A massive WTF moment interrupted my reading of The Observer's review of the paywall going up around the Times and Sunday Times.
Shortly before the end of John Naughton's piece, he declared:
Think of all the costs involved in the physical processes of printing and distributing a paper – all those rolls of newsprint and vats of ink, the thundering presses, the trucks, the drivers, the delivery vans, the newsagents' returns. No wonder it's impossible to make a profit on the cover price alone.
But publication on the web magically takes all the printing and distributions costs out of the mix, leaving only the editorial costs.
The emphasis is mine. The one thing that makes me bang my head against the screen more than any other is the idea that shifting whatever you do online is automatically cheaper than doing it offline.
There are all sorts of costs associated with running a website.
Just looking at the distribution costs of online, there are servers to operate and protect, bandwidth to pay for, search engine optimisation to invest in, social media to manage, designs and redesigns to oversee (along with additional staff such as information architects to ensure people can find your content), testing to plan (or not), apps to build - and this is on top of the additional online editorial costs such as online image rights to buy, the relentless race to keep up with your competitors in terms of functionality, comments to moderate, video to pay for ....
Naughton may be right that:
As every economist knows, in a competitive market, the price tends to converge on the marginal cost of production, which, in the case of online news, appeared to be zero.
However, the fact that the price converges to zero is not the same thing as saying that the cost does or that "publication on the web magically takes all the printing and distributions costs out of the mix".
Websites cost money to run. It may cost more to successfully run an online operation than a print one. Whatever methods Murdoch uses to sell his paywalled sites (even if he insists on the inefficiency of running two sites), the paywall is not going to be a success due to it being free to run a website. Because it isn't (and as MySpace contributed to a $150 million loss in the last quarter, he knows that better than anyone ...)