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Online subscriptions: the second digital divide

Google and Facebook control almost all the world’s online advertising revenue. To get around this, news organisations and other online media use paywalls and subscriptions.

It makes perfect sense when there’s precious little advertising revenue to pay wages and other bills. Producing media costs money.

As Tom Foremski explains at ZDNet, this creates a new digital divide.

He writes: “The digital divide is about to get worse with the rise of subscription-based news media because of the failure of advertising to provide revenues for a sustainable business model.”

It’s another reason to not like Facebook. Another reason to fear Google.

Newspapers are not the only examples. Subscriptions, not advertising, pays for Video and sports streaming services. Pay-per-view is not new, but there is now more of it.

Here, the National Business Review hides all stories behind a paywall. The New Zealand Herald keeps the best stories for subscribers. They are not alone.

A second digital divide

As an upshot, low income people who manage to jump the first digital divide and get online, come up against a second divide. Subscription costs often shut them out from the best online content.

Free media has stepped in to fill the gap left by newspapers. Some free sites are good. the Guardian and RNZ both run excellent free news sites.

Some free media is darker. People with a hidden agenda and money to spend can publish plausible looking news. Although plausibility isn’t essential here. Manipulators have free run to bombard readers with lies and misleading information.

Propaganda

Look up an international story on Google News. You’ll find links to certain sites that are openly or not so openly propaganda sites. There are Russian and Chinese examples. In some cases intelligence agencies pay the bills.

Other free news services might push extremist ideologies or misinformation. Lies are common.

People who buy subscriptions end up better informed. They can make better choices. They may even live better, healthier, even happier lives than the poor souls on the wrong side of the second digital divide.

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Dealing with the pay wall economy

Ben Brooks gets close to the heart of the problem with pay walls when he writes Subscription Hell. It’s hard to make money from pay walls.

The only online sites that do well are those like New Zealand’s National Business Review or The Economist. Both serve well-heeled audiences with unique, quality content readers can’t get elsewhere.

Brooks makes two interesting points.

First, differentiation. Brooks is thinking about podcasting, but it applies to all online media. In essence he says there are thousands of undifferentiated podcasts chasing the same audience.

…but will they pay?

The implication that no-one will pay to listen to one of the podcasts when there are dozens of free alternatives. You could say the same about most online media. This, in part, does not apply to pay wall successes like the NBR and The Economist. Their audiences don’t have obvious alternatives.

The other point is subtle. Brooks makes the connection between people paying for apps and buying pay wall subscriptions.

On the surface these are two quite distinct markets. And yet, recently I was thinking about exactly this concept from the opposite point of view. I have a number of subscriptions to pay each month. Some are for apps or online services. Others are for, it’s not the best word to use, but let’s go with it: content.

Pay wall, subscription software: two aspects of the same thing

In my budgeting, I see the two as aspects of the same thing. I allow myself so many dollars a month for subscriptions. It’s a single pool of money to cover things like cloud storage, online music, movie downloads, pay walls, apps and services. What isn’t spent on  apps is available for media. What isn’t spent on online media can be spent on apps.

A decade ago the budget was zero. It’s not zero today. While it isn’t a huge amount of money, it’s about the same as I spend on coffee. It may grow larger in the future.

The issue is, consciously or not, people only budget so much money for subscriptions. I have a limited pool of funds. So does everyone else. The world has a limited pool of funds for subscriptions. On a world scale it is huge and still growing. Even so, there is not enough to go around for everyone who would like to earn money selling pay wall subscriptions or apps. Too many sellers, too few buyers.

And there’s the problem. It’s not hopeless. Services like Press Patron (see the red button at the foot of this page) offer a way out. People can choose to set their own amount to pay. If you go back to my budget approach, if I don’t buy software one month, I can flip a few bucks into someone’s Press Patron.

But it’s difficult. The market for content pay walls or subscription software is not infinite.

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media

New Zealand Herald digital — newspaper without paper

New Zealand Herald digital editionThe New Zealand Herald sent an email today inviting readers to subscribe to a NZ$25 a month digital edition.

This is a good idea. A digital edition is an exact electronic copy of the print edition. The paper is available online at 6am each day. It is separate from the website version of the paper at http://nzherald.co.nz.

