Paywall math, Guardian edition

By Felix Salmon
January 25, 2010
a lot of speculation on this blog about the economics of the NYT paywall. So let's stop speculating and look at what Alan Rusbridger, the editor of the Guardian, has to say on the subject. After all, the Guardian, and its website, are in a very similar situation to that of the NYT: a newspaper which has a huge online audience, but which is still losing a lot of money. What's more, there's a good chance that a NYT paywall, if it's set high enough, will catapult the Guardian into position as the most widely-read newspaper in the English-speaking world.

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There’s been a lot of speculation on this blog about the economics of the NYT paywall. So let’s stop speculating and look at what Alan Rusbridger, the editor of the Guardian, has to say on the subject. After all, the Guardian, and its website, are in a very similar situation to that of the NYT: a newspaper which has a huge online audience, but which is still losing a lot of money. What’s more, there’s a good chance that a NYT paywall, if it’s set high enough, will catapult the Guardian into position as the most widely-read newspaper in the English-speaking world.

My commercial colleagues at the Guardian – the ones who do think about business models – want to grow a large audience for our content and for advertisers, and can’t presently see the benefits of choking off growth in return for the relatively modest sums we think we would get from universal charging for digital content. Last year we earned £25m from digital advertising – not enough to sustain the legacy print business, but not trivial. My commercial colleagues believe we would earn a fraction of that from any known pay wall model.

They’ve done lots of modelling around at least six different pay wall proposals and they are currently unpersuaded. They’re looked at the argument that free digital content cannibalises print – and they look at the ABC charts showing that our market share of paid-for print sales is growing, not shrinking, despite pushing aggressively ahead on digital. They don’t rule anything out. But they don’t think it’s right for us now.

The New York Times, like the Guardian, is currently seeing little if any erosion of its print circulation from the fact that it’s available for free online. That might be counterintuitive, but it does seem to be true, at least for the time being. So if I’m right that the main purpose of the NYT paywall is to shore up the newpaper’s print circulation, this would seem to be a weird time to implement it.

In fact, the reverse is true: with Rupert Murdoch seemingly hell-bent on putting paywalls around all of his newspaper properties (although not, as Rusbridger notes, around SkyNews.com), a lot of Murdoch’s readers are going to look elsewhere for news. And many of them will find their way to the Guardian and the NYT. I’m told that the current plans for the paywall around the Times and the Sunday Times are for what John Gapper calls a “Berliner”: no meter, no free content, just a wall which you have to pay to get past. I’m sure that Rusbridger is licking his lips in anticipation.

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