The Great Debate

The year of the newspaper paywall

By Clay Shirky
January 6, 2012

By Clay Shirky

The views expressed are his own.

This may be the year where newspapers finally drop the idea of treating all news as a product, and all readers as customers.

One early sign of this shift was the 2010 launch of paywalls for the London Times and Sunday Times. These involved no new strategy; however, the newspaper world was finally willing to regard them as real test of whether general-interest papers could induce a critical mass of readers to pay. (Nope.) Then, in March, the New York Times introduced a charge for readers who crossed a certain threshold of article views (a pattern copied from the financial press, and especially the Financial Times.) Finally, and most recently, were a pair of announcements last month: The Chicago Sun-Times was adopting a new threshold charge, and the Minneapolis Star-Tribune said that their existing one was working well. Taken together, these events are a blow to the idea that online news can be treated as a simple product for sale, as the physical newspaper was.

For some time now, newspaper people have been insisting, sometimes angrily, that we readers will soon have to pay for content (an assertion that had already appeared, in just that form, by 1996.) During that same period, freely available content grew ten-thousand-fold, while buyers didn’t. In fact, as Paul Graham has pointed out, “Consumers never really were paying for content, and publishers weren’t really selling it either…Almost every form of publishing has been organized as if the medium was what they were selling, and the content was irrelevant.”

Commercial radio is ad-supported because no one could figure out a way to restrict access to radio waves; cable TV collects revenues because someone figured out a way to restrict access to co-axial cables. The logic of the internet is that everyone pays for the infrastructure, then everyone gets to use it. This is obviously incompatible with print economics, but oddly, the industry’s faith in ‘every reader a customer’ has been largely unshaken by newspapers’ own lived experience of the move to the web.

A printed paper was a bundle. A reader who wanted only sports and stock tables bought the same paper as a reader who wanted local and national politics, or recipes and horoscopes. Online, though, that bundle is torn apart, every day, by users who forward each other individual URLs, without regard to front pages or named sections or intended navigation. This unbundling leads to the odd math of web readership — if you rank readers by pages viewed in a month, the largest group by far, between a third and half of them, will visit only a single page. A smaller group will read two pages in a month, a still smaller group will read three, and so on, up to the most active reader, in a group by herself, who will read dozens of pages a day, hundreds in a month.

Against this hugely variable audience behavior, a paywall was all-or-nothing: “If you won’t give us any money, we won’t show you any ads!” Offered this all-or-nothing choice, most readers opted for ‘nothing’; the day they launched their paywall, the Times of London shrank its digital audience from a large multiple of its print circulation to a small fraction of it. This isn’t a problem with general-interest paywalls — it is the problem, widely understood before the turn of the century, and one to which there has never been a convincing answer. The easy part of treating digital news as a product is getting money from 2% of your audience. The hard part is losing 98% of your advertising base.

* * *

To understand newspapers’ 15-year attachment to paywalls, you have to understand “Everyone must pay!” not just as an economic assertion, but as a cultural one. Though the journalists all knew readership would plummet if their paper dropped imported content like Dear Abby or the funny pages, they never really had to know just how few people were reading about the City Council or the water main break. Part of the appeal of paywalls, even in the face of their economic ineffectiveness, was preserving this sense that a coupon-clipper and a news junkie were both just customers, people whose motivations the paper could serve in general, without having to understand in particular.

The article threshold has often been discussed as if it was simply a new method of getting readers to pay, to which the reply has to be “Yes, except for most of them.” Calling article thresholds a “leaky” or “porous” paywall understates the enormity of the change; the metaphor of a leak suggests a mostly intact container that lets out a minority of its contents, but a paper that shares even two pages a month frees a majority of users from any fee at all. By the time the threshold is at 20 pages (a number fast becoming customary) a paper has given up on even trying to charge between 85% and 95% of its readers, and it will only convince a minority of that minority to pay.

Newspapers have two principal sources of revenue, readers and advertisers, and they can operate at mass or niche scale for each of those groups. A metro-area daily paper is a mass product for customers (many readers buy the paper) and for advertisers (many readers see their ads). Newsletters and small-circulation magazines, by contrast, serve niche readers, and therefore niche advertisers — Fire ChiefMother Earth News. (Some newsletters get by with no advertising at all, as with Cooks’ Illustrated, where part of what the user pays for is freedom from ads, or rather freedom from a publisher beholden to advertisers.)

Paywalls were an attempt to preserve the old mass+mass model after a transition to digital distribution. With so few readers willing to pay, and therefore so few readers to advertise to, paywalls instead turned newspapers into a niche+niche business. What the article threshold creates is an odd hybrid — a mass market for advertising, but a niche market for users. This is the commercial equivalent of the National Public Radio model, where sponsors reach all listeners, but direct suport only comes from donors. (Lest NPR seem like small ball, it’s worth noting that the Times ‘ has convinced something like one out of every hundred of its online readers to pay, while NPR affiliates’ success rate is something like one in twelve. Newspapers with thresholds now aspire to NPR’s persuasiveness.)

