Money wall

Paywalls in my back yard: A forecast for newspaper business models

By Steve Outing

It’s now been many years that I’ve been writing and opining about “paywalls” for news websites. It’s not a subject that’s going away, although living in the Boulder-Denver, Colorado, media market, I haven’t had to deal with paywalls myself. Until now.

Both the Daily Camera (my local newspaper/news website in Boulder) and the nearby and larger Denver Post are adding paywalls to their digital news in early December. The papers are part of Denver-based MediaNews Group, which is run by New York-based Digital First Media.

The Camera and Post paywalls are a bit of a surprise, since Digital First CEO John Paton is no fan of the news-paywall model. But on his blog last week, he unenthusiastically explained that many of his newspaper properties would try out a new paywall model — what Digital First is calling “All Access.” Paton wrote: “Let’s be clear, paid digital subscriptions are not a long-term strategy. They don’t transform anything; they tweak. At best, they are a short-term tactic.”

This news of an anti-paywall/subscription CEO changing his mind (sort of), plus another bit of news from last week, reveal a likely scenario for how the “paywall” or “digital subscription” business model for newspapers will play out. I’ll call it a likely scenario, since many variables can change the outlook in the years ahead.

A significant move by NY Times

The other news comes from the New York Times, which experimented with a failed partial paywall several years ago (called TimesSelect) and now is having better success with a metered paywall instituted in 2011. You’re welcome to substitute the word “subscription” for “paywall” in the previous sentence; they’re essentially the same thing.

What’s new with NYT is word that the executive in charge of the digital-subscription strategy, Paul Smurl, has indicated (via a Ken Doctor column on Neiman Journalism Lab) that the Times is likely to add a new “premium” digital subscription, above and beyond its current (convoluted) one.

NYT’s existing subscription offering varies in price depending on the format you wish to read its content on: print, the web, tablet, and/or smartphone. Print subscribers get full digital access on any digital device. Digital-only subscribers get full access to NYT content on the web and smartphone for $3.75 a week; the web and tablet (e.g., iPad) for $5 a week; and access on any digital device for $8.75 a week. Some might call that absurd; count me as one of those people.

The Times really needs to set a flat, reasonable rate for digital “all access” and get rid of the ridiculous pricing model described above. “All access” is what Digital First’s newspapers and their digital services will offer: either one price for a digital subscription that works on any device, or a print subscription which also includes all-access digital.

The promising tidbit from NYT’s Smurl is the planned “premium”-tier subscription, allowing Times fans to pay more and in return get more. New York Times events and conferences will be part of the premium goodies; Ken Doctor in his column also expects NYT’s e-book singles business, partnered with Byliner, to be a premium benefit.

Times executives are careful to describe theirs as “subscription” and “premium subscription” offerings. Fine, paying $5 a week (or whatever) for digital-news access to all of NYTimes.com content can aptly be termed a “subscription.” But the “premium subscription” (NYT’s term) is really a “membership” which offers extra benefits on top of all-the-news access.

GigaOm media columnist Mathew Ingram took the words right out of my mouth when he wrote, “The paper refuses to call what it is doing a ‘membership’ program, but insists on talking about it as a ‘premium product’ offering instead. This is a mistake.”

My thoughts mirror Ingram’s: Modern news organizations engage and have a relationship with their audiences; old-thinking news organizations produce a “product” and keep the audience at arms length. To reject the “membership” label for its “premium”-tier offering is a mistake, because it reflects and projects an outdated view of news organizations as the experts speaking from on high.

A future-of-news business model scenario

Anyway, here’s my analysis and forecast for what the developments described above mean for the financially challenged newspaper industry:

  • “Metered” and “porous” paywalls will be around for some time, though I don’t expect them to last long term. This means that non-paying subscribers will get a set number of digitally viewed stories a month for free, then get cut off from viewing more. But because newspapers don’t want to decimate their digital traffic, content views that come in via links from social-media sites, blogs, web or news searches, etc. don’t count toward the free user’s monthly allotment.
     
