Is the Free Content Model Dead?

There was an interesting article in the Wall Street Journal yesterday by Martin Peers, Media Floats Ideas After the Flood. It suggests that the economic crisis has made media properties finally realize that there may not be enough advertising revenue to support their businesses. The question is whether the web can move from the current equilibrium where almost everyone except a few premium financial sites give everything away for free and count on online advertising to pay the bills to one where viewers pay for access.

It may well be that the shock of slump ad revenues and the prospect of bankruptcy may enable the media business to jump from a free-content equilibrium to a paid content equilibrium. Short of this shock, that change is hard because no single web property can easily make the move unless the other ones do as well. But the crisis may force enough sites to sing the paid content tune to reach a new harmonious equilibrium. This wouldn’t be the first time for equilibria jumping. As Schmalensee and I describe in Catalyst Code the 19th century magazine industry made most of its income from paid subscriptions. One or two large media properties slashed prices and sold advertising and that was enough to force everyone to change. Going in the other direction is very tough though because it requires taking a hit on advertising revenue while risking losing subscribers to other free properties.

But there’s nothing like the asteroid-like strike of the financial crisis to persuade media properties to either go the way of the dinosaurs or to evolve.