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The internet created giants – but the healthiest ones don’t give anything away for free

Across the media the evidence is growing that the whole free model is under terrible, perhaps terminal, strain.

Seven years ago, long before I had the privilege of being editor, I made and lost an internal argument at the Independent on the case for charging online. I wanted us to go radically upmarket and become what some had dreamed the paper would be for years, a kind of “white FT”.

My view was that quality costs; advertising income couldn’t be relied on forever; it was wrong to put our future in the hands of social media companies that could turn the taps off at any moment; a paywall would send a strong message about the integrity of the brand; the evidence suggested people were increasingly prepared to pay; asking readers to pay creates a direct, honest relationship with them; and being free can erode your editorial values by providing an incentive for salacious drivel.

There was nothing original about these arguments, all of them purloined from Rupert Murdoch. Now the raw commercial facts suggest that the decision to ignore my strategy was the right one: the Independent, very much free online, is worth tens of millions, if not more. Last summer it attracted a huge investment from a Saudi businessman.

And it has successfully surfed the wave of pro-Corbyn and pro-Sanders sentiment in America to make the most of the Brexit and Trump news dividend. Although, on social media at least, the content looks less and less like that of the old paper, the unarguable fact is that today it is a profitable business, whereas for most of its previous existence it wasn’t.

Yet I can’t help but wonder how long this will last. Across the media the evidence is growing that the whole free model is under terrible, perhaps terminal, strain. And in important ways it wasn’t really free in the first place.

The idea that “if it’s free online, you are the product” was gaining currency long before John Lanchester riffed on the subject for the London Review of Books. In recent months, former tech executives have lined up to say that the companies they created are hacking our minds, storing dangerous quantities of data about us, and combating the very ideals they were founded to advance.

One, Chamath Palihapitiya, previously at Facebook, said that social media companies are destroying how society works. Facebook’s boast when you sign up that “it’s free and always will be” is starting to look like a sinister falsehood to those who argue that these platforms impose considerable costs – on our minds and our public life.

For the companies that rely on it, the decision in early January by Mark Zuckerberg to shift Facebook’s feed away from news and toward “meaningful interactions” – ie those from friends and family – could be fatal. In recent months, Mic, Mashable and BuzzFeed, three media brands driven by a free model based on prolific sharing, have announced layoffs or markedly lower valuations, citing in some cases the entertaining reason of a “pivot to video”.

The free model is also under strain in newspapers, which advertisers see as an ever less attractive venue for brands.

So much for the companies. As for the countries that rely on free social media platforms to distribute news and challenge either state monopolies in media, or just an absence of flourishing voices, the news is grim there, too. When Facebook announced last year that it would reduce the amount of news it distributed in six small markets – Sri Lanka, Slovakia, Bolivia, Cambodia, Guatemala and Serbia – news organisations saw their numbers of visitors drop by around half.

Amid the hype and hysteria of the early internet age, the idea that everything would – and should – be free has given way to brute realism. Certain rules of business are eternal, if mundane, such as: ask customers to pay – it’s the best guarantee of revenue.

I used to think the future of commerce was a BAT with FANGs. The BAT is China’s tech giants (Baidu, Alibaba, Tencent); the FANGs are their American rivals (Facebook, Apple, Netflix, Google). Now I realise this is too simple. The internet has created giants – monsters, you might say – but the ones with the healthiest prospects don’t give things away for free.

The same goes for hacks like me. Aside from a few incorrigible miscreants, most journalists do something valuable. Asking the public to pick up the tab for that value should be a source of pride, not guilt; and doing so makes it more likely they’ll be able to carry on. 

This article first appeared in the 02 February 2018 issue of the New Statesman, The Great Migration

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Labour’s renationalisation plans look nothing like the 1970s

The Corbynistas are examining models such as Robin Hood Energy in Nottingham, Oldham credit union and John Lewis. 

A community energy company in Nottingham, a credit union in Oldham and, yes, Britain's most popular purveyor of wine coolers. No, this is not another diatribe about about consumer rip-offs. Quite the opposite – this esoteric range of innovative companies represent just a few of those which have come to the attention of the Labour leadership as they plot how to turn the abstract of one of their most popular ideas into a living, neo-liberal-shattering reality.

