Paywalls rise

By Felix Salmon
March 27, 2013

It’s paywall season right now: the Washington Post, the San Francisco Chronicle, the Telegraph, the Sun — all have recently announced plans to erect paywalls in an attempt to extract subscription revenues from their most loyal online readers. And other paywalls are being tweaked: the NYT paywall is getting less porous, while Andrew Sullivan’s is being tightened up, with a new $2/month option to complement the existing $20/year price point.

The trend here is clear. There is now only one major US newspaper without a paywall of some description, although others have free spin-off sites, like Boston.com or SFGate.com, which act a bit like the outside-the-paywall content on other sites.

There are three big drivers of these decisions. The first is that there’s no hope that online ad revenues will ever grow to replace print ad revenues. They’re barely growing any more, even as they’re still only a small fraction of total ad revenues. The second is that for various reasons, newspapers need to “cling to the mantle of quality at near insane costs”, as Sarah Lacy puts it. If costs are stubbornly high while revenues are shrinking, then the only possible solution is to try to raise new revenues by any means necessary — or go bust.

Finally, there’s the behavioral aspect: newspapers in general, and the NYT in particular, are quite deliberately habituating readers to the idea of paying for content. This was an obvious strategy even before most of the paywalls launched, back in 2010: first get people used to the idea of paying at all, and then, slowly, raise the amount that you ask them to pay over time.

There are an infinite number of points on the spectrum between tip jar and paywall, but there does seem to be a clear move to the right over time, towards less porous and more expensive paywalls. Some paywalls, like the FT’s, are what you might call Metropolitan Museum paywalls, porous in name only. While in theory the FT works on a meter system, giving people a certain number of free articles before asking them to pay, in practice if you want to read an FT article you’re going to be asked to pay — even, annoyingly, if you’re already a subscriber. (I would dearly love a subscription which authenticates based on device rather than on an easy-to-forget and hard-to-enter username/password combo: can’t the FT just see that it’s my phone accessing the site, and let me read anything I want if I’m a subscriber?)

And in general, the more you’re asking for, the more coercive you need to be. At a buck or two a month, loyal readers are happy to support you. At $15 or $20 per month, you need to break out the sticks as well as the carrots.

One of the problems with paywalls is that everybody wants their paywall to be simple and transparent and easy for everybody to understand. But if you do that, you can’t A/B test; you can’t work out empirically what the optimum price is or what the best place to set the meter is. Which is where the raft of different paywalls out there comes in handy.

Here’s my prediction: At some point, the industry is going to informally settle on a single management-consultancy company to ask for paywall advice from. Everybody’s going to use the same company, with the result that the consultancy in question is going to see real internal figures from lots of different newspaper publishers, with lots of different models. The consultancy will then — for a price — tell its clients what “best practice” is in the industry, which is code for “this is the way that the most successful newspapers are doing it”. No one site can easily do A/B testing on its own. But put them all together in the head of a well-connected management consultant, and it becomes much easier to see what’s working and what isn’t.

But all of the paywalls and consultants in the world won’t change the fact that the amount of information freely available on the internet continues to grow very fast, and that the number of people willing to pay for any kind of news online is always going to be a small fraction of the total online news-reading population. As Lacy says, there’s an exciting future for online news — even if the prospects for legacy-burdened newspapers are dim. The paywalls might help with newspapers’ finances. But they’re certainly not going to help make them any more relevant.

15 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

what I want is:

1. pay a monthly subscription to access a large set of paywalled web publications
2. have some clever technology work out how to allocate my subs fee between publications based on which sites I visit

I do not want separate arrangements with each site.

Posted by Luis_Enrique | Report as abusive

“can’t the FT just see that it’s my phone accessing the site, and let me read anything I want if I’m a subscriber?”

Felix, most browsers will remember your password, and you can always download the app which will remember it also.

In regards to hard to remember passwords, keep in mind that some passwords protect you, and some protect the website. Passwords for a news website are not there to protect you, so you can choose an easy to remember one, and use it for lots of sites. If somebody wants to waste their time trying to guess it, they’re not going to empty your bank account.

Posted by KenG_CA | Report as abusive

I hadn’t really thought about this for several years, but with the advent of these new paywalls popping up, I wondered what sort of impact they would have, too. So, I started with how I gather news.

