It’s not just that readers don’t see the value in paying for content when something “similar” can be found elsewhere. It’s also that there is positive extra value in reading free content, since it becomes much easier to share that content via email or blogs or Facebook or Twitter, you don’t need to worry about following links or running into paywalls, and in general you know that the site will play well with others on the open web.It is not just that the content has to be uniquely valuable to make the hurdle of a paywall worth it to readers. It is also that the experience of a paywall detracts from the value of the content because of the hassle to all readers, including when someone wants to share an article with a colleague but cannot because of the paywall.
If Newsday puts up a paywall and it fails, is that because readers can find content similar to Newsday’s elsewhere for free? Yes, in part. But it’s also because the people who would otherwise visit Newsday.com have lots of other things they also like to do. They like to spend time in Farmville, or they want to watch a video of a dog skateboarding, or they want to see their house on Google Earth, or they want to go walk their dog. These aren’t people who need certain information and are going to seek it out at the lowest cost; they’re just people who would visit Newsday’s website if it was free, but won’t if it isn’t.
That’s why gateways and paywalls are such problematic things, online: they’re a bit like that crappy VIP room in the back of the nightclub which is much less pleasant than the big main space. You might wander in there from time to time if it’s free, but if you need to buy an expensive bottle of Champagne to do so, forget it. There’s lots of other stuff to do, both online and off. And so the walled-off areas of the internet simply get ignored.
I would add that, even ignoring the value of sharing, the hurdle of a paywall often seems to be underestimated. As described in Dan Ariely's Predictably Irrational ( ), among other places (), free has no transaction costs, no risk of loss, and great appeal. Charging anything, anything at all, creates transaction costs and risk, to the point that the vast majority of people will not do it unless the perceived value is obvious and obviously high.