  • The New York Times is the news organization that other newspapers follow, and others will follow the idea of asking for more money from some of their users in exchange for additional benefits or goodies. If publishers of follower newspapers are smart, they’ll market this as a “membership” offer, because it will benefit the newspapers to develop deeper relationships with readers, rather than treat them only as “buyers” of a product. (Some newspapers, like the Los Angeles Times, already call their “premium” offer a “membership”; lesser newspaper brands than the mighty NY Times would be well advised to use that term in order to connect more deeply with their most committed customers.) Since it’s proven extremely difficult to get consumers to pay for digital news, extra benefits apart from commodity news can tip the scales and get fans of a newspaper brand to pay up for online and mobile.
     
  • In the U.S., it’s estimated that about 40% of newspaper digital-news services have paywalls today (if you include Digital First’s upcoming paywall additions). The numbers are likely to rise further in the near term. My expectation is that at some point in the next couple or few years, we’ll see publishers back away from paywalls (probably to something that looks more like a “membership” that offers more than the news for consumers’ money). In recent months, the San Francisco Chronicle and Dallas Morning News abandoned their web paywalls, but kept a premium offering (essentially, a paid “membership”). And Digital First Media, reading CEO Paton’s thoughts, is likely to use metered digital paywalls as a short-term, necessary step toward a future successful business model of another (yet to be developed) form.
     
  • Here comes the bad part, which is down the road if newspaper companies increasingly rely on subscriber revenue: talent drain. While metered, porous paywalls prevent steep digital traffic declines in the way that a “hard” paywall would, they nevertheless keep a significant percentage of potential readers away. That’s especially disconcerting to a newspaper’s “star” talent, who we can expect to abandon newspaper employment as digital news operations get their acts together and pay not only higher salaries, but offer a prominent columnist, say, a much bigger audience and influence.
         We’ve only just begun to see this news talent drain accelerate: Tech columnist David Pogue, from the New York Times to Yahoo!; media reporter Brian Stelter from NYT to CNN; Glenn Greenwald of The Guardian and Dan Froomkin, ex-Huffington Post and Washington Post, to billionaire Pierre Omidyar’s planned $250 million “NewCo” news start-up; and perhaps most tellingly, Katie Couric from ABC to Yahoo!
         Since most newspapers continue to make cuts, and pile more work on remaining staff, it’s logical to predict that their best journalists will migrate to better pay and bigger audiences at digital media companies that wish to expand into news and media. If newspapers get too aggressive with the paywall/subscription model just as digital media/news enterprises move faster in establishing themselves as media brands, newspapers will either fail or adopt alternative models — perhaps pay-more-get-more memberships!

What do you think? What’s your future scenario for business models that will support newsrooms in the future? Let me know in the comments below.

Author: Steve Outing Media futurist | Digital-media/news innovator | Journalist | Online-news pioneer | Consultant | Blogger | Writer | Researcher | Author | Speaker | Educator

9 Responses to "Paywalls in my back yard: A forecast for newspaper business models"

  1. […] It's now been many years that I've been writing and opining about "paywalls" for news websites. It's not a subject that's going away, although living in the Boulder-Denver, Colorado, media market, …  […]

  2. Adina Levin
    Adina Levin 5 months ago .Reply

    I don’t know what this means for news industry business models. I do know that as a reader, it reduces my level of knowledge. As a California resident, when I see a link to an interesting story in Seattle or Boston or Tennessee that has a paywall, I am not going to subscribe, and am less informed as a consequence. I am interested to learn how the Charles River restoration is going, but not enough to put the Boston Globe on recurring payments on my credit card.

  3. […] It’s now been many years that I’ve been writing and opining about “paywalls” for news websites. It’s not a subject that’s going away, although living in the Boulder-Denver, Colorado, media market, I haven’t had to deal with paywalls myself. Until now. – See more at: http://mediadisruptus.com/2013/11/25/paywalls-in-my-back-yard-a-forecast-for-newspaper-business-models/#sthash.z8cslRRh.dpuf  […]

  4. John Newby
    John Newby 5 months ago .Reply

    While I tend to agree with the blog, I don’t think that we owe potential readers the freebie to have all knowledge. Prior to the Internet, if something happened in another market, most never knew. Just because the Internet came to be, doesn’t mean we must provide all the information to all. The key for sustained survival still remains great enterprise along with enterprise that is primarily local in nature.

