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?