Here's another argument for the freemium model online. the CUNY Graduate School of Journalism has started the CUNY New Business Models for News Project, and the school's research so far has found that putting content behind a pay wall online does not work.

CUNY ran the numbers on a few paid models for newspapers online. What did they find? That publications that try charging for all their content will lose millions of dollars.

The Graduate School of Journalism ran two models. One was a 100% paid model. The second was a hybrid model that would keep up to 80% of the content available for free.

Accroding to the New Business Models for News Project:

"We will use as our model market a hypothetical top 25 metro area in the U.S. where the sole daily newspaper has ceased publication. In short: We are asking what will fill the void. We posit that no single company or product will do that. Instead, an ecosystem made up of many players operating under many models and motives will emerge. In all cases, we are agnostic as to who owns and operates these entities: legacy or new companies, large or small."

Both models used four scenarios with differing subscriber and fee levels. The paid model, holding all content behind a pay wall, would result in a loss of millions of dollars over three years. But in three out of four scenarios, the main site in the hybrid model would be profitable in its third year. And the main takeaway of the study so far is that profitability rises with the level of free content available.

Media companies are struggling to find a business model that works, and while consumers are opening up to the idea of paying for content, only 51% of publishers believe it will work. Part of the reason is the large gap between what people say they are willing to pay for and what they will actually open their wallets for. Many large publications have been burned in the past by putting their content behind a pay wall. And as the publications burn through cash trying to find a profitable model online, the stakes are becoming greater.

According to Jeff Jarvis, who works with the CUNY journalism school, finding a model that is profitable is a neccessity:

"The only way that journalism is going to be sustainable is if it is profitable – and out of that market relationship comes many other benefits: accountability to the public it serves; independence from funders’ agendas; growth; innovation. This is the future for journalism we envisioned in the New Business Models for News Project."

Meghan Keane

Published 2 October, 2009 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

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