Between 1999 and 2001, the Napster peer-to-peer file sharing program was indispensable for millions. At its peak, the service drew 26.4 million monthly unique users, who spent a collective 6.3 billion minutes a month pilfering shared hard drives for free music. In just over two years, Napster managed to cripple and nearly destroy the music industry. At the same time, it conditioned a generation to see the internet as a place where almost anything can, and therefore should, be free.
Since its beginning, the internet and a broad, loose conception of “freedom” have been inextricably linked. The “first web page,” authored by Tim Berners Lee, described the web as a “wide-area hypermedia information retrieval initiative aiming to give universal access to a large universe of documents.” The notion of a “free and open internet” has animated some of the web’s biggest movements, from open-source software to Wikipedia to, in some cases, outright theft. Broadband connections grew popular, leaving users continuously logged on. Regular internet users soon came to expect that almost every type of media they once paid for — music, movies, news — would be available for free, legally or otherwise.
That era — let’s call it the internet’s free trial period — is coming to an end. In the 12 years since courts shut down Napster, the internet has taken its hatchet to every other branch of the media industry, deftly pruning ad dollars, jobs, and shaving away bottom lines. Now the reaction, opposite but never quite equal, and always late, is starting to take effect. The untamed and lawless expanses of web content are quickly being replaced by paywalls and monthly fees. And, surprisingly, we don’t really seem to mind all that much. Most of us don’t even seem to notice.
Before sites like Amazon and eBay legitimized the process, paying for anything online — either physical or digital — was widely perceived as a risky proposition. A 2001 New York Times article captures this consumer trepidation with e-commerce, quoting a survey in which over 20% of respondents were identified as either “fearful browsers” or “suspicious learners”:
“The online shoppers are distinguished from the non shoppers by a single differentiator: credit card fear. They are fearful of the computer and are afraid they won’t get their merchandise or that their credit card will be stolen.
While the reliability and ease of e-commerce sites like Amazon quickly assuaged users’ basic worries, digital shopping carts were reserved almost exclusively for physical goods. Amazon purchases became second nature, while digital marketplaces like Rhapsody struggled to find a model to get customers to pay for a product they couldn’t hold in their hands.
In 2003 that all changed, with the launch of the iTunes music store. With the backing of all five major record labels, Apple and Steve Jobs turned the music industry on its head, introducing the first efficient, truly appealing system for buying a digital product online. Set at 99 cents a song, the low price point helped Apple sell a million songs in its first month of operation (over 50 million in its first year). But more importantly, it was a crucial first step in conditioning normal internet users to pay for media online.
“99 cents felt like the price point that would be just enticing enough,” Paul Vidich, a former executive vice president of Warner Music Group, and the first to suggest the 99-cent price point to Jobs, told BuzzFeed. “It was low enough that in that moment, when you’re doing that value equation in your head, it’s something you don’t have to think twice about before buying.” Vidich also credits iTunes’ simple interface and one-click purchasing, which made buying a painless, easily repeatable experience — even psychologically satisfying. “We made it very easy to have honest people act honestly,” Vidich said. “Most people don’t desire to steal this stuff. There’ll always be the hacker vanity of getting it for free but the majority of people aren’t in that category. If you give people the right things in the right window in the right time, they’ll pay.”
The growth of iTunes and the music store was the beginning for paid media online. “I was confident and so was Steve that we’d have some success, but we did not anticipate it would be as big as it was,” Vidich confessed. At the time, Apple had no way of knowing it, but 99-cent songs were indeed the turning point, priming users for Apple’s next coup. When iTunes’ App Store caught fire, online digital purchases graduated from a regular semi-habit to a weekly, or even daily, part of life. Even free apps had to be “purchased” through the same system and with the same password, ingraining the behavior deeper and deeper with every mouse click and finger swipe. It’d be fair to assume that most regular iOS users don’t remember when they first added a credit card to their iTunes accounts.
Ten years later, iTunes has sold over 25 billion songs. It recently celebrated its 50 billionth app download. Other companies, like Amazon, which was armed with millions of credit-card linked profiles from selling physical goods, followed suit, building out their own vast digital libraries. Meanwhile, services like Netflix transformed from a DVD mailing service into a mammoth on-demand streaming video network with over 30 million paid subscribers. Platforms like Steam, once seen as a nuisance by the gaming community, quickly became the most trusted destination for game purchases, digital or otherwise, with over 54 million active user accounts.
The rise of paid sites like Netflix coupled with wildly effective crackdowns on online piracy and the shutdown of massive file sharing sites like Megaupload mean that it’s now often easier for the average internet user to pay a nominal monthly fee for a Netflix account than navigate the murky waters of illegal streaming and bit torrent sites.
Even news media, arguably the hardest hit by the “everything for free” ethos of the web, is seeing a change of heart — albeit, a slower one. Paywalls, once denounced as a suicidal move for news outlets, have proved effective for larger organizations. Now, over 450 of the nation’s 1,380 dailies have digital play plans in place or in the works, according to the Pew Research Center.
There’s a shift in reader sentiment as well. In 2010, Pew’s State of the Media report revealed that 82% of its 11,000 respondents would abandon their favorite news site if it introduced a paywall. In 2012, a study by DigiCareers posed the same question. This time, only 52% indicated they’d be willing to abandon their favorite site if it erected a paywall. Similarly, a report from the Reuters Institute for the Study of Journalism noted “a significant shift in public attitudes towards digital news, with more than twice as many people paying for digital news content than a year ago.”
As far as trends move, paid news’ is creaking along glacially. The percentage of enthusiastic paywall subscribers is still below 20%, but it’s growing — an encouraging sign for a business model that was widely predicted to fail at the outset. “Today’s paywalls are by no means perfect, [and] have a lot of big holes in them,” Magid Advisors’ president Mike Vorhaus told BuzzFeed. “But we’re all going to pay for more and pay for stuff we’re not used to paying for. And as a result, publishers of all kinds will continue do a better job figuring out what we value and packaging our content better and more efficiently.”
While we’re nowhere near the end of the “free” internet, the web’s untamed corners undoubtedly feel smaller; increasingly, they’re hardly “untamed” at all, subject to various levels of co-opting by the companies they appear to undercut. A recent Variety article on password sharing revealed that while 40% of Netflix and 36%of HBO Go subscribers share their login credentials, the streaming companies don’t seem all that worried. “Enabling freeloading could be a counterintuitively savvy promotional tool for getting potential customers hooked on a product they wouldn’t otherwise sample,” the article speculates. Adding credence to the theory, the study also notes that “forty-one percent of HBO non-subs said they were willing to fork over fees within the next six months, while 33% of Netflix non-subs said they were ready to pay, as well.”
Today, finally, the pendulum is swinging back, after years of file sharing, downloads, and obsessive browsing that have left us, the consumers, engorged and hooked on new and enticing versions of every major media category.
“It’s a huge sea change,” Vorhaus said. “I would have told you five years ago that the paid content world had a dismal future. Now, I’d say that paid media is in the second inning, and there’s still a lot of runs and at-bats coming down the road.”
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