Paywalls Not Saving Newspapers?
Newspapers are still finding it hard to live in the Internet Age.
The Wall Street Journal reports that newspapers are not finding much success with those fancy new paywalls they’ve been putting up in recent years:
As more newspapers close the door on free access to their websites, some publishers are still waiting for paying customers to pour in.
The numbers of readers signing up so far suggest that at many papers, “paywalls” aren’t about to reverse publishers’ deteriorating finances. Yet the results aren’t discouraging industry executives, who say their efforts are succeeding in shoring up the core print business after years of declines.
So far, the Star Tribune in Minneapolis has attracted 14,000 digital subscribers—equivalent to about 5.7% of its existing weekday print subscribers—since it started charging readers for its website in November. The Boston Globe has sold about 16,000 digital subscriptions, which include those for mobile devices, in the three months after it launched a paid website last fall, compared with its daily print circulation of about 200,000. Meanwhile, Newsday in New York had fewer than 1,000 paying digital subscribers two years after erecting an online paywall.
The industry has little choice but to keep trying. Over the past decade or so, with newspapers’ content available free online, their finances have been devastated. Newspapers saw weekday circulation drop by nearly 10 million from 1999 to 2009, about 17% of the total, according to the Editor & Publisher International Yearbook. Print advertising revenue was cut almost in half in that period, according to the Newspaper Association of America.
The rate of decline has slowed recently, but online advertising revenue isn’t growing nearly fast enough to make up for the erosion of print.
This is hardly surprising. Online ad rates are unlikely to bring in the kind of revenue that print ads did for newspapers back in the glory days. A banner ad from Macy’s for example, isn’t going to bring in nearly as much revenue as one of those four-page, full-color ads in the A Section of The New York Times that you see around the holidays or whenever there’s a big sale going on. Furthermore, advertisers still remain wary of the power of online advertising to do what they need, and they’re unlikely to be willing to pay top dollar for something that probably isn’t going to do that much good for them.
That’s why the industry has looked to paywalls as a way to make up for all that lost advertising revenue. After all, these companies aren’t going to survive by giving their content away for free. As noted above, though, the paywall experiment doesn’t always work out so well. For one thing, it goes against the general ennui of the Internet, where information has been freely available since the birth of the World Wide Web. Tell people that they have to pay to access your website, and they’re just going to go to one of the many sites out there where the news is available for free. There are exceptions, of course, but they are exceptions that have mostly proven the rule and don’t really provide a good guide for the rest of the industry:
Some big newspapers have had success with paywalls. The Wall Street Journal, which has restricted access to some online content since the mid-1990s, had about 537,000 digital subscribers as of last fall, according to the Audit Bureau of Circulations. About 80,000 of them read versions for tablets, smartphones or e-readers, while the rest get the online edition. Pearson PLC’s Financial Times, which launched its current pay model in late 2007, had 267,000 digital subscribers as of the end of last year, the company said.
Since New York Times Co. began charging for online access to its flagship paper last March, it has signed up 380,000 paid digital subscribers. That is about half of its daily print circulation.
But these may be the exceptions more than the rule. The Journal and the Financial Times preceded the rest of the industry, and offer specialized business-news content. And the Times started with more than 30 million monthly unique visitors to its website in the U.S., according to comScore Inc. That large number was an advantage for conversion rates, said Martin Nisenholtz, who retired in December as senior vice president of digital operations at New York Times Co.
The other advantage that papers like the Journal and Financial Times have is that, in many cases, the subscriptions are paid for by the employers of the people in the financial industry who write it off a business expense. For the average American, though, the cost of a subscription to one of these sites can really only be justified if you have a specific need for the type of reporting they do. As for The New York Times, it strikes me that they’ve actually handled the transition to a paywall pretty smartly. For one thing, their package for online access includes the ability to use mobile apps, something that no doubt appeals to some significant portion of their readership. For another, the Times also exempts most content from the paywall if it’s accessed via Twitter or an RSS feed, meaning that’s possible to read much more than the 20 free articles per month that they offer if you know how to do it. Finally, not every newspaper is The New York Times and they arguably have a better shot at getting people to pay to access their content online than, say, the publisher of the Minneapolis Star-Tribune.
Because of this, many newspapers seem to be finding the going to be a little tough:
Last year, researchers at the Project for Excellence in Journalism persuaded six companies that own 121 newspapers to share private data about the financial performance of many of their papers. And the findings were grim.
