I have written perhaps too much about paywalls. I even sort of vowed once to stop writing about them (fortunately I hedged it). I think maybe I kept writing about them in hopes of someday expressing my doubts about paywalls as clearly as Mathew Ingram and Dave Winer did today.
Ingram cites three reasons newspapers shouldn’t charge for their digital content:
- “Paywalls restrict the flow of content.”
- “Paywalls are backward-looking, not forward-looking.”
- “Newspapers need to adapt, not retrench.”
I’ve tried to make similar points before and cheered on Janet Coats when she made point #2 last year, criticizing the New York Times paywall as a rear-view mirror strategy.
Ingram had an appropriate observation about the supposed success of that strategy.
Everyone seems to have decided the New York Times paywall is a success because it has about 400,000 subscribers and it is bringing in an estimated $35 million in revenue. But that is still a drop in the bucket: according to the paper’s recent results, one of the world’s most successful paywalls is not even making up for the continuing decline in print ad revenue.
Before I could weigh in with my praise for Ingram’s piece, Winer beat me to it:
Paywalls express a desperate wish to go back to a time when there was a reason to pay. … What paywalls are really asking is how are the news people of the past going to hold their lock on the flow of information in the future. And that’s not a great question, because the answer is they aren’t.
Ingram and Winer make their points so well that I’m not going to elaborate on them here, except to encourage you to read them.
And I’ll wrap up with one question: Do you think Facebook and Google are making plans for their paywalls?
Update: This Matt Stempeck interview with Richard Gingras of Google covers a lot more ground than paywalls. But his paywall answer certainly fits in this discussion.
Google and Facebook have absolutely zero need for paywalls with all of the personal data, web tracking, likes and interests they have stored. That’s a gold mine of revenue for them (Googe made more money in 2011 than the entire newspaper industry combined). Newspapers were far too slow — and still are — about collecting data about their customers online. If you have no idea about your audience, you will never win the game. And that’s just one reason I think the idea of delivering a bulk local audience to advertisers can only go so far. Google and Facebook can deliver ads cheaper and more targeted than most anyone else can.
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Happily the newspaper busienss missed the website goldrush because that vein appears to have limited upside. Online advertising did not increase by even 1% in 2011 and is mired at roughly 18% of total ad spending, which itself is stalled. Keep in mind that newspaper revenue alone used to account for nearly half of total 2011 ad spend back in the golden age.
The NYT paywall revenue quoted here underestimates the take by a factor of 3 (400,000 x 240 = $96 million, not $35 million) Keep in mind the editorial budget of the NYT is (probably) little more than $96 million … moving to 1,500,000 subscriptions and the NYT could totally pull the plug on their printing and paper distribution system … turn a profit … and … well … not be the NYT as we used to knwo it …
And there isn’t a single metro newspapers across the U.S. who could switch to the online subscription model. You are absolutely right about that. The simple fact is that local metro news/content as produced by a newspaper newsroom encompases almost nothing of value as perceived by the population.
And, yes, I absolutely imagine Google and Facebook specifically imagining how to deliver a ‘premium’ or other subscription-based offering.
Advertising is a horrible business. It insults the very people it attempts to get close to. If advertising were email, it would be considered spam and would be banned, along with any idenfiyable organization sourcing it.
We would do well to be looking for new models of customer services that can be delivered digitally to smart phones perhaps and for which the value is worth a subscription … keep in mind that all of the great ‘publishing’ businesses these days follow the subscription model … cell phones, cable television, satellite television … and then there are the smaller digital dogs nipping at the market’s heels, such as Netflix. And just to go a little crazy, Amazon let’s one subscribe to Cheerios … oh, and diapers.
There is lots of money available in the market. It is well that publishers look at the consumer, rather than their content inventory, and create new subscription serrvices.
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[…] Mathew Ingram and Dave Winer explain the folly of paywalls (stevebuttry.wordpress.com) Share this:TwitterFacebookPrintLinkedInEmailDiggLike this:LikeBe the first to like this post. Tagged: Globe & Mail, Jeff Jarvis, Ken Doctor, New York Time, newspaper, PayWall, Raju Narisetti, times Posted in: News-Trend ← Print’s salvation may be arriving at the weekend Be the first to start a conversation […]
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As I stated on Giga – I believe Matthew’s views are incorrect. I have written a rebuttal on my own blog meteredpaywall.com to start to counter the folly of mainstream “fire & brimstone & paywall” reporters.
