The Economist Erects the Paywall (follows FT)

The Economist, who runs Drupal like we do as their core CMS btw,  sent me an email today explaining the free access to their site will change dramatically on October 13th. Content from the print editions and .com articles older than 90 days will only be available to digital subscribers--who will pay $79/year or $19.95/month.  There is also an "academic" subscription for 4 months at $30.

Ben Edwards, the publisher, further tells me in this email (and really I didn't even know I was registered on their site even) "We will also enhance the experience we offer our most loyal readers by expanding our subscribers-only features." So, the Economist is trying to link loyalty with paying--seems like a terrible idea. Loyalty comes at price? In fact they are the ones "taking something away" from their audience without really offering some new value. So where is the loyalty on their side of the relationship? Wouldn't it be more compelling to offer a subscription that added more than the free offer? Or maybe just state the truth--we need more money and less noise from too many users? But let's see how it goes.

The Financial Times has been charging for content for some time already at £3.99/week = $640/year! The Guardian ferreted out of them that they have about 110,000 payers = more than $7mm in annual revenue.  Guardian quotes Lionel Barber from FT:  " He said the new digital world "poses a threat but also an enormous opportunity to established news organisations", and warned that the "mediocre middle" was most at risk." Looks like the Economist is going cheaper and after larger base of payers.  They missed the opportunity for the 110,000 and more people that are paying for FT. I guess they will need to market this pay-to-access a lot harder. Right now there isn't much info on the site to inspire "the loyal" to reach for their cc or pp.

We think the "Freemium" model makes a lot of sense, but how it is introduced, marketed and supported is going to separate the winners from the panicers.  The example of Flickr charging for a "pro" acccount at $25/year seems to work.  There is in fact a massive amount of loyalty for Flickr as the hardcore use it as a key online tool/resource/social area. I would even say that Flickr could reasonably charge more.  Yahoo doesn't release details on the value of the pro accounts, but we might guess they are worth $5mm--$10mm? But no mattter how you look at it they need other revenue sources--like ads shown to the non-pro accounts.

Freemium needs the revenue mix. The risk of course is that in going to a paywall like Economist is doing, you alienate your overall audience and lose more revenue in the process than you gain.  But maybe downsizing the audience and finding the true core is the way to go anyway. If there is a lot activity on the site, but no monetization from ads/sponsorship, then what is the point of having a .com anyway?

Components to the Freemium Mix:

•  Subscribers -- trick is to get the offer right and add something to free that is useful, but doesn't cripple the free access = traffic volume
• Ad revenue -- via ad networks, adsense / hard to get this productive without traffic and it can clutter up the site
• Sponsored Content -- also good  for co-creation on new content that could deliver big lift for both parties
• eShop -- exclusive products/web only -- but what to make, offer and can you fulfil orders? and what about returns?
• Affiliate Deals -- like Amazon, Commission Junction --which can deliver high cpc values, but maybe not high total revenue

One way to think about Freemium is to consider the marketing costs to attract people to a premium only site. So the Freemium has a built-in flow from SEO if you do it right.  if your content is behind the paywall is won't get crawled = it doesn't exist online. Also if you have a community site--well, you need enough people to have  comments, discussions etc. Premium only will never have the same immediacy, scale, rawness, openness as Freemium. So in fact, Premium vs Freemium vs Free sites will be very different experiences.

I think also there is an interesting aspect about the value of the community contributions. Shouldn't people that make comments, add content get some recognition? We have a points system and can imagine reward activity on our sites. But of course we a fresh view on this aspect, where "old media" is looking to penalize the freeloaders (who in many ways created value for them).