On average, for every new dollar the newspapers were earning in new digital advertising revenue, they were losing $7 in print advertising revenue. The papers seemed not to be diversifying their revenue streams or coming up with innovative products at a fast enough clip.
“Some of those we talked to seem frustrated and even uncertain about how to proceed,” said Tom Rosenstiel, the director of the project, which is part of the nonprofit Pew Research Center. “But we also found signs that, if you can break out of old cultural patterns, there is another way.”
Of course, part of the problem seems to be that the industry itself still hasn’t adapted to the new world:
“The papers that are succeeding,” he said in an e-mail, “are those that have pushed harder to change their sales staffs, have pushed digital even at the risk of putting less effort into the old categories that pay the bills, have taken more risks — have fought against the deep ‘inertia’ that many of the executives describe.”
The report identifies no shortage of challenges for newspapers on the sales side. Some of the papers it studied have struggled to sell mobile ads, recruit digital advertising sales representatives and profit from so-called daily deals similar to Groupon coupons.
“Only 40 percent of papers say targeted advertising is a major part of their sales efforts,” the report states. “Most papers are not putting major effort into selling ‘smart’ or customized digital ads, the category expected to soon dominate local advertising.”
There’s an old saying, adapt or die. If the industry doesn’t do the former, it’s going to face increasing risk of the later.
People are willing to pay money for news that will make them money. That’s why the WSJ paywall can generate revenue. For most news reporting? Not so much.
And as to opinion if there’s one thing the blogosphere has proved it that each person has at least one.
This is the free market at work.
The opinion comment is spot-on. Remember when the NYT tried to get people to pay for the privilege of reading Maureen Dowd and Gail Collins? Yea that lasted about six months I think.
One of the commenters at balloon juice suggested that one way forward would be for a large number of newspapers to band together and do some sort of group pricing and revenue sharing. I’m not sure that I would buy it, personally, but I can see that being a very attractive option for places like libraries. How many people are going to pay for online access to the local paper in Ithaca, NY? Probably not many. But if for $x per month, they get paywall access to several hundred local papers, that’s more appealing.
A couple things leap out at me.
First, I suspect the most likely source for susbcription revenue is going to be apps. People balk at paying for online access to a paper via their Web browser, but they might go for paying 99 cents for an app … maybe even paying 99 cents every three months, six months, or what have you.
Second, I don’t think people are going to pay fifteen bucks a month to access premium content at the Washau Gazette. But might they pay fifteen bucks a month to access premium content across 1,000 newspapers worldwide? I have no idea. But aggregating their subscriptions (assuming there aren’t antitrust implications) may be the only way for newspapers to survive.
Sunday when I went to Hy0vee to do a little grocery shopping there was a guy at the entrance trying to get people to subscribed to the Sunday edition of the Des Monies Register. When he offered me a free copy and asked if I wanted to sub I simply asked him… “Why would I want to pay for something I can get free on the web?” He didn’t have much of an answer. Even local news these day can be had for nothing online. Print papers are a thing of the past. Only ones with specialized content that is supplemented by online resources will survive. The WSJ being one, the Pennysaver being another.
The problem is not so much the digital age. The real problems are first the content of these rags and second demographics.
Newpaper readership for decades has been in steep decline. Long before the likes of Netscape, AOL and Google, newspapers were bleeding readers.
Personal anecdote: I remember working on a class action that was filed and then litigated against Knight Ridder back in 1997-1998, and although that case was not specifically related to circulation it was a tangential issue. Even back then the circulation managers there were in a complete panic about the extent to which they were bleeding readers.
Thing is, there’s really not that much demand for left-wing dogma and talking points. Certainly not outside of a few major urban areas on the coasts. Leftism just doesn’t sell well. Check out the circulation declines over the past 15-20 years for the likes of the L.A. Times, the New York Times, the Boston Globe, the Washington Post, the Philly Inquirer, the Baltimore Sun, the Seattle P-I and the S.F. Chronicle. Staggering. Check out the ratings for the likes of CNN and MSNBC. Pitiful.
The paywall idea is sort of like trying to sell thin ice in February in North Dakota. Who’s going to pay to read a bunch of uneducated and inexperienced liberals pontificating about this and that? Not too many people.
