posted by David Adams on Sun 11th Jul 2010 18:54 UTC
IconThere's an article today at abc.com that looks at recent trends around net-based pay-for services and the smattering of paywalls from News Corp to the NYT that are up or threatening to be put up, and speculating that this could be the beginning of a trend. Of course, a YouTube video rental site and a few large publishers putting up paywalls will make zero difference to the "free internet" on their own. But if they're successful, it could spark emulation. But could this be a trend that could snowball enough to change the nature of the net?

I doubt it. As an online publisher myself, I've seen what's happened to advertising rates, so I know why there's all the heartburn out there. But by prediction is this: having individual internet users pay for content is destined to be a niche strategy.

It's worth talking about, though, and to some extent, it's worth worrying about. If the only economic mechanism for getting stuff on the internet is direct pay-for-use, the the internet as we know it is dead. The biggest problem is that the overhead costs of tracking who is entitled to what would put a huge anchor around the neck of anyone who wanted to launch a new service or content site. The truth is, most internet users could probably afford to spend $10 or maybe a little more per month to pay for what they read and use online. Some people could afford hundreds, but for every one of them, there are ten internet users who can afford next to nothing. And it wouldn't be worth it for most pay-based systems to charge much less than a few dollars. So that means that most people would only be able to afford to subscribe to a few services. That would make the internet worse than AOL.

Speaking of AOL, probably the most workable pay-for scenario looks a lot like AOL, with people paying a flat fee for access to a whole vertically integrated content network, run by one entity or a federation of affiliated publishers, who shared the revenue. But the AOL walled garden compared very unfavorably to the free internet back in the 90s, and it would look even worse today.

As the abc article mentions, one of the big fallacies with the pay-for internet idea is that very few content consumers have ever paid the full price for their news and entertainment anyway. Newspapers and magazines are supplemented by advertising, TV and radio too. Even the cinema and sporting events are subsidized by tax breaks and overpriced concessions. Only book buyers pay for the full cost to produce and distribute their goods, and even that model is undermined by libraries. And in most of these cases, the producers of the content receive a small fraction of the revenue: the lion's share goes to the apparatus that funds, manages, markets, promotes, and distributes the content. The reason that the free internet worked in the first place is that it slashed the distribution costs so dramatically, and eliminated the need for so many middlemen, that it made the economics work to distribute for free and pay the content creators on advertising alone.

Just because we're in an advertising slump doesn't mean that those fundamental realities are broken. Sure, there are some kinds of information that are just too fringe or niche to be able to make enough money for their creators to justify doing the work for purely economic reasons. If you have tens of millions of viewers to your web site, it's always going to be easier to make ends meet than if you have thousands. For publishers reaching small audiences (and this includes OSNews) the primary reason for participating is always going to be non-economic. We do it because we like to be part of a community, and let's face it, the biggest contributors of user-generated content do it because they like being prominent in their chosen communities. We do it for our egos, or because it advances our careers in some way, or because it just plain gives us pleasure and satisfaction.

And remembering the flipside of the "information wants to be free" cliche, some information wants to be very expensive. And even if it's only useful to a small number of people, they will be willing to pay -- a lot. So there will always be a place for paid services and paid content online. You know what's also valuable? Our time. The more valuable your time is, the more you'll be willing to spend for online services that save you time or hassle.

There are no shortage of people who will continue to create things online for us to use for free. They can make it work because as long as we have net neutrality and the gatekeepers don't create artificial tolls on distribution, it will always be cheap, and ever cheaper, to distribute your bits online. Some of the existing media firms are too inefficient to make money online even with huge traffic, and they will eventually become efficient or become dead. And every day people will come up with ideas for services or content that just aren't good enough to survive. And they'll get dead too. And some ideas that would have worked when the economy was good won't survive an advertising slump. And maybe advertising will stay slumped. And that will make it hard for publishers. But we already have a supply that exceeds the demand. If I lose out on two favorite sites because they don't survive the economy, I'll surely find another three later on. And if any of the now-free things I rely on goes paid-for, then I'll decide to either pay up or let it go. Chances are I'll let it go, because I only have so much money, and if I had to pay $3, or even $1, or even $.01 for every web site I go to in a month it would be more than my house payment.

I read something a couple of weeks ago that was discussing ways that the government can stimulate the economy. Small-government advocates rightly point out that it is difficult-to-impossible to identify the right places to put any funds, and it just becomes a politically-biased handout to a few lucky individuals. But they advocated that governments could spend money and political capital promoting a robust and free (as in liberty) internet network in their countries, and that would pay a huge dividend. Even if the government wanted to prop up the media, to ensure a vibrant "fourth estate," the best way to do that would be to make sure that the internet infrastructure that the future media will use to distribute its bits is as inexpensive and flexible as possible. If the government propped up the media by subsidizing the internet (and more importantly, by creating a legal framework that protects the network from artificial restrictions from business or government gatekeepers) then the unintended consequences would be a blossoming of internet-based economic growth like we saw 15 years ago.

Sadly, if the world's governments is doing anything, they're doing the opposite. Demonstrating an unwillingness to reign in existing access gatekeepers while layering on laws that restrict freedom, usually in the name of protecting the citizens from pictures of boobs, protecting media companies from file sharing, or protecting themselves by limiting citizens' exposure to ideas that are inconvenient to the government.

So the internet is vulnerable to a loss of freedom in both senses of the word, and internet users have demonstrated that they'll go along, up to a point. But once you take it too far, you'll find that the people won't go along. Where will that point be?

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