* * *

Paywalls held out the possibility, however illusory, that if all readers could be treated as customers, the organization wouldn’t have to pay much attention to them, except in aggregate. Threshold charges blow that up; a single fee-paying user will generate hundreds of times the revenue of the median, ad-viewing reader. This subjects the logic of the print bundle — a bit of everything for everybody, slathered with ads — to two new questions: What do our most committed users want? And what will turn our most frequent readers into committed users? Here are some things that won’t: More ads. More gossip. More syndicated copy. This is new territory for mainstream papers, who have always had head count rather than engagement as their principal business metric.

Celebrities behaving badly always drive page-views through the roof, but those readers will be anything but committed. Meanwhile, the people who hit the threshold and then hand over money are, almost by definition, people who regard the paper not just as an occasional source of interesting articles, but as an essential institution, one whose continued existence is vital no matter what today’s offerings are.

In discussing why the most loyal subset of readers would pay for access to the Times, Felix Salmon described some of the motivations reported by users: “I like the product, understand the incentives involved, and want its production to continue” and “I feel that maintaining a quality NYT is immensely important to the country as a whole.” Now, and presumably from now on, the readers that matter most are disproportionately likely to score high on the God Forbid index (as in “God forbid the Sun-Times not be around to keep an eye on the politicians!”)

The people who feel this way have always been a minority of the readership, a fact obscured by print bundles, but made painfully visible by paywalls. When a paper abandons the standard paywall strategy, it gives up on selling news as a simple transaction. Instead, it must also appeal to its readers’ non-financial and non-transactional motivations: loyalty, gratitude, dedication to the mission, a sense of identification with the paper, an urge to preserve it as an institution rather than a business.

* * *

Thresholds are now mostly being tried at big-city papers — New York, Chicago, Minneapolis. Most papers, however, are not the Minneapolis Star-Tribune. Most papers are the Springfield Reporter, papers with a circulation 20,000 or less, and mostly made up of content bought from the Associated Press and United Media. These papers may not do well on the God Forbid index, because they produce so little original content, and they may not find thresholds financially viable, because the most-engaged hundredth of their audience will number in the dozens, not the thousands.

On the other hand, local reporting is almost the only form of content for which the local paper is the sole source, so it’s also possible to imagine a virtuous circle for at least some small papers, where a civically-minded core of citizens step in to fund the paper in return for an increase in local coverage, both of politics and community matters. (It’s hard to overstate how vital community coverage is for small-town papers, which have typically been as much village well as town crier.)

It’s too early to know what behaviors the newly core users will reward or demand from their papers. They may start asking to see fewer or less intrusive ads than non-paying readers do. They may reward papers that make their comments section more conversational (as the Times has just done.) The most dramatic change, though, is that the paying users are almost certain to be more political, and more partisan, than the median reader.

There has never been a mass market for good journalism in this country. What there used to be was a mass market for print ads, coupled with a mass market for a physical bundle of entertainment, opinion, and information; these were tied to an institutional agreement to subsidize a modicum of real journalism. In that mass market, the opinions of the politically engaged readers didn’t matter much, outnumbered as they were by people checking their horoscopes. This suited advertisers fine; they have always preferred a centrist and distanced political outlook, the better not to alienate potential customers. When the politically engaged readers are also the only paying readers, however, their opinion will come matter more, and in ways that will sometimes contradict the advertisers’ desires for anodyne coverage.

It will take time for the economic weight of those users to affect the organizational form of the paper, but slowly slowly, form follows funding. For the moment at least, the most promising experiment in user support means forgoing mass in favor of passion; this may be the year where we see how papers figure out how to reward the people most committed to their long-term survival.

This piece originally ran at shirky.com.

PHOTO: A pressman keeps watch on the print run of the first Baghdad edition of the Patriotic Union of Kurdistan’s newspaper April 22, 2003. REUTERS/Shamil Zhumatov

8 comments so far | RSS Comments RSS

In the age of Google News, why pay for content? If you’re interested in a story of any significance, it’s being widely reported. If you’re interested in opinion, well, no shortage of that online (cf. this comment). And if you’re interested in ads, ha, no shortage of those either.

Again, why pay for content when roughly equivalent content can be found elsewhere for free? The only way it would work is if every media outlet refused to offer content for free. The analog would be scientific journals, few of which have freely accessible digital content. You have to buy a subscription or pay per article. They have to do this because they don’t derive their income from ad revenue. Big Media does. Science journals also publish topical and meaningful niche content that can’t be found anywhere else and is sometimes critical to know for certain people. Big Media doesn’t.

When the NY Times can give $15 million to their CEO for not doing a very good job, I think it’s clear that Big Media needs this pressure. What will the outcome be? There are two potential ends of the spectrum. On one end, vapid content-free journalism that exists only to fill up the parts of the page not covered in ads. On the other end, lean and meaningful journalism supported entirely by readers who can’t get equivalent content anywhere else. We’ll see some of both.

