Everyone wants everything on the internet for free. Just ask the New York Times.
Over the years, the Times website has gone from free, to paid, back to free, and, finally, back to paid. Well, mostly paid. For now, anyway.
By practice and by ethos, the Internet has generally been a place where free content thrived and paid — news, music — struggled. The information superhighway had few toll booths. It was, in fact, less like a highway and more like a hippie commune where people shared everything and smelled kind of funny.
Yet the Internet won’t survive until people start paying for the things they find on it, which cost money to produce and distribute. This is a particularly painful reality for media companies, who debate paywalls with the intensity of medieval bishops parsing scripture. Entertainment Weekly will soon be putting up a paywall, as will various other Time Inc. properties, according to a report that emerged on Friday.
“People are starting to realize the limits of what they can get for free,” said Robert Picard, director of research at the Reuters Institute at the University of Oxford. “Free is pretty good at providing general information. It’s pretty good at providing general news and information, but it’s not really good at getting the kind of high-quality news and context that you need or quality entertainment.”
Right now, around 15% of Internet users pay for some sort of service, according to Picard’s research. That number continues to grow, with around 30% saying they are willing to pay. The Times has 910,000 paid online subscribers and is now relying on its digital paywall for the future of its business. Spotify has 15 million paid members, although profits remain evasive. Even short-form video, maybe the most Internet-native content is getting in on the subscription game. YouTube is preparing its own subscription service, joining startups like Vessel and CuriosityStream, which don’t offer anything for free.
As Picard notes, free things aren’t going anywhere anytime soon. There’s more free product online right now than at any other time in history. We’re talking Daily Show clips, Google Books and entire libraries of music and news from every corner of the globe backed by advertising.
Free is bait. It’s supposed to get you hooked. If you’ve played many mobile games, this pattern might be familiar. It’s called “freemium,” in which companies offer their apps at no cost and then charge for the good stuff once you’re addicted. (This model is also popular among drug dealers.)
Usually this process is meant to happen quickly over hours or maybe days. For the Internet, it’s taken a few decades. But it’s happened.
So when do we pay up?
Funny you should ask. We’ve hit the peak of free Internet. And that’s OK.
Times they are a-charging
Free online content isn’t going anywhere, but it is experiencing what Ashu Garg, general partner at venture capital firm Foundation Capital, calls a “rebalancing.”
Slowly, as free was getting people addicted, the system of whispering for people to pay online also grew stronger. There were a few dovetailing reasons.
Online payments — There was a time when putting your credit card online seemed like an invitation to fraud. Now, spurred by companies like PayPal and Amazon, e-commerce is a monster, projected by eMarketer to hit $1.5 trillion worldwide in 2015. From Paying for things online is just part of life now.
Smartphones and the ubiquitous Internet — Almost 75% of adults in the U.S. have a smartphone, meaning that we’re almost never more than a pocket plunge away from the Internet. Faster speeds have meant a better experience as well as better content.
Better everything — If you’re going to charge for something, it better be good. The Internet hasn’t always been the source of great content or particularly good user experience. That’s changed rapidly. Some of the best TV shows are now only available over the Internet, and music is now primarily an online industry.
A coming of age — Many of the people who grew up on the Internet didn’t have a ton of extra cash to spend, which is kind of why it made sense to spend time on the Internet. Now, they’ve grown up and they’ve got a little cash to spend. Granted, they aren’t exactly overeager to pay for news, but 40% of them are still paying for a subscription.
Global — Subscription services aren’t just targeting millions of people, they’re going after billions. Picard said that subscription rates tend to stay pretty consistent across industrialized countries. International growth has become a key part of the most successful Internet-based subscription service yet: Netflix.
As the economics of online content evolve to look more like the broader market, a premium tier has begun to emerge, says Foundation Capital’s Garg.
“I think that there will always be a set of premium services [and] content that consumers will pay cash for, similar to HBO and the Wall Street Journal offline,” Garg said. “However, the vast majority of content will always be monetized through advertising, with consumers paying with their time.”
That premium tier is starting to attract premium brands, such as Apple, which is reportedly readying the relaunch of the Beats Music service.
And, yes, maybe we’ll look back at this point in time wistfully, telling tales of freely streaming music and viral videos. Perhaps the best days of the Internet are behind us and its now just a platform on which mega-conglomerates can make money.
Or maybe this will come to be seen as a point where the Internet’s initial promise of democratized distribution began to be fully realized. There’s a certain shabby charm in the weird old web with its terrible banner ads and dark humor. You can still find it, mostly on reddit.
The bottom line is that just about everything is online these days in every medium and almost all of it is free. As subscription services grow in number and popularity, that’s going to inevitably form a smaller part of the overall Internet.
But what good has it all that if it wasn’t being used to stick it to the biggest media corporations in the world? The last 12 months alone have seen some of the biggest companies in the world figuring out new ways of offering their most lucrative content. ESPN and HBO, the two crown jewels of pay TV, are now available outside of the bloated cable TV packages that have housed them for years.
Still, there is a limit to just how many services people are going to pay for, leaving companies in tight competition for the limited number of subscription dollars out there. This is an important silver lining — it means there will be free stuff online for years to come.
Just not quite as much as there is right about now.