Newsosaur: Tear Down That Paywall!

By: Alan D. Mutter

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).

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Published: December 10, 2015

10 thoughts on “Newsosaur: Tear Down That Paywall!

  • December 10, 2015 at 9:52 am
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    Newspapers went to paywalls for a reason — you cannot give content away and be profitable. Those those papers like ours which have local content that cannot be found anywhere else, paywalls will remain.

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    • January 4, 2016 at 6:01 pm
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      BUT, many communities have social media pages that I have found to provide far more — and faster — information than newspapers.

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  • December 10, 2015 at 9:53 am
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    I have to wonder whether this analysis applies equal to very small markets, like weekly newspapers, which have a virtual monopoly on local information. It would seem they have more leverage than metro papers, which this article focuses on, in having success with a paywall.

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  • December 10, 2015 at 9:53 am
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    Well, I often think Mutter is right, but on this, he’s dead wrong. Of course, a smart paywall focuses on local, non-wire news, but, that should all remain paywalled. Alan’s simply wrong on this.
    That said, the AP board was wrong 20 years ago. The “TV model” ignored, already in 1995, that pay cable channels like HBO had existed for more than 15 years.

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  • December 10, 2015 at 9:53 am
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    Excellent analysis
    This article is spot on. At this point in the game, paywalls are a huge negative and likely do far more damage than good. Good intentions aside, they are like slamming a door in someone’s face and to me smack of arrogance and exclusivity. Online communication and digital data are fundamentally fleeting and ethereal, and of far less quality than things that people can hold in their hands. Going back to print only, as many weekly papers have found, is a better option.

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  • December 10, 2015 at 9:53 am
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    I can only assume this was directed at metro newspapers, but it never says that explicitly.
    Mid-size and under certainly have a lock on local content; content that in many cases the metro can no longer cover as well or as fast, if at all, because of the newsroom decreases mentioned.
    Smaller publications also have another justification for pay walls, to keep selling papers. Readers aren’t fools and 60 and over may not flip to online in as great a number as younger age groups, but they have proven they are perfectly capable of picking up the news online when it is free there vs a $1 in the box or half that for home delivery.
    I’d also dispute that the first-time reader who followed a link to digital content is likely to develop into a regular reader.
    But to address that point, the five free clicks per month concept addresses the peruser who happens on a site that they like enough to explore further and bookmark to return to in the future.

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  • December 10, 2015 at 9:54 am
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    I have an idea: let’s chase growth of the 80% of our traffic that comes from consumers who don’t care about our content. In order to fully maximize this growth, let’s dismantle the sophisticated mechanism that stops repeat visitors from having to subscribe. Removing this barrier would reduce our revenue (industry wide by $1B?) and message to our paying (print!) subscribers that they are back in the chump-bus where everyone else gets the (digital) content for free. Further, this would eliminate any risk that some of the 20% of the consumers who love and value our content would pay for it….
    It’s called a meter, Alan, and it segments our audience and allows for the growth of our most profitable and sustainable revenue source. Suggesting we take it down to chase social/search traffic in an ad-only model is so dumb that it really calls to question you (and E&P’s) judgment and analysis skills. I’m embarrassed for our industry if this is the state of our dialog.

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  • December 10, 2015 at 9:54 am
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    Isn’t this exactly what folks were recommending years ago? If you make your stories available for free, financial success will naturally follow. Except it didn’t (or maybe it did a bit until banner ad rates tanked). What did follow was dropped subscriptions. What makes it different today? If you build a loyal readership conditioned to pay nothing and if ad rates remain bleak and if the organizations directing traffic to your site continue to seek ways to use your content to their benefit, where will the revenue come from? Free still is a pretty good price.

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  • December 14, 2015 at 9:54 am
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    You’ve totally missed the distinction between a paywall and a pay meter. With a pay meter, there is not a material loss in casual traffic. Also, most pay meter sites, including The New York Times, do not block sideways traffic from search or most social referrals – even after you’ve reached the monthly limits.
    Meanwhile, in a market which is only the 12th largest in the US, The Star Tribune has generated 48,000 paying digital subscribers and added substantial value to our print subscribers through implementing a pay meter, not a paywall. This has been the centerpiece of a strategy that has enabled us to stabilize revenues and earnings.
    I agree with most of your points about the downsides of a hard paywall, but very few US publishers deploy a paywall.

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  • January 9, 2016 at 6:23 am
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    In my experience, the addition of some sort of paywall or pay meter has led to greater awareness of value for readers, as well as newspaper staff. Readers have become more aware of content’s value. When we provide unique regional content that they must pay for, they will. Ultimately, paywalls are a two-way street. If something truly has value, there is a cost, and if you charge for something, the customer has a right to expect it to have unique value.

    Reply

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