  5. Henrik Bortels
    Henrik Bortels 5 months ago .Reply

    Talent drain is a completly new aspect to me. But I think a bigger problem is the diversity of payment solutions, like every state having its own currency. News junkies are using a couple of sources. But I doubt they will pay differently for every paywall to open.

  6. Steve Katz
    Steve Katz 5 months ago .Reply

    Hey Steve:

    When DFM announced its “all access” plan, here’s what I posted on FB about my local paper, the Marin Independent Journal:

    “So Digital First Media, the parent company of Bay Area News Group and the Marin IJ, is about to take all of its newspapers behind a paywall. Details TBD, but CEO John Paton says “The future… lies in selling…multi-platform products and services to advertisers and marketers.” http://t.co/52NmgHjcE3

    Ok fine, but there’s another question here: what’s left at the IJ that people will actually be willing to buy – in sufficient numbers to make it worth doing from a business/operations end of things? Why do people read the IJ or any local paper these days?

    Sports.
    Columnists.
    Maybe 1 or 2 reported stories on local news.

    The rest of the paper: repurposed news releases (and no disrespect to the reporters – this isn’t about the quality of the journalists, it’s about corporate profit strategy).

    So they’ll put sports, columnists, and local news behind the wall?

    If that happens, how long before the columnists start complaining about lost audience (see also: the first time the NY Times set up a paywall), and some young guys figure out they can do local sports better and cheaper than the IJ – and beat the paper at its own game.

    As for local news: there’s so little in the paper these days, and almost no real accountability/watchdog reporting any longer. This is the hardest stuff to pay for. My guess: this is the one thing that won’t be taken over by some body else. It’ll just continue to slowly disappear. Leaving the County with even less news coverage than it has now.

  7. Barry Campbell
    Barry Campbell 5 months ago .Reply

    Steve, thanks for continuing to beat the paywall drum. It is the future and our clients have been quite satisfied with the results.

  8. […] ne segnalo due quello di Steve Outing che fa alcune ipotesi di possibili sviluppi futuri: Paywalls in my back yard: A forecast for newspaper business models e Paga, poi leggi. Paywall a confronto dell’Osservatorio europeo sul giornalismo che fa […]

  9. Steve Staloch
    Steve Staloch 5 months ago .Reply

    With the value of those mastheads not on the national radar screen rapidly diminishing, and the industry flocking to gimmicks in hopes of slowing the demise of print, I’m convinced it’s time we allowed the marketplace of readers to decide IF and WHEN the individual pieces of content produced should be monetized, but only after free and open access feeds viral interest and triggers a micropayment requirement. Not sure how a story or video reaches its potential “throw weight,” or is talked about around the kitchen table or water cooler if parked behind a paywall, and keeping score of how many stories I’ve read or viewed during a publisher-defined period of time is an instinctively negative experience for consumers, and technologically porous in practice. And just how many sites will a consumer subscribe to in order to read or view what they want to consume?
    Maybe not yet Armageddon, but the issues mainstream publishers face are debilitating and their way of doing business today, unsustainable: aging printing presses reaching the end of their useful life with a negative future ROI; employees cleverly but indefensibly disguised as independent contractors delivering their products; an archaic belief that readers will continue to support a masthead simply because of its one-time relevance and legacy; and the stark realization that with each readership study commissioned, the demos relied on for their very existence are looking even less like the audience advertisers demand they reach.
    With the proliferation of metered paywalls, the vast majority of media companies appear intent on writing another Darwinian chapter in their history by once again following the publishing big dogs over what could well be a fiscal cliff of their own making.
    It’s time for innovation that gives publishers the tool to create a new revenue stream for reinvestment in quality content based on monetizing individual pieces of content that are credible and virally-certified by the marketplace of readers as worth paying for (think iTunes or Pandora as a conduit for the proliferation and success of otherwise obscure artists), rather than replicating failed subscription models of the past.

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