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No pay wall and Facebook has launched a direct-from-user revenue service … just like a subscription … check it out here.
http://www.zdnet.com/blog/facebook/facebooks-worst-idea-yet-paid-post-promotion/12925
Emil didn’t like it either … and Facebook is totally desperate for revenue and they absolutely see the impossibility to supporting a $100 billion market cap with advertising … let alone growing it to $200 billion or more …
Online advertising isn’t going to do it for any company beyond Google … and Google is only growing by stealing online advertising from others, rather than bringing on more advertisers if 2011 figures in the U.S. predict the future … remember, online advertising stalled out with a growth of just 4/10s of 1% for the year, while over all advertising grew at twice that rate, though at 8/10s wasn’t all that much itself.
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Steve,
I respectfully disagree with many of the points made here against paywalls. And I just might need some additional education on your thinking on this issue. Here’s mine:
I think the newspaper industry made a serious miscalculation a decade ago by panicking and allowing its valuable news to go online for free. Now many newspaper chains like Gannett and Lee are trying to rectify that by establishing paywalls. I think they are doing so because it works. The WordPress model allowing 10 or 20 free stories per month is offsetting a lot of the casual traffic. I think, anyway.
I read your blog daily and completely agree with probably 98 percent of what you advocate. I am a very happy and productive and all-in Digital First multimedia platform journalist. But I think there’s a danger of throwing out the baby with the bathwater in the rush to reject old methods. The idea behind the subscription model hasn’t lost value. The ability to deliver a committed audience to advertisers is the key to driving revenue. Right?
Let’s consider some of these arguments. First off, I am fairly stunned that anyone would take on the NYT’s subscription model, as it has been a huge success by any standard. Mr. Ingram is quite disingenuous in poo-pooing the $35 million in paywall revenue (since when is tens of millions of dollars a “drop in the bucket?”). The point isn’t that the NYT took in $35 million on this. It’s that they took in $35 million in the first year! The incredible growth alone in a world absent newspaper carriers and related distribution costs is cause alone for immense optimism. And why are we comparing apples to oranges? Circulation revenue has always been a very small part of newspaper revenue. Why, all of a sudden, is online subscription revenue supposed to cover print ad losses?
That doesn’t make sense to me.
My big point here is the NYT has reversed the stale old newspaper perception. This is what we are all searching for as we transition to new multimedia news orgs. The online subscriptions are booming because a NYT’s digital sub is hot. Whether you’re viewing the NYT content on your laptop or iPhone or some other device, it’s a trendy, new, must-have item. I very much want one myself!
People will happily pay for things perceived to have value. Newspapers have shortchanged what they do by letting Internet audiences believe what they do has no value. Yes, you’re getting more traffic, but what kind of traffic? If getting potential eyeballs on the content is the foremost value, why didn’t newspapers give away hard copies all these years? The same principle applies. I would think advertisers would be more impressed by 10,000 measured hits from a dedicated, paying audience than 50,000 hits that came from who knows where. Again, maybe I need more education on the symbiotic relationship between clicks and ad dollars.
The question isn’t whether the NYT model is a success, but whether that model can be repeated at metro newspapers. I think it can. I can open our York Daily Record and count a dozen features our readers can’t get anywhere else. Not to mention we are the first and best at covering any breaking news. What we do has value and I think our paywall is a big key to our future success.
Please educate me otherwise because I want to quadruple my blog hits too!
Thanks Steve.
John Hilton
religion reporter
York Daily Record
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Thanks for your thoughtful response, John. I won’t be able to respond at length for a while, but I will. My answer will repeat points I’ve made in the previous paywall posts linked in this post as well as those Ingram & Winer made.
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John,
Thanks for the time and thought that you put into this response. I appreciate the depth of your concern and respect that you and I are both hoping to help journalism find a healthy and prosperous future. Though I am repeating myself, I will address the issues you raised:
I addressed the myth that newspapers erred by posting content for free in this post: https://stevebuttry.wordpress.com/2009/08/16/newspapers-original-sin-not-failing-to-charge-but-failing-to-innovate/
While I recognize this as a rhetorical flourish, I should make clear that I am not at all interested in a “rush to reject old methods.” For instance, I have blogged repeatedly about the timeless value of accuracy and about old and new methods of verifying facts. My concern about paywalls is strictly motivated by my interest in developing a business model for a prosperous future for journalism.
