounts of money for different products. Murdoch should have one price and one

price only for the WSJ online: $0.

But the FT, of course, shows no indication whatsoever that it’s capable of

getting its online act together. When it launched its new business plan, the

whole site was in fact free for about a week, since the software driving the

new model didn’t work. Now the software does work, but it automatically logs

out visitors after half an hour, "for security purposes". Can anybody

give me a single reason why this helps with security? You can’t spend money

on the site, so it’s not as though it’s possible to commandeer somebody else’s

computer and drain their credit card if they’re still logged in.

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