The newspaper publishers who put paywalls on their websites in the last few years should declare victory and tear them down before the barriers become more trouble than they are worth.
It’s true that paywalls slightly ameliorated the 40 percent dive in the industry’s aggregate revenues in the last decade. But the continued use of pay systems is bound to limit audience growth at a time when fully 79 percent of the traffic to the typical news site comes from casual visitors, instead of people navigating directly to NewspaperSite.Com.
More on that in a moment. First, the background:
After giving away their content for free for more than a decade, a growing number of newspapers in the last few years began putting paywalls on their websites. In all, about 450 of the nation’s 1,300 papers operate paywalls, according to News & Technology magazine.
Publishers opted for paywalls, in part, because they wanted to emphasize the value of the content they invest in producing. Even though one of three newsroom jobs has been eliminated by expense cutting in the last decade, newspapers still put more journalistic feet on the street than any other medium.
The primary reason publishers installed paywalls was to help offset a catastrophic collapse that took industry sales from a record $60 billion in 2005 to an estimated $34 billion in 2015. (The revenue statistics cited in this article are from the Newspaper Association of America. After publishing detailed data since 1950, the trade association stopped issuing sales reports as of 2013, requiring folks like me to project performance in subsequent years from the financials of the publicly traded newspaper companies).
When publishers launched their paywalls, they hoped to attract bazillions of new customers itching to pay for digital content. Unfortunately, that didn’t happen. In but one example, the Gannett Co., the biggest newspaper publisher in the land, reported awhile back that it had acquired fewer than 60,000 digital-only subscribers—a sum equal to about two percent of the 3 million print copies in sold on an average day.
Yes, the Wall Street Journal and New York Times each has about 1 million digital-only subscribers. But they are unlike the typical newspaper in that they are mission-critical reading for the international elites in government, business and academia, whose readers for the most part pay with the boss’s credit card. To put those achievements in perspective, 1 million paid readers represents a puny penetration of 0.03 percent of the 3 billion Internet users in the world. Further, 1 million paid subs pales against the 65 million subscribers of Netflix and the 20 million subscribers at Spotify.
Even though newspapers failed to sign up significant numbers of digital subscribers, they usually coupled their paywall launches with hefty increases in the price of their print products. To ease the pain of the rate increases, publishers gave print readers free access to paywall-protected content.
Fortunately for publishers, most print readers accepted the rate increases, so the industry’s collective circulation revenues climbed to almost $11 billion in 2013 after slipping to a bit less than $10 billion in 2011. The extra billion took some of the edge off the revenue dive. But not much.
Now that publishers have conditioned their print subscribers to paying an ever-greater share of the costs of producing and delivering the paper, they should declare victory and turn their attention to building robust and loyal digital audiences. They’ll need ever more digital readers to sustain their franchises as their superannuated print readers—the median readership at most papers is 60-plus—head toward the demographic cliff.
The digital pivot won’t happen very effectively if casual readers encounter pop-ups that either block, or threaten to throttle, access to the content they want to view. With so much news available for free on the Web, paywalls are distinctly inhospitable—especially the young consumers coveted by publishers and their advertisers. Repelled once or twice by paywalls, most incidental readers depart and seldom return.
As much as editors and publishers believe readers venerate their brands, the truth is that most of the traffic to a typical news site comes from incidental readers steered to the site via social media, a search request or another external source.
In a recent study, an audience-analytics firm called Parse.ly found (notab.ly) that 79 percent of referrals to 400 media sites were from external sources.
With more people than ever relying on news-aggregating apps from Google, Facebook, Apple and others, newspapers in the future are bound to get even more referral traffic than they do today. They can’t afford to let paywalls antagonize the new readers they desperately need.
Alan D. Mutter is a former newspaper editor and Silicon Valley CEO who today consults with media companies on technology and technology companies on the media. He blogs at Reflections of Newsosaur (newsosaur.blogspot.com).