As for the New York Times, I think Ingram was certainly right in placing the $35 million figure in context of the Times’ financial performance. The paywall was adopted to help improve the financial picture and the financial picture continues to decline. The Times invested $40 million in development of the paywall (according to Bloomberg; Sulzberger denied that but didn’t provide an alternate figure that I have seen, so I presume Bloomberg’s reporting was accurate, though the figure might have been rounded off).
Also, let’s be clear: The New York Times (like the Wall Street Journal) is not at all comparable to local news sites. Beyond the high-value nature of their content, both of those organizations rely much more heavily than any community or metro paper on subscriptions that can be expensed to employers or written off on taxes as a business expense.
Clearly some people will pay for online content and other people will not. The value equation that you mention presumes that people’s time has no value. The broadcasting industry has proven that businesses value people’s time. I think we can build a healthier business based on making more meaningful connections for businesses with a larger free audience than we can build charging a diminished audience for access to content.
Your question about why newspapers didn’t give away hard copies misses the point (and not because some were quite successful doing just that). In essence, we did give the content away. The money we traditionally charged for a subscription or a single copy barely covered the cost of our expensive systems of production and distribution. We covered journalists’ salaries and made our profits by gathering a large audience and connecting advertisers with our audience.
I also think advertisers care more about data on their audience than whether the audience paid. Facebook and Google collect data without charging, and I think we can, too.
That’s the bottom line to me: Newspapers are seeking success in the digital marketplace with multiple iterations of a model from the print world. At best, we measure success by saying we are losing ground more slowly. I was not being glib in saying that Facebook and Google aren’t working on paywalls. The success stories of the digital marketplace aren’t winning with paywalls.
I’ll also add that I hope I am wrong. I wish all the news organizations pursuing paywalls well. But those good wishes do not keep me from expressing my doubts and seeking a better model.
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Thanks for the equally thoughtful response, Steve. Several things here that I hadn’t considered. I guess we’ll have to keep watching to see how this develops. We definitely want the same results.
Take care.
John
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It seems to me that everyone is dealing with advertising revenue as separate from subscription revenue – when it should all be considered part of one monetary plan. Yes I see the point that you’re trying to make but the point that is missed is that advertising revenue has always been a by product of a rich subscription rate even when they were the focus of the paper (ad rates are based on your subscription numbers – so by definition your focus is on subscribers). I’m not a big fan of paywalls (outright blockers — they don’t work), but I am a big fan of metering system (because they do work).
I don’t think Ingram really did justice to NYT’s revenue, instead making their metering system look like a silver bullet (i.e. it will make us whole the moment we implement it). Fact of the matter is they have gotten a significant revenue source for online digital subscriptions (previously free) — but have created a lot of other revenue avenues because of their metered paywall. i.e. their online ad rates for protected areas have increased, they have more sponsorship opportunities, and they’ve added further value to their existing print subscription product (via bundling opportunities).
The original sin was actually due to an avalanche effect of a mad-rush to buy regional papers in the 90’s, followed by downsizing news rooms to bring cost down (because of all that overlap) and over utilizing news feed services like Reuters and AP to replace those lost reporters. This lead to every paper looking like the other. Since in the tangible paper world you could “sorta” get away with that due to the papers regional spread between the others, this cookie cutter problem never seemed real. But when you put that paper into cyber space it becomes very real – any product with no competitive edge over rials will have a real problem. This entire scenario is what we should consider the original sin.
This is also the reason that previous attempts at paywalls didn’t work. Nothing was unique enough to be deserving of charging for the entire website.
There are lessons learned in this story, because unfortunately most sites these days still aren’t “good” enough to pay an all in/all out price for. But, thats where the beauty of metering comes in — where you can use different types of meters (i.e. ad walls, survey walls, pay walls, etc) to protect different types of quality content.
As I mentioned in a prior post I have added a rebuttal story on http://meteredpaywall.com for Ingram’s story. I invite all to read it and voice their opinions.
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[…] just linked to some paywall discussions last week, but this one deserves attention, too: Dan Conover explains why Warren Buffett […]
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[…] category where I have discussed the topic at length (as I just did). I have sort-of promised a couple times that I’m done talking about paywalls because I really haven’t had anything new to say […]
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[…] in 2012, I praised Mathew and Dave Winer for pieces they wrote about the folly of paywalls. (Mathew has been more persistent and eloquent […]
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