Paywall, Charging for Content and Commodity

In a long essay defending the importance of paywalls, Harper’s Magazine’s John MacArthur wrote this,

I can’t quite believe my ears at the nonsense still being peddled by the advocates of free content.

I can see his anger what he must be feeling to hear new media Gurus (aka charlatans) advise him and every other content creator why giving away content to attract more readers is the new reality.  MacArthur is in his rights to be incensed by such business advice from those who do not know what marketing or value creation is.  However my support to his argument ends there.

If Gurus make a nonsensical case based on marginal cost of digital content, MacArthur commits the same mistake based on his cost (fixed cost) to produce and distribute quality content.

Why doesn’t Harper’s give away a particularly good investigative piece (such as Ted Conover’s powerful undercover report in May on an industrial slaughterhouse) so that more people will read it?

Because good publishing, good editing, and good writing cost money, and publishers, editors, and writers have to earn a living.

This cost based argument justifying charging for content is same as marginal cost argument asking for it to be free.  We cannot ask customers to pay for content or anything else because we have costs. See this for how ridiculous such an argument sounds.

You charge for a product as your fair share of the value you created for your customer.  The fact that it costs you to edit, write and pay writers is your concern, not customers’. If the content you create is no different from many other options or adds no perceived or real value to the customers then they will have no reason to pay for it.

MacAcrthur takes his argument even a step further and making it an argument about fairness,

This photographer, who requested anonymity, risked arrest and prison to take excellent pictures — as do other photographers such as Samuel James — for the benefit of Harper’s and you. The censors in Tehran are surely upset. Shouldn’t Anonymous be paid for this courage and skill? Shouldn’t Harper’s be compensated for sending Anonymous into the field?

Do not try answering his questions because they are irrelevant. People take risks because they see payoff at the end and are willing to trade-off risk and reward. If the photographer believes his content will be just another commodity and will only be valued thusly by his customers (publishers and readers) he would not be willing to take the risk.

It is not that the Anonymous must be paid for courage and skill but Anonymous is showing courage and skill because he sees opportunity to get  fair share of differentiated value he creates through this courage and skill.

And definitely Harper’s cannot expect to be compensated for sending Anonymous. It your risk and your risk alone.

In the customer value equation it is just pure and simple:

  1. You create value to customers through your product
  2. Customers share part of that value as price
  3. You find a way to turn a profit from this price by producing the product at lowest cost

You do not incur costs, take risks then demand to be paid.

Value Equation