Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

MediaWatch Monday: Newspaper Paywalls Are Freemium Business Models

Posted by Tom Foremski - July 12, 2010

Newspaper paywalls have been criticized by lots of people in the Geek communities and also by popular journalism bloggers such as Clay Shirky, Jeff Jarvis and Jay Rosen but they follow the best practices of "Freemium" business models used by thousands of tech startups.

Freemium has been a successful strategy used by many tech companies. Please see: Emergence Capital: Profitable Lessons From Freemium Business Models - SVW. And: Case Studies in Freemium: Pandora, Dropbox, Evernote, Automattic and MailChimp

Freemium is based on a simple plan: give away a great service for free and up-sell some users to a paid subscription service.

Yet strangely, newspapers are facing huge amounts of criticism for trying to follow a freemium business model.

Clay Shirkey at The Guardian:

"Everyone's waiting to see what will happen with the paywall - it's the big question. But I think it will underperform. On a purely financial calculation, I don't think the numbers add up."

Jeff Jarvis at BuzzMachine:

"Rupert Murdoch has declared surrender. The future defeated him. By building his paywall around Times Newspapers, he has said that he has no new ideas to build advertising."


Surely, it is good for newspapers to explore new business models and they should be encouraged. I've long been an advocate of what I call a "Heinz 57" business model for newspapers. Their future will be defined by how well their publishers can manage multiple revenue streams from a range of sources from advertising to virtual currencies.

Please see: The "Heinz 57" Media Business Model - SVW

Tim Gentry, head of optimization and effectiveness at the Guardian:

"It's all about working out what's right for different businesses. There isn't one right and one wrong path, the fact we are committed to keeping our main site free doesn't mean we don't charge for some digital features."

David Mitchell's recent column:

Rupert Murdoch may be evil, but that doesn't mean his paywall is. The media mogul has been dismissed for introducing his Times paywall, but what if it actually works?

If newspapers are to survive they should be encouraged to try many business models.

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Freemium


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