I am talking about nationalisation – or, more broadly, public ownership, which was the subject of a special conference this month staged by a Labour Party which has pledged to take back control of energy, water, rail and mail.

The form of nationalisation being talked about today at the top of the Labour Party looks very different to the model of state-owned and state-run services that existed in the 1970s, and the accompanying memories of delayed trains, leaves on the line and British rail fruitcake that was as hard as stone.

In John McDonnell and Jeremy Corbyn’s conference on "alternative models of ownership", the three firms mentioned were Robin Hood Energy in Nottingham, Oldham credit union and, of course, John Lewis. Each represents a different model of public ownership – as, of course, does the straightforward takeover of the East Coast rail line by the Labour government when National Express handed back the franchise in 2009.

Robin Hood is the first not-for-profit energy company set up a by a local authority in 70 years. It was created by Nottingham city council and counts Corbyn himself among its customers. It embodies the "municipal socialism" which innovative local politicians are delivering in an age of austerity and its tariffs delivers annual bills of £1,000 or slightly less for a typical household.

Credit unions share many of the values of community companies, even though they operate in a different manner, and are owned entirely by their customers, who are all members. The credit union model has been championed by Labour MPs for decades. 

Since the financial crisis, credit unions have worked with local authorities, and their supporters see them as ethical alternatives to the scourge of payday loans. The Oldham credit union, highlighted by McDonnell in a speech to councillors in 2016, offers loans from £50 upwards, no set-up costs and typically charges interest of around £75 on a £250 loan repaid over 18 months.

Credit unions have been transformed from what was once seen as a "poor man's bank" to serious and tech-savvy lenders where profits are still returned to customers as dividends.

Then there is John Lewis. The "never-knowingly undersold" department store is owned by its 84,000 staff, or "partners". The Tories have long cooed over its pledge to be a "successful business powered by its people and principles" while Labour approves of its policy of doling out bonuses to ordinary staff, rather than just those at the top. Last year John Lewis awarded a partnership bonus of £89.4m to its staff, which trade website Employee Benefits judged as worth more than three weeks' pay per person (although still less than previous top-ups).

To those of us on the left, it is a painful irony that when John Lewis finally made an entry into politics himself – in the shape of former managing director Andy Street – it was to seize the Birmingham mayoralty ahead of Labour's Sion Simon last year. (John Lewis the company remains apolitical.)

Another model attracting interest is Transport for London, currently controlled by Labour mayor Sadiq Khan. TfL may be a unique structure, but nevertheless trains feature heavily in the thinking of shadow ministers, whether Corbynista or soft left. They know that rail represents their best chance of quick nationalisation with public support, and have begun to spell out how it could be delivered.

Yes, the rhetoric is blunt, promising to take back control of our lines, but the plan is far more gradual. Rather than risk the cost and litigation of passing a law to cancel existing franchises, Labour would ask the Department for Transport to simply bring routes back in-house as each of the private sector deals expires over the next decade.

If Corbyn were to be a single-term prime minister, then a public-owned rail system would be one of the legacies he craves.

His scathing verdict on the health of privatised industries is well known but this month he put the case for the opposite when he addressed the Conference on Alternative Models of Ownership. Profits extracted from public services have been used to "line the pockets of shareholders" he declared. Services are better run when they are controlled by customers and workers, he added. "It is those people not share price speculators who are the real experts."

It is telling, however, that Labour's radical election manifesto did not mention nationalisation once. The phrase "public ownership" is used 10 times though. Perhaps it is a sign that while the leadership may have dumped New Labour "spin", it is not averse to softening its rhetoric when necessary.

So don't look to the past when considering what nationalisation and taking back control of public services might mean if Corbyn made it to Downing Street. The economic models of the 1970s are no more likely to make a comeback then the culinary trends for Blue Nun and creme brûlée.

Instead, if you want to know what public ownership might look like, then cast your gaze to Nottingham, Oldham and dozens more community companies around our country.

Peter Edwards was press secretary to a shadow chancellor, editor of LabourList and a parliamentary candidate in 2015 and 2017.