The majority of news information that I read, comes from blogs that have no print media. Even when I had a subscription to the NYT digital content, I read less than 1/10th of what was available.

When you want to read about the latest in cars, you don’t turn to the NYT; you turn to Autoblog and its ilk.

When you want to read about the latest rumblings in tech, you don’t turn to WaPo; you flip the Currents feed to CNET, The Verge, or any of the hundred or so tech blog sites.

The news that I do read, comes from an unlimited variety of sources from around the world: Google News. If something is occurring in Japan, the best news source is from Japan; better yet if they have an English version.

If you include blogs in Google News, you expand the treasure trove of information out there, because there are a lot of very intelligent people who can link data together to weave a compelling story.

I guess what I’m saying is: Journalism isn’t dead at all, rather, it has been dramatically transformed, such that newsprint’s decline will continue.

Posted by GRRR | Report as abusive

The costs on these paywalls is simply way too high. I would love to get access to FT, NYT, and WSJ but I’m not going to shell out a grand a year to do it. I would gladly pay a couple of bucks a month for full or even expanded access.

I think this high-price paywall approach is going to backfire as people cannot pay for all of these. It will just make these stubborn publications lose readers and influence.

Posted by Slapdash13 | Report as abusive

I suspect that large strategy consulting firms are already advising the major newspapers and mags on the “right” strategy for building their paywalls – both metered and unmetered.

More than likely, these advisory services, which must be continually refined, of course, depend heavily on the kinds of metrics Google Analytics et al churn out.

But like one of your commentators says above, what I would be most interested in (and others too, perhaps), is a single paid service that lets me consume news and high-quality content from a variety of newspapers and magazines. Perhaps we will see a service like that come up when news sites have exhausted the pool of those who don’t mind signing up on a site-by-site basis and yet, they need incremental revenue.

Mohan Kompella | BminusC.com

Posted by Mohan_Kompella | Report as abusive

I wonder if the timing has any relationship with the demise of Google Reader. I was a former NY Times subscriber and found I no longer needed the site as my eclectic assortment of RSS feeds filled it’s place in aggregate. Depending on how well another RSS reader fills the voide / if RSS is even supported to the extent it needs to be, I may have to revert back.

Posted by bjacobs103 | Report as abusive

I want what @Luis_Enrique wants.

I have no objection in principle to subscribing to multiple sites which I want to visit for news, but in practice, every site has their own little quirks and problems, which means that if I actually did subscribe to each, I would spend time each month dealing with their support teams as to why I can’t log in or why I can’t read particular stories or why I can’t comment.

I am never, ever going to waste my time doing that.

I want one site that I pay, and that site then works with ferocity to beat down all the technical problems that may occur with my access to the 20-25 actual content sites that I visit daily.

Posted by lauradeen | Report as abusive

Certain GLOBAL brand newspapers will be able to charge–the FT, the NYT, the WSJ. Forget about second and third tier publications, and here I would include the Wash Post, the LA Times, or the SF Chronicle. They can’t compete with the seasoned global giants, and their specialized sector or local coverage (politics or Hollywood, for example) has been undercut by scrappy hyper-specialized or hyper-localized websites that out report them. And even the NYT is starting to look a bit wobbly in some areas once you compare their coverage to elite British competitors. And the competitive advantage of ALL American newspapers further fades if you are privileged to be able to read other languages and access the best publications from abroad. And the NYT or other U.S. papers can’t get away with what it did often pre-internet when it would selectively refer to certain overseas papers that covered topics in the same manner, implying they were all “on the same page” and this was the received wisdom. Easy consumer access to the global news put an end to all that. Let a million opinions bloom!

Posted by bluepanther | Report as abusive

While I don’t know about any management consultancy, Subscription Site Central has a wealth of resources for sites looking to initiate and optimize paywalls — from pricing to marketing to design. I strongly urge any news sites interested in getting the most from their metered paywalls to check us out.

Posted by subsiteinsider | Report as abusive

Good to read your thoughts on this, Felix. We’re definitely observing a big trend to create the “premium web,” where those who pay get higher quality. iTunes and the iOS app store have already conditioned millions to understand that if you pay just a little bit, you get a superior entertainment experience. Hundreds of newspapers have already adopted this idea because of the financial reality facing them.

