Paywalls: Newspapers should make themselves more valuable, not more costly

A thoughtful reader has taken issue with my last post, which argued that paywalls are a poor solution to the newspaper industry’s twin troubles of declining circulation and declining revenue.  You can read his defense of paywalls in his well-written blog here.

Meanwhile I’ll take another stab at making the case against them.  But before I begin let me articulate two beliefs I share with paywall advocates:

  • Journalists and editors create great value for society and play a vital role in a well-functioning democracy.
  • Many readers value content enough to pay for it.  Indeed, that is the norm in print, and, while less common, there are oft-cited examples online as well (e.g. WSJ.com and FT.com).

On to the disagreement.  Paywall advocates put a great deal of stock in a seemingly common-sense economic argument: quality content is valued, therefore it will be purchased if not freely available.  This analysis is incomplete.

First, the fact that a product is valued and can attract a paying audience is no guarantee that it will be purchased at prices and quantities sufficient to cover the costs of its production and distribution, to say nothing of the provision of an economic return to the providers of its capital. The recent fate of The Seattle Post-Intelligencer is an apt if unfortunate case study: still unprofitable at last report despite having laid off 90% of its journalists.

Second, and more importantly, paywalls send exactly the wrong message to the industry.

They say, “the problem with our industry is that we are insufficiently expensive, not insufficiently valuable.”

This is insanity.  For 400 years newspapers have provided their readers with a one-size-fits-all information product whose content was selected by an editor based on some  weighting of what the editor felt his audience needed to know and what he thought the larger pluralities within it might enjoy.  But today, unlike the first 380 years of industry history, I have myriad alternatives to get at the content I enjoy.  And an increasing number of those alternatives are personalized to me, not some fictitious average of me and 200,000 other people; they include more of what I’m interested in than my newspaper does (an RSS feed on voting reforms, for example) and – importantly – less of what I don’t (I don’t have to navigate around obituaries or Paris Hilton on my Flipboard app or my personalized Yahoo! home page).  In other words, if I invest my limited discretionary time in a personalized news medium I will get a much better return on my attention than with today’s newspaper, online or in print.

The rational, if challenging, response to these wonderful new competitors is to improve the return on attention that the newspaper offers by offering personalized content along with the editor’s choices.  As I’ve argued before, the print edition is a feature, not a bug, of the newspaper experience.  Google, Yahoo!, Facebook, Flipboard, etc will never compete with us to put a hunk of paper in a reader’s driveway – we monopolize that channel.  That is an enviable position that we need to leverage by re-imagining what’s possible in print.  Variable Data Printing and QR Codes are transformative technologies that have already changed whole industries, but have yet to be embraced by newspapers.

They will be adopted eventually, but paywalls, like other urgency-sapping placebos, serve only to distract from this urgently needed transformation while generating – at best – trivially small incremental revenues (and at worst an evisceration of the paper’s online readership).

I believe firmly that the newspaper industry will be in a much better place in five years, but it will be because they made themselves more valuable, not more expensive.

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3 Responses to Paywalls: Newspapers should make themselves more valuable, not more costly

  1. In a free market, value is determined by one thing — what’s it worth in dollars and cents? Whether that price can cover the costs to make the product is called profit and loss. Doing a thing without a profit isn’t sustainable. In this case, online journalism generally doesn’t exist in a vacuum — most of it is generated and paid for through the legacy product like a newspaper. To take that product and give it away elsewhere is, well, it’s insane.

    Paywall is a bad term — its online subscription. Considered as part of an overall print/new media strategy, it will work. The 1,200 daily newspapers in the U.S. not serving large metropolitan markets have a monopoly on the local news channel. We produce in a single day more local news and information than local TV and radio stations do in a week — combined. To ask for money for that information when it comes printed on dead trees but to give it away when it’s distributed online is the wrong model and not sustainable.

    If you really want to wade in, try to work your way through my treatise on the Internet and underpants: http://gumpole.blogspot.com/2009/07/internet-underpants-and-everything.html

  2. John Dowd says:

    Roger,
    Your treatise suggests some differences in our thinking. I confess to having 100k+ circs in mind, though I believe they signal what’s to come for smaller papers. Perhaps you would disagree.

    Generally, I am indifferent as to whether content should be distributed freely or paid for. Within and without the newspaper industry successful exemplars for each can be found.

    In the particular case of newspapers I believe the following:
    Newspapers will succeed or fail based on the success of their print product. What is done online, via paywalls or advertising, will be mere window dressing except inasmuch as it distracts from the need for print reinvention.

    Your blog mentions that 80% of European newspapers have been charging for online access. Wonderful. But meanwhile, according to WAN, their circulations and ad sales continue to contract, by 5.6% and 13.7% respectively last year. The rosiest projections of what’s possible from paywalls amount to a pittance next to these trends.

    Readers are not merely shifting their newspaper consumption from paid print to free web – they are walking away from newspaper content completely. Print readers spend 13 hours (and falling) per month with newspaper content. Of those that migrate to the newspaper’s free website – and many do not – the average drops to less than 1 hour. Furthermore, declining circulations began a generation before the internet, so can hardly be laid at the feet of free websites.

    Thus the problem is neither the medium nor the price tag – it is the content on offer. An exploding array of alternatives offers highly personalized content streams, which deliver great bang-for-the-minute. Meanwhile newspapers continue to offer a one-size-fits-all product. Consumption of any media costs a significant portion of one’s discretionary time. Consumption of paid media incurs the additional cost of a trivial amount of one’s discretionary income. The opportunity cost of the time is the more important, and only personalization can lower it.

    My conclusion is that a newspaper can charge for online access or not – it will make little difference. If their print product becomes more personalized they will succeed in either case. If it does not, their paywall strategy is so many deck chairs on the Titanic.

    Ergo the title of my post – we should be concerned with making newspaper content more valuable, not more expensive.

  3. We essentially agree. I believe that print has a long and profitable future (we recently invested $7 million in a new press, insertion equipment and a new building to house them). I do believe that future will be aided, perhaps modestly, by requiring a payment for our news regardless of the medium. As it always has been, it’s all about the “content” (what we used to call “news”.) Probably a good share of our differences amount to semantics.

    RP @ PR

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