I’ll go out on a limb and say it flat out: paywalls are a clear sign that the news publisher doesn’t yet understand digital news revenue and where the industry needs to turn for online profits.
And no, “online profits” is not an oxymoron (see my previous posts about John Paton and what you can do to drive plenty of online revenue). Yes, banner network advertising pays out next to nothing. Dumping cheap banner ads is the first thing a publisher should do. But going to paywalls is a mistake. Publishers have rarely derived significant revenue from news consumers; most revenue has been from advertising, and will continue to be. And there is plenty of money to be made in digital advertising, if you are willing to look at how businesses are spending their (growing!) advertising budgets.
Let’s think about the paywall model a bit. Pundits (and desperate publishers) like to cite The Wall Street Journal as an example of a paywall that works. Well, unless you are publishing a financial journal, forget about the comparison. Subscribers themselves rarely foot the bill for their WSJ subscriptions: the subscription fees are subsidized. How? Because you can take WSJ as a corporate expense. Heck, you can take it off on your taxes as a business or professional expense (in the US, it’s a legitimate “unreimbursed employee expense” for many people).
But who is going to let you put your hometown newspaper (or the New York Times for that matter) on an expense report? It just isn’t a business periodical.
Some of us read with interest the story about Piano Media, the initiative where content from all nine news publishers in Slovakia are delivered under one national paywall. (Here is one article about it from Columbia Journalism Review: http://bit.ly/HOgrWW.) Is this a model for the free world? Consider this: if you want news content in your native language, and someone holds a monopoly on all news in your language, then yes, perhaps under these artificial circumstances, a paywall will work:
“With all the major newspaper publishers (and one broadcaster) involved and little Slovak-language competition from outside the nation’s borders, readers would seem to have little choice but to pay for their news if they want it.” (CJR ibid.)
But that’s a bit of an extreme example, one that would never succeed in the markets where I work (America, Ireland, Canada, and the UK). Even in the case of Piano Media, the revenue is tiny: “At the end of its first four weeks the company says it had taken in about $52,000, and that income and subscriptions to the system have held steady at that rate ever since.”
This is actually in alignment with a Pew Research report (Excellence in Journalism Special Report 2010) which said:
“Over all, the evidence suggests the outlook is difficult both for pay walls and for online display advertising. While most people have not been asked to pay for content, even among the most avid news consumers online, only about one in five at this point say they would be willing to pay, and this does not include less voracious news consumers. At the same time, the vast majority of those online, 8 out of 10, say they basically ignore online ads.” (http://stateofthemedia.org/2010/special-reports-economic-attitudes/)
So instead of paywalls and terrible-performing banner ads (from ad networks), let’s look at models that do work. Look at what business advertisers are asking for. Look at where they are spending their advertising budgets. And provide them those services!
I have some solid suggestions in my previous post. Does anyone out there have more to add to the list?
Rich, re Piano: the first month of operations in Slovakia we generated over €40k revenue. Since then we are gaining both subscribers and revenue. Our aim is modest, in the first calendar year of operation (which will be May 2 this year) we would like to achieve .5%-1.5% conversion from free news readers. I can assure you we are on target. We also launched in Slovenia this January and first month operational revenues were more than €26k.
Piano only puts SOME content in the pay system, not all. Neither page views, unique users or advertising revenue is affected by publishers adopting the Piano system. Part of our job is helping publishers decide what works and doesn’t work in Piano’s system.
Finally, if you think that pay-walls don’t work, you’re mistaken. Press+ has implemented 285 pay-walls since its first implementation in Sept. 2011. They plan an additional 185 by the end of 2012. Gannett will put up paywalls on ALL of its newspapers by the end of 2012 (USA Today excepted). Newspapers in 30 US states will have pay-walls, on the web, and 20% of the almost 1500 newspapers in the US, by the end of 2012 will have some sort of pay-wall. I should think in the year 2013 it will become increasingly difficult to read good journalism without some sort of payment. And by 2015 I expect all news to be paid for in some fashion or another. It might not be on the web, it may be tablets, but it won’t be free. Those days are over.
David, thanks for your comment. You’re in the paywall systems business and I’m in the newsroom advertising systems business, so we’re naturally going to have quite different perspectives. (The good news for our clients is that we’re both working to drive their top-line revenues.) For now I’m still betting on advertising over paywalls, but if your model proves to be the winner, I’ll be happy to eat my words (publicly). In fact, I may have to do one better, and recommend your systems to my clients! But I think paywalls are a mistake, for the reasons I cited. Thanks BTW for the info on Press+. I look forward to following your progress and seeing how you do in other markets. Best of luck, Rich Julius