You can read the digital edition from a Windows PC or Mac in a browser. There are apps for iOS and Android users.

Read on PCs, tablets, phones

The NZ Herald digital edition displays well on a big PC screen. A digital facsimile of the daily paper would be a joy to read on, say, the large version of the iPad Pro. You’ll get by fine on most laptops and 10-inch tablets.

A digital newspaper is harder work on a mobile phone. Small screens are not the best way to read tabloid pages. Yet even that format can be useful sometimes.

Digital newspaper editions are not new. They’ve been around since the 90s. A digital version of The New Zealand Herald was available on Pressdisplay (now called PressReader) when the Herald was still a broadsheet.

Like a newspaper, without paper

There are two reasons why a digital edition could be better than reading a website. First, web news pages lack context. You can instantly grasp the relative importance of stories and how they relate to each other.

While editors place the most important stories at the top of a list on a site’s home page, that’s not the same. And anyway, few readers arrive via the home page. For most news context is something decided by a Google algorithm or another automatic process.

Online news sites serve up atomised news, digital editions give a bigger picture.

The other aspect of old school print papers that you miss when reading news websites is the lack of filtering.

Papers are organised into sections: News, world news, business, sport and so on, but they serve up a wide range of material within these broad sections. You’ll find you’ll read more widely and are better informed — even if that is just a matter of glancing at headlines in passing.

The downside of a digital edition is that is out of date after publication. Although you might see this as a positive if you think of it a snapshot frozen in time.

At $25 a month, the NZ Herald digital edition is about half the price of having the print edition delivered. Some print subscriptions include the digital edition at no extra cost. For some readers that makes the digital edition great added value.

Money

Given the high cost of printing and distribution, it might seem the publisher isn’t passing on all the potential cost savings.

In practice, it’s more complicated. Setting up the technology to deliver a digital edition is expensive, it may require frequent tweaking. Reader numbers for digital editions is often a fraction of print edition reader numbers. So these costs are shared by a relatively low number of readers.

One trick the Herald’s digital edition marketing effort has missed is offering a sample edition so potential customers can check the format is right for them.

Six years ago Rupert Murdoch hailed tablets as the newspaper industry’s saviour. That was premature. The industry is still stumbling to find a way to make money after the advertising apocalypse. Digital editions could help, but it puts the onus back on publishers to ensure the content is worth paying for.

Bill Bennett writes features for New Zealand Herald business reports.

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Subscriptions, not paywalls

Karen Fratti thinks publishers need to stop using the word ‘paywall’ to describe ways online sites charge readers. She prefers we talk about subscriptions.

Fratti writes:

 let’s stop talking about putting up walls to keep people out. The paywall has only led to griping from consumers who’ve reached their monthly article limit, and unique ways to get around them. We’re wordsmiths, we know words matter, and ‘paywall’ is another relic of the old media-new media debate. Knock it off.

I agree with Fratti on this, rightly or wrongly paywall makes me think of the watch towers and armed guard that patrolled central Berlin during the Cold War. The paywall is the new media’s equivalent of Cold War thinking.

Can’t We All Just Subscribe? Why ‘Paywalls’ Won’t Get Us Anywhere – 10,000 Words.

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Fairfax to go digital-only

Fairfax CEO Greg Hywood says the media company will move to a digital-only model.

Hywood doesn’t put a date on it but says the move will be in the future and only if print becomes unprofitable.

This makes perfect sense even if there’s little evidence of other newspaper publishers making a successful move to digital. Media companies have little choice, either shrink to a digital core and hope the mastheads continue to carry weight, or hang around for the inevitable day when the presses stop running.

Of course, anyone reading this site will have known that was true a decade ago.

Hywood says Fairfax’s digital strategy is ahead of the company’s competitors and ahead of most traditional media companies around the world. He is only part right. Fairfax’s most serious competition comes from media companies that were born digital.

Speaking of businesses born digital, I wonder about Fairfax’s strategy in the light of its part sale of the TradeMe auction site. If I was in Hywood’s shoes TradeMe would sit at the core of my business. By now there would an Australian TradeMe. And I’d junk those crappy low-value Google ads on Fairfax sites and link to TradeMe auctions instead.

AdNews: Fairfax will shift to digital-only model.