News Leadership 3.0

August 09, 2009

Pitfalls of the pay wall

Before they jump into charging for content, news organizations must bypass the “quality journalism” argument and answer these five questions instead

I’ve hesitated to write about the notion of charging for online news content. I’m not a news business expert and I was not focusing on online years ago when some news organizations tried charging for content and could not pull it off. But with News Corp, The New York Times and The Boston Globe and other organizations considering charging for online content, I’ve been studying up and I want to add my voice to the chorus that’s saying “Don’t” or at least “Take a hard look before you leap.” (Special thanks to Steve Yelvington, Steve Outing,  and Jeff Jarvis, whose blogging about paid content has helped me understand the issues.)

Last week, News Corp owner Rupert Murdoch stepped it up a few beats, announcing his news Web sites all soon would charge for access to content: “Quality journalism is not cheap and an industry that gives away its content is simply cannibalizing its ability to produce good reporting.”

Indeed. While it is evident that many news organizations provide quality journalism, I don’t think that really addresses the question of whether news organizations can profit by charging for content. (I also realize that doesn’t seem fair.) But after all, if quality content was the key, many news organizations would have been charging for years (and some tried and failed more than a decade ago.)

Instead, here are five questions I think any local publisher or editor needs to ask before charging for content:

1. Will the content behind the pay wall be unique and essential to users?
Finances aside, I think this is a critical question for news organizations. It also is a question that journalists are ill-equipped to answer on their own. Sure, we have plenty to say about the value of our work. But we tend to see it through the prism of the time and talent we invest in it and we judge it by the approval of our peers. Journalism has struggled for decades to be consistently relevant, useful, engaging and credible. Sure, you say, your organization is the dominant provider of local news, so your content is unique and residents cannot do without you. Think again ...

2. What about the competition? If you are in a market with decent local television, a weekly and few fledgling local news Web sites, you can probably assume those will be good enough sources for many of your users who won’t or can’t pay. Even if you don’t have competition now, a pay wall is likely to encourage start ups, small community-oriented sites that can be operated on a shoestring. Of course, you say, those sites don’t have the breadth of all the news we bundle on our site. But these days, with links, social networks, and RSS feeds, people can do their own bundling.

3.Is it even possible to put a lid on your content? Copyright law allows others to use a small amount of your content. What’s to stop another site from posting your headline and a few words? That may be all many people want to know. And how much time and effort will it take to monitor for fair use violations? What about politicians, agencies and others who want to get the word out. If your stories are behind a pay wall, won’t they just take their news to other distributors? Don’t forget, many people who now find you by search won’t click through to the paid stuff.

4. How many users are you likely to lose? That’s an open question. It depends on your market, your users, your pay plan and your journalism. Given the unknowns, be sure to look at multiple scenarios and the effect each will have on your online advertising rates. In the process, figure out when to declare defeat if it comes to that.

5. What is your plan for finding out what people in your community will pay for and providing it to them? Circle back to Question 1. Talk to your users: Where do they get their news? What do they come to you for? What will they pay for? How much?

The pay wall works for Murdoch’s wsj.com because users think it is essential for them to make money and many of them can write off their subscription fees either on their expense accounts or their income taxes. Some form of it may also work for The New York Times because it has unique national and political content and a brand that won’t quit.

It may also work in some local news markets that have the right combination of strong local content and brand, loyal Web savvy users with a little money to spend, and weak competition. More likely, though, it could be a lot more difficult and a lot less lucrative than appears on first blush.

Comments

Michele raises questions about website pay walls that newspapers would ignore at their peril.  I think walling any currently free content would be a huge mistake.  Instead newspapers should price entirely new content that potential subscribers would perceive as indispensable, or close to it.  Developing such content would force papers to give some hard and creative thought to their resources and how to exploit them with entrepreneurial energy.  What would be “indispensable”?  It might be a frequently updated “big picture” look at the community.  How well is the community performing, according to different criteria (e.g., recreation/open space, public safety, mobility, job creation, neighborhood improvement, heritage protection)?  Local papers, with their still-considerable resources, are best placed to assemble such community assessments.  This kind of information would be particularly valuable to homeowners with a newly apprehensive eye on their investments, and some of them might pay a modest sum – say, $50 annually – to get a well-packaged, authoritative, regularly updated assessment of their community.  The subscription should include exclusive discounts at participating local retailers and other businesses –- a feature that could offset the entire cost of membership.  I don’t have much confidence that newspapers, for all their information resources, could produce such a model with their current journalistic/business mindset.  In an earlier piece I wrote for OJR about how the New York Times could return to a subscription model, I suggested the paper bring in an outside “impresario” who could look at the paper’s resources with a fresh eye and discover how to exploit them for profit—http://www.ojr.org/ojr/people/TomEditor/200902/1643.  I think other papers could do the same.


Hi Michele…here’s a little example/case study how #1 actually works:

my local paper, the Daily Hampshire Gazette, last year did a story on an old textile mill redevelopment project that went bust in Easthampton.  We were all curious about it, as many of us knew people who were connected with it in some way or another.  We also knew that the town was counting on the development to bring in much-needed tax revenue.

The Gazette, which is mostly behind a pay wall, published the first part of this multi-part investigative report in their weekend edition, with subsequent parts on following days.  The first day, one could read it online for free, or buy the paper and hold onto it for when one wanted to read it.  The following day, the previous day’s article was behind the pay wall—so if you missed a part, you would have to pay. 

