I'm finding it bizarre how much weight is being placed upon two arguments by the proponents of paywalls:
Argument 1. If something costs money - that is, quality journalism - people should pay for it. This should be the case even though it's free elsewhere and will surely remain free at the point of use for the foreseeable future (from the BBC, for instance).
A moment's reflection on the world around us is sufficient to show this isn't true: in monetary terms, things are only worth what people are willing to pay for them. It's ironically amusing that it's often the greatest supporters of free markets (most recently and egregiously Fraser Nelson, Matthew Parris, James Murdoch) that appear to believe that prices should be determined by producers on a cost-plus basis.
Arguement 2. Fraser Nelson commenting on Matthew Parris: 'the choice for my industry is clear: either we manage to make digital subscription work, or game over.' Why? Because 'Online advertising has not covered the cost of free articles.'
But as I've written before, a decline in demand for paid-for journalism should result in a decline in its supply until a new equilibrium is established. In other words, it's not the industry that's doomed but the marginal players. If a few newspapers go bust then the online advertising pie will be split between fewer newspapers and so be able to support their respective costs. If you added up the total value of advertising - online and print - dedicated to newspapers and divided it by the average cost of newspaper journalism (assuming distribution and printing is covered by paid-for print copies) you'd arrive at the number of papers that the market can support, roughly speaking. I don't know how many this is - but it's got to be more than zero (perhaps two or three each of broadsheet and tabloid?).
Journalists and media owners are the keenest employers of these dubious arguments. I suppose they're comforting despite their presentation of a binary choice between survival and total destruction: after all, a get-out-of-jail-free paywall means everything can stay the same and it's difficult to seriously envisage an entire industry disappearing. The alternative reality provides a messy middle ground and a painful march towards it: whilst the industry survives, a number of newspapers are going to go bust and a lot of journalists are going to lose their jobs.