Old folks still read newspapers with some regularity, mostly by rote, but obviously that’s not a growth component of a legitimate sales strategy. If you’re relying on Grandpa Prostate Cancer as a target audience you’re not going to be around for too much longer.
Ultimately I suspect what will happen is that a large number of big city newrags (all of which are owned by major corporations, BTW) will be sold off to local private investor groups, who in turn will convert them from newsrags into smaller, nimbler online-only vehicles for entertainment, travel, sports, gossip and like matters. A few will survive. The WSJ and some other financial publications will continue to have modicums of audiences. Probably the New York Times. On principle, and somewhat out of spite, wealthy liberals won’t let the Gray Lady go down. USA Today is sufficiently moderate, at least outside of election years, and sufficiently well run that it should be able to stay afloat. Not too many others will make it. No great loss.
The local papers really need a digital strategy that is heavily oriented to the local population of whatever city or town they’re based in. That was their main value in the Print Age: their circulation wasn’t huge, but people buying advertisements and classifieds could be sure that they were reaching the local population.
The Daily Deals stuff sounds like a good start.
That is right on the money, Brett. My take on the future of newspapers is a bit different from that of other commenters. I think the future is not so bad for small local newspapers but pretty bleak for newspaper chains. Small local newspapers can operate pretty much the way they have for the last two hundred years. You don’t get rich but if you stick to your last you won’t starve, either.
The problem is really faced by chain newspapers that were saddled with debt when the original independents were acquired by the chains. The newspaper business just can’t deal with that level of indebtedness.
And the problem of the NYT is unique: there’s barely enough demand for a national news daily let alone a national opinion daily. The NYT could do just fine as a local news daily but that wouldn’t support the lifestyles of its publishers or columnists.
Those excerpts leave aside the obvious. The web has shown a huge tendency to shake out one winner in a market segment. There is one Twitter, one Facebook, one Google, one Linked-In, one Amazon, one eBay.
In the day there were thousands of papers, sure. Those thousands have momentum but they are colliding with the web dynamic. It might be possible for many to survive on a low-overhead ad budget, but if it comes down to subscription, it will collapse to one. It’s the nature of the medium, with no penalty for distant delivery.
Here is a local paper that seems to have found their niche. No idea if they are making money but they do make you want to check out the headlines which keeps you on for the advertising.
It seems the key is to violate all the old headline rules:
True and for Americans wanting honest reporting of US news, more and more have been turning to the British papers.
things that make you go, hmmm.
Nonsense. There’s MySpace, Bing, Reddit, Craigslist, Tumblr, and foursquare, just to name a few. Just because one firm has a plurality of the market share doesn’t mean they’re the only firm in the market.
And today we have thousands of bloggers willing to do the job of independent publishers and editors all on their own, for free! Reducing the barriers to market entry is a good thing.
MySpace is a loser, with well-documented afterlife as a backwater (and strangely a “bands” land).
Bing is a loser.
Reddit isn’t on the radar, but might be a near-example of “the one” effect I talk about, them or Digg.
Craigslist is definitely an example of “the one” effect.
Foursquare is a loser.
(Basically, by going to second or third tier sites you conform my analysis, with me, anyway.)
BTW, on the “bloggers” thing, it’s well known that few of them break news. Hey OTB guys, how often do you claim to have done it?
They are a different dynamic, an ecosystem of 1001 websites all alike, all sub-pontificating on pontifications made further up the tree, toward origination.
It is a root and branch structure. Consider this comment my terminal leaf.
@john personna: Well, if you dismiss a firm out of hand as a “loser”, then it must be so. I said it once and I’ll say it again: just because one firm has a plurality of the market share doesn’t mean they’re the only firm in the market.
I’m not sure why you’ve put “scare quotes” around bloggers, but even if few bloggers break the news, but they’re certainly some bloggers breaking the news. Reducing barriers to market entry always makes the market more competitive.
Generally speaking, small town weeklies are doing fine. And all things considered the major Nationals are not in bad shape either — despite what everyone thinks about the NYTimes, the problems it has have less to do with the paper itself and more to do with corporate holdings.
The real problem is in small-to-mid sized city newspapers. There are a couple issues for this. One of the biggest is that currently, most of these papers are held by chains (Gannett being one example). And the papers fortunes are very much based on the fortunes of the chains finances rather than their local situations.