Not all of us have accepted the paywall trend yet, but it certainly seems inevitable – as you pointed out, online ads can’t sustain enough revenue. 90% of ad revenue is consolidated in the top 50 publishers and cost-per-click ad rates per page have been going down every day for the past 3 years, according to Google’s public filings. No content publisher depending on website revenue can stay in business without a premium offering.

You’re also right that the NYT is habituating people to the idea of paying for content. This follows my favorite “transition to premium” analogy, the Starbucks example, in which the cost per ounce of coffee at Starbucks is 2 to 5 times that of a typical fresh cup of coffee at a fast food chain or convenience store. Over time, most people accept this cost per ounce, because they appreciate higher quality, service, and consistency. The cheaper offerings that once scoffed at the high prices are now unsuccessfully left to compete with the new standard for “premium coffee” that dominates the market.

Though we may not be able to work out “empirically” what the optimum price or model is across the board, I DO believe testing is possible and effective for individual publishers. No paywall is ever “done,” and to achieve outstanding results, publishers should test many options to maximize their revenue. User tastes differ from site to site, and also change over time. Testing is the only strategy for paywall success, as content models are also evolving as methods of monetization that shift beneath publishers’ feet. Metro newspapers must test, try, and adapt cost structures to take advantage of new digital content creation (e.g. video blogging, shorter articles from more contributors, comments rapidly affecting the article content) and methods to consume them (mobile, tablet, RSS feeds, etc.).

Posted by MCasSelle | Report as abusive

@bluepanther – I generally agree with your point, but with a notable caveat for certain local news. For example, if I want to read about local city government, my options are relatively limited, and some number of people are willing to pay for that news. Similar point for coverage of various local issues and high school sports. (Some people will pay for in-depth coverage of local professional sports teams, though in that case national outlets such as ESPN present more competition.)

Where I do agree, though, is that not many people will pay to read 2nd or 3rd tier papers covering national issues. As a result, I think a lot of that original reporting will disappear and be replaced by licensed content from wire services or the big brand publications.

Posted by realist50 | Report as abusive

Bluepanther is on the right track….most publications do not produce content good enough to be worth paying for. Probably the only two sites in the world which I would pay to access are the NY Times and Andrew Sullivan.

Every time a second tier publication announces that it is erecting a paywall, it gets laughed out of the building. I’m writing from Seattle, where the Times recently announced that they would be erecting a paywall, and the comments were overwhelmingly dismissive. Same thing in San Francisco (my hometown paper) when the Chronicle announced their paywall.

Bottom line…if you want people to pay for your product, you better have a damn good product…because there is a lot of very good, free, content out there competing with you.

Posted by mfw13 | Report as abusive

Pay to read media that almost always has its own agenda and ideology – politics, in particular? I don’t think so. Not while there are websites out there that do NOT brainwash the readers.

Posted by AZreb | Report as abusive

Interesting that the discussion is around access and not quality. If people can’t make a good living investigating and reporting what’s going on, and if we don’t have media companies willing to publish their findings, then we are in trouble. No number of “free” sites can dig up what’s really going on (they can of course copy, aggregate, and otherwise grab what’s come out of other sources, parrot and comment endlessly on official news releases, but this is not journalism). Mind you, today’s news sites, even those behind pay walls, are hardly practicing journalism either, but fundamentally, being able to make a living at finding out what’s going on is as critical to a healthy society as having the right and the means to publish what you find.

So I’m all for reasonable pay walls if it can help restore a healthy, skeptical media. But I am in agreement with Luis_Enrique — a Netflix for news would be great, and I’m not likely to pay even a couple of bucks for any one source.

Posted by Sanity-Monger | Report as abusive

The internet is the world’s library, and soon every word ever written and every image ever captured will be within a few keystrokes of everyone’s grasp.

Businesses that wish to build pay to watch peepshows in the dark corners and little used hallways of this library are welcome to try, but I’ll wager a thousand to one on those that will vote against that plan with a simple click of the back button.

Don’t go behind a paywall Felix, or if you do we’ll miss you.

Posted by CaptnCrunch | Report as abusive