If a local paper wants to charge when I read more than ten articles, it’s easy to go elsewhere. SF Gate, LA Times, NY Times, Seattle PI, BBC, Guardian, Sydney Morning Herald, Der Spiegel. And Adblock completely nullifies the annoyance of advertising. They can keep serving those ads to non-paying readers, but nobody sees them. If nobody sees them, nobody will click on them, and advertisers will flee.

It really is a losing battle for Big Media. They have to change, they have to become something else that won’t be seen as a commodity, freely available elsewhere. And they have to stop relying on advertising to get their income. Ad-supported anything is a plague on our culture and it needs to go away.

Posted by Nullcorp | Report as abusive

This passage would have made a sobering lede:

“There has never been a mass market for good journalism in this country. What there used to be was a mass market for print ads, coupled with a mass market for a physical bundle of entertainment, opinion, and information; these were tied to an institutional agreement to subsidize a modicum of real journalism. In that mass market, the opinions of the politically engaged readers didn’t matter much, outnumbered as they were by people checking their horoscopes.”

We’re one of Mr Shirky’s “God Forbid” types, vis-a-vis Reuters and the NY Times, though we’ve found that we rarely get to the Times’s limit, so we’ve still got our “99 cents” promo subscription dosh in our pocket. We’re OK with no paper becoming too powerful, but we couldn’t imagine a world of equal noise by lots of sources if the big ones shatter.

Posted by WeWereWallSt | Report as abusive

Every month I go over the NYTimes limit and then just turn to the various loopholes available to get around the paywall. I also do the same for FT. FT is a bit harder than NYTimes but it’s possible. I wont share how, will simply say hacking is not involved, anyone can do it. Even sites with absolute paywalls like JSTOR are rather easy to get around, and again, without having to hack. Again that’s all the info I will share.

In my opinion, companies like the Financial Times and NYTimes offer quality, over say something from Joe the Angry Blogger site. Even with Wikileaks, the information was raw, but news reporting on the raw information was needed as simply many people just don’t want to find themselves going through such large data packs. They rather have what is unique reported to them, without wasting the time to find it on their own.

I understand these companies need to pay their employees, and from that they need money to do so. The current model is set up where companies are best set with creating a paywall, but that’s the problem, it’s the current model. There needs to be a paradigm shift, a new model that changes the entire landscape of how journalist are paid for their content and how news companies earn revenue from that. There are a number of theories but probably the best out, or at least the freshest and most promising is creator-to-contract. I’m afraid I wont have enough room to go into detail here. But the paywall system is going to collapse because once 1 person has that information they can share it with friends and family rather easily who can also share it rather easily (legally or illegally.) But for now, bring them on, bring the paywalls about, once the sharing becomes problematic that is when the paywall bubble will burst. Maybe then creator-to-contract theory will emerge from the ashes of 20th Century business models.

Posted by Proxyariesman | Report as abusive

What an interesting and well spoken article Clay, thank you!

One revenue methodology never mentioned because it would rely on trust would be a little pay link at the end of every article.

“Did you like it? Then give us a to compensate the author and cover our expenses ”

I would have paid for the pleasure of reading this piece once I knew how well it was written.

Posted by CaptnCrunch | Report as abusive

I would welcome the opportunity to pay a small amount for an article that I valued. A click spot at the end of the article is a creative idea. I think the same folks that are willing to pay for the pay wall would prefer to pay for the content they found useful/interesting/worthwhile/entertaini ng, which would in turn give rewards to those who create the content they value.

Posted by tmaxwel1 | Report as abusive

Articles with this subject come up fairly often, but one aspect that bothers me is never mentioned and it is the apparent greed of the online charges. Traditionally newspapers have cited the cost of newsprint and ink as the reason to raise the price of a single issue or a subscription. My former west coast newspaper added insult to injury by giving a cheaper subscription price if you threatened to cancel. With a digital subscription, there are none of those costs – no paper, no ink, no warehouse, no distribution costs including wages, street corner boxes, trucks, and so on. Unfortunately digital subscriptions are priced like paper subscriptions with a big windfall of savings pocketed by a newspaper who sees the digital subscriber as the golden goose. I would be willing to pay a fair subscription price to a digital newspaper, but I don’t want to feel like someone’s fool unless I also get to deduct the subscription as a charitable contribution on my taxes.

Posted by winc06 | Report as abusive

An interesting but overly long article that misses the point: namely, this is a ‘pay-as-you-go’ world now. I, for one, would be willing to pay for what I want to read on an article-by-article basis just as I pay for my mobile phone calls and Skype calls on a minute-by-minute basis. Instead of doing the smart thing and offering such a pay-as-you-go option for their content, the media giants tried to play their old game of ‘teaser’ content plus the bundle- said bundle containing desired content plus undesired content. If they did the pay-as-you-go model they would see the statistics of what people want (ie desired content) versus what they don’t want and could then on working to improve and create more desired content. Then if enough ‘undesireables’ started whining about missing their type of content then specialty rags would start up to address that need. That’s how business works folks. Duhhhh….

Posted by Eric93 | Report as abusive

I’m boycotting the nytimes.com. I use Google news to look for other sources, that’s how I found this newspaper.

Posted by theloreli | Report as abusive

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