All that said — and I know this from first hand work with local newspapers — everyone is trying to do hyperlocal. The problem is that really rejigging a paper — even without everything associated with having to run it up to an out of town corporate master — also requires alienating either (a) advertisers or (b) subscribers.
And (all things told) small city newspaper ad departments are not the place you go to meet the sharpest knives in the draw. As much as people imagine the newsrooms being old fashioned, its pretty amazing to see how in the dark ages the ad departments are.
@john personna: As for Reddit, it’s a large aggregation website that was recently purchased by Conde Nast. Similar sites are 4chan, 9gag, imgur….oh the list goes on.
Really, stop and think about your list, and then what we are talking about with city newspapers across the country.
Is there a Reddit per city? Why not, exactly?
You really seem to have lost the forest and taken refuge in a few chosen trees.
The quotes were on “bloggers” because it doesn’t mean “newspapers,” nor “subscription models,” which is where we started.
Bloggers certainly ain’t going to save the local paper.
Well I was the first ever blogger to ever be credentialed by the LPGA Tour. I blogged a tournament at OTB Sports in 2007.
Why haven’t I done so since then? I did in Apr 08 but not for OTB Sports. When the 1st tournament rolled around again in late 2008, I was just off open heart surgery. No LPGA tournament has come come within 150 miles of my home since then.
@The Florida Masochist:
That’s great, it really is. But you could probably tell us about the gap between your kind of coverage and traditional, year-round, local newspaper sports coverage, right?
(I believe that bloggers are filling gaps like high-school sports & etc., but in doing so they aren’t really helping the nearest city paper with their subscription model.)
Times Select lasted two years. Sept 05 to Sept 07.
One Florida paper erected a pay wall. The Tallahassee Democrat. That newspaper is so mundane I don’t know if a local would even miss it. It’s the paper for the State capitol but its coverage of the state government is ordinary at best.
A pet peeve I have- Why should I pay to go through the archives of the newspaper I’ve been subscribing to for 23 years. Those archives shouldn’t be restricted to paying customers IMHO.
At the April 2008 tournament I was the only media member to go out with a golfer playing in the next to last group. She pulled into a tie for the lead after 6 holes but then went double bogey-double bogey.
No one knew in the media room knew why Young Kim took those scores. I did, because I saw every shot. Kim, didn’t do a press conference at the end of the round(She finished 3rd one shot out of the playoff that decided the tournament) so everyone else was clueless.
At the 2007 tournament I was by a stroke of luck, the only media member out with one of the first round leader co-leaders. So I got a blow by blow description then too.
At my home blog in 2005, I broke the story of how there were delays in the giving out of hurricane food stamps. The hometown newspaper never covered that story, the next closed paper(45 miles away) got on the story 3 days after me. One local television story did however post the story at the same time I did.
In 2007 I related the story of how a writer/blogger for the Weekly Standard was not crediting a source for his writing on the Scott Thomas Beauchamp affair. A blogger I knew was passing on private info about Beauchamp and his unit to the WS writer but rather than fufill promises to the blogger to give her credit, he wasn’t. Lovely set of journalistic ethics the guy has, hmmm..? He ended up working for McCain for a while.
All that said, bloggers don’t often break news.
@The Florida Masochist:
Or perhaps we should invert it. The percentage of blog posts that are breaking news is low. See also, memeorandum.
I never meant that bloggers can’t do news, just that it isn’t the volume business, especially in the opinion “tree.”
@john personna: Sorry for the delay,
First, you write:
There actually are. And not just city, but scores of subreddits for everything you can imagine. But, that’s somewhat beside the point i’m trying to make; which is independent of the success or failure of city papers.
My point is that your notion that the internet as a Continental Divide game that narrows a field of competing firms to “the one” is a false one. That’s the beauty of the internet. Sure, one firm may have a plurality, even a majority of market share. But that doesn’t mean their aren’t other firms in the market with customers and advertisers. And that’s important, because it helps us get closer to a optimal volume of producers and suppliers for goods and services.
This is the free market at work.
My apologies if I implied that was my point. It’s not. Bloggers can certainly fill some of the space that a local paper may have provided in terms of local reporting. A savvy paper (like a free one we have in my old town) can certainly employ bloggers in a way they employ freelance writers.