IMO, this was a pretty good way to go about it—esp. for a piece that was so thoroughly investigated and gave all of us in town far more information about the project than any of us ever knew.  It pulled together all the bits of information and “town gossip”  put names to it, and families, and reasons to why, what, and how the whole thing went totally wrong.  The story was of great value to the community, and, therefore, paying for it if one missed a day, or wanted a print copy, really didn’t cause much grousing among the populace.

Same thing for articles on the signage dispute in town.

So, when there’s value, there’s no reason not to pay.

But who wants to pay for re-hashed AP and other wire articles?  no one!  Quality journalism is the stuff that helps us understand what’s going on in our communities, not gives us the same stuff we can find other places for free.


I tread into these waters carefully because so many people whom I respect are sounding alarm bells about the drawbacks of paid content.

But I must ask: what happens if we tried to erect a paywall and failed? Will we lose readership? Will revenues drop? Will we be forced to make draconian cutbacks to our resources and staff?

We’re already doing all of these things. Michelle long ago taught me a great phrase about overplanning, calling it “analysis paralysis.”

I applaud anyone willing to jump into these waters and make a go of it. We as an industry can only learn from our failures. Am I paralyzed by fear right now? Yes. But I keep looking at the alternative and wondering why we shouldn’t encourage everyone to go for it.


Thanks Tom, Tish and Carlos for your insights.
Tom, I think your idea of getting an outside perspective is excellent.
I also like the Gazette example, Tish. Did people then pay a fee for a single story or did they subscribe longer term? Love to know more about how it worked.
Carlos, you are a genius at throwing my words back at me grin If you decide to go for it, I know you’ll think it through and I hope it works.


I’m still a big advocate of the freemium model. Keep 90 percent of current content free, maybe even 100 percent, but offer a “pro membership” which gives you access to special content from top writers, columnists etc., maybe even a kind of Twitter feed with news and commentary the minute the writer hears it. This way you keep the big numbers of eyeballs to satisfy advertisers, but you also have a secondary revenue stream akin to newsstand sales. Also, make EVERYONE who wants to read your free content register, with an email address, so you convert these browsers into contact points. You can then send out summaries of news that interests them and get them to click back to the site more often, boosting eyeball counts.


It’s all speculation right now. There is only one way to settle this Free vs. Paid debate: Try it! We have no way of knowing what readers will pay for, but we can find out. All that’s needed is a simple tool that would enable publishers to request payment (traditional or alternative) and would enable readers to choose from among “many ways to pay.” The system does not have to be perfectly airtight to allow publishers to start opening modest, multiple revenue streams (we know advertising isn’t enough). But it should be flexible so that publishers can change their models to suit their content and their audience. That’s the concept behind PayCheckr.com. “Keeping what’s read in the black” - Make it easy for users to support the sites they value and enjoy.


Great column, Michele.  No matter how many times the industry clicks its heels and repeats “Pay wall,” it’s not going back home to Kansas. We’re better off acknowledging we’re in Oz and spending our time developing Oz-based solutions, not trying to turn back the clock.

All five of your points are important, but No. 5, in my view, is the most important. The only way to settle the free-vs.-paid debate is NOT to try it and see if it works, but to ask actual users what products or services they would buy. This approach is anathema to many (me included) in the news business, who have spent their careers declaring that we can’t have the readers running the newspaper. Well, the readers run it now.

Newspapers must acknowledge what every successful business already knows: You succeed by asking people what they need, then delivering it. Flailing around with inadequately researched business models is the quickest way to burn through a lot of cash, time and opportunities. It’s also the quickest way to lose to a generation of quiet competitors whom you’ve never heard of, but who are out there right now, putting nostalgia and hubris aside and listening to customers. We would do well to join them before it’s too late.


A phrase in Tom’s comment comes closest to what may be a good business model — “entirely new content.”
Newspapers’ websites and their online publications should be entirely different products. Websites with general information, light entertainment, reader submitted material of all kinds and teaser links to the paid product would be free, while online local news, photo and feature products would be available only by subscription.
It would be, of course, the newspaper’s chore to create local content that local people would pay for.
And we must always keep in mind the service that printed newspapers provide to local advertisers. Advertising in a printed newspaper works great, and local merchants who use newspaper advertising know that. (Newspapers that are redirecting most of their resources toward the web to eliminate production and distribution expenses are starving the draft animals.)
The reasons online advertising doesn’t generate enough revenue are:
1. in any market there can be millions of websites, and
2. a website has a severely limited amount of ad inventory with any value.
Years ago when community newspapers faced new competition from free total market coverage shoppers, they created free total market products of their own. These were completely different products from the subscription newspapers.
That’s something like what newspapers should do now with their websites and their online editions. Offer both — different products — a free access website and a subscription only site.


Michele, a little investigative journalism might not go astray when mulling over the issues. US Newspapers make $40 an average from online readers. Put up a paywall and blind Freddy and his dog can see you are going to need a hefty sum to break even, as readers scarper, let alone improve the status quo. Facts speak louder than words.

Perhaps newspaper managers should be focusing their efforts on finding ways of improving online ad revenues - but that is asking a lot from the stewards of the industry demise.


I don’t understand what all the hand-wringing is all about. Online (maybe) generates 10% of your newspaper’s revenues and the assorted print products generate 90% of your revenues. Quit chasing the 10% and shore up the 90% or you won’t have any content for online anyway. Original content must be placed behind a paid wall. Non-original content should be free (because it’s available elsewhere).


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Exploring innovation, transformation and leadership in a new ecosystem of news, by journalist and change advocate Michele McLellan.

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