But no, “blogging” isn’t going to “save” the print media business model.
What I just gave you was my thumbnail of Cumulative Advantage.
Is Justin Timberlake a Product of Cumulative Advantage?
And basically, when people can’t grasp the bigger ideas, and think it’s just me … I don’t take it too seriously. The internet and cumulative advantage is a big story, you can’t dodge it by hiding in wrinkles of the argument.
Cumulative Advantage willl lead to fewer, possibly as few as one, dominant internet news source over the next say 50 years.
Sorry, bad link
Is Justin Timberlake a Product of Cumulative Advantage?
Cumulative Advantage Explains Web 2.0, MySpace, The A-List, TechCrunch, Digg, And So Much More
@john personna: Great links, thanks for sharing. I’m not sure what exact claim you’re trying to imply with them. Does the internet have a coalescence effect around a single firm? Sure. But that doesn’t imply that other firms can’t be present and compete for market share. From the NYT article:
This is what economists and game theorists understand as a “Beauty Contests and Continental Divide games. The link is to a Colin Camerer paper, who is considered a leader in the behavioral game theory field. If you’re interested, the relevant material is on page 24-27.
The social effects of consumer preferences is a big and new field of study. But I helps us refine, no refute some basic principles of market theory. Just because payouts (or all your friends, or the best search algorithms) are highest at a single firm, that doesn’t imply that other firms can’t be present in the same market. Just because Google dominates the search engine market share, doesn’t mean that Bing still doesn’t operate a search engine service, and employ programmers and mathematicians to help develop their search engine product, and sell advertising space to market their customers. Just because you think Bing is a “loser” (a thought I share, for the record) doesn’t mean that Bing as a firm (or Microsoft subdivision) isn’t producing economic activity and providing a product.
The beauty of the internet is that if their is a single dominant firm, there’s space for other firms to pick up on excess demand and compete for market share. That fact that the barriers to market entry (hosting a URL) is much much lower than previously possible, creates all kinds of opportunities for optimal competition.
I started with the idea that city newspapers, especially smaller city newspapers, are going to be losers in a contest of cumulative advantage. That’s happening now. It is more an observation than a prediction. Sure, a local paper may do a pay-wall, but they have “equal delivery” with the NY Times and the Financial Times. They’ve lost the physical delivery advantage and find themselves in a new game, with the big boys.
Now, it might be a little more of a prediction to talk about 50 years out, and one winner, but we have those examples of lock-in with Google and Linked-In. They have so much now that no one can truly compete.
It’s really strange that you talk about Bing. You know that the only reason it exists is that MS can support it with a huge burn rate, right? You don’t pretend it is positive cash flow, do you?
@john personna: I have no idea what Bing’s financial situation is like. I’m only trying to point to the fact that just because a firm dominates market share, doesn’t mean that it’s the only firm the the market.
At any rate, I understand cumulative advantage (thanks again for the links) in the context of diminishing marginal returns; the more a firm gains in market share, the harder it is to gain more share. The more a firm dominates the supply of a given product, the greater incentive there is for other firms to compete (as long as barriers to market entry are low).
With that, I can’t possibly see how the internet will coalescence around a single news provider. It’s certainly possible that news consumption will fragment into various self-contained ecosystems, but I’m doubtful.
1. Of course we know Bing has a huge burn rate.
2. “That other firms exist” was never the argument.
You are taking refuge in trees again, or to use another truth of the internet, yes there is a “long tail” but the long tail does not disprove the “power law” associated with it.
Geez, be a little more self-aware that you aren’t arguing against my main point now, just making a retreating and misdirecting exit.
@john personna: No retreat, just confusion about your main point:
“That other firms exist” is I the source of my disagreement.
Is it really that hard? Ask people where they go for search, where they go for auctions, and online books, they are going to overwhelmingly name the winners of the cumulative advantage.
The also-runs are “losers” in my first posts because they face in insurmountable, exponential, climb to parity.
If you keep saying, hey, there are ankle-biters out there …. ok. Whatever.
@john personna: I really don’t see how you can make the jump from “overwhelmingly” to “only”.
overwhelmingly ~= only
I mean, which hides and which reveals? To say that Linked-In is “the one” for personal business identity management, or to scrounge up some ankle-biter that attempts the same thing?
@Gromitt Gunn: I would, dammit. Born and grew up there!