Mon, 02/27/2017 - 21:48

Posted by Belinda Alzner on December 30, 2011

High-quality journalism doesn't come for cheap and advertising doesn't cover the costs in the digital age as it once did. Ira Basen looks back at paywalls in 2011 and explains how they may impact the future of journalism as we begin a new year. 

 

Want some bad news about the future of news?

Here are some recent headlines about Canadian media companies….

November 10 2011 - Torstar to offer buyouts to 1,050 Star employees

November 28 2011 - Quebecor cutting 400 Sun Media jobs through layoffs, buyouts, attrition

December 02, 2011 - No Turnaround for Newspaper Revenues in 2012 

December 16 2011 - Postmedia offering buyouts at two B.C. papers

Want more? 

Not included in this list is news about significant layoffs at the CBC coming in 2012 when the Corporation is asked to absorb a budget cut that could total more than $100 million off its base budget. 

And then there’s the news that ad revenues for U.S. newspapers are expected to hit a new low in 2011.  And that there were more than 3,700 layoffs and buyouts at American newspapers this year.  And that newsroom staffing in the U.S. is 22 per cent lower than it was in 2007, and is at its lowest level since the American Society of Newspaper Editors began counting in 1978.

Want some good news? 

It’s possible that 2011 will come to be seen as a watershed year; the year that that saw the emergence of a business model that might actually allow risky, time-consuming and expensive journalism to be pursued, allow journalists to get paid a living wage, and allow media companies to make a reasonable return on their investment.

Ever since news started to migrate online in the mid 1990s, and publishers decided to give it away for free, the challenge has been to accomplish all three of those objectives in an environment where revenue from print advertising has tanked, and online advertising has not made up the difference (“exchanging digital dimes for print dollars”), and where a growing chorus of people have insisted that “information wants to be free,” and “nobody will pay for news online.” 

And for a long time, that was largely true.  But in 2011, there are signs of a shift. 

As those headlines indicate, advertising revenue in a depressed economy is still shrinking, or at least, not expanding. And historically, it has been ad revenues that have paid for quality journalism. A newspaper’s ability to staff a foreign bureau was more or less dependent on how many ads the local car dealer was prepared to buy that year. The money received from readers in the form of subscriptions or street sales was trivial compared to ad revenues.

But this is the year readers have started to step up to the plate and pay for news. They’ve done it  by paying for content that newspapers have put behind paywalls, and by paying for content on enhanced digital versions of newspapers delivered on tablets and smartphones.

So far, this represents a trickle, not a flood, of revenue, and these gains might still be reversed, but it’s the most hopeful signs newspapers have seen in some time.

Hard paywalls

There’s nothing new about paywalls. Readers looking for Wall Street Journal online content have had to pay for the privilege since 1997, and with one million paid subscribers, the Journal remains the most successful example of a newspaper paywall. But the paper appeals to high income readers and offers content not easily found elsewhere, so lessons learned there are not necessarily transferable. 

In 2010, The Times of London, a high end general interest newspaper, also put its content behind a “hard” paywall, meaning that there was no free access to anything on the site.  The result was an immediate 90% decrease in traffic, and corresponding ad revenue, but Rupert Murdoch, who owns both the Times and the Journal, is philosophically opposed to giving away content, and he’s convinced that the business case for hard paywalls is solid.

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And he may ultimately be proven right.  The number of digital subscribers to The Times and The Sunday Times grew by 28 per cent between February and June 2011 (79,000 to 101,036), and they now represent almost 50 per cent of the newspaper’s total subscription base.

Start the metre

But there are other models beyond the one favoured by Rupert Murdoch.  Another is the so-called “metered paywall”, where readers are allowed to view a fixed number of stories in a given period of time, and after they’ve reached their quota, they need to become a paid subscriber to continue viewing the site.

In March 2011, the New York Times introduced a metered paywall.  Readers can see 20 stories every month without having to pay, although there are several ways to get around the content wall. 

It’s too early to make a definitive assessment about the success of the Times’ paywall, but the company is encouraged by the results so far.  It currently boasts more than a quarter million customers paying at least $15 a month for online access. Kindle and iPad subscriptions add almost 100,000 more readers to that total.

By this time next year, the Times expects to have about 400,000 paid digital subscribers, generating subscription revenues of around $60 million. Add that to the roughly $155 million a year from online advertising, and the Times’ total digital revenue of more than $200 million will, for the first time, exceed the cost of running its newsroom. It’s no wonder that the company is now extending its metered paywall to a second paper in its ownership stable, the Boston Globe.

Canada gets metred

In Canada, the Postmedia chain is leading the charge to paywalls.  Although digital sales now account for only about 9 per cent of the company’s total revenue (compared to 12 per cent at Torstar), Postmedia has effectively bet its future on its “digital first” strategy. It has already introduced a metered paywall to the Montreal Gazette, and the Victoria Times-Colonist, (which it has since sold), and plans to roll it out across its entire newspaper chain in the coming year.      

“Newspapers are going to need this going forward,” Postmedia CEO Paul Godfrey declared. “It’s only a matter of time.”

In November, the Globe and Mail announced that it too would be starting a digital subscription service this summer.  Details are sketchy, but the plan might include a metered paywall and making some columnists and other features available only to paid digital subscribers.

“We want to have a diversity of revenue”, explained Globe editor-in-chief John Stackhouse. “We don’t want to be reliant solely on display advertising.”

But perhaps the most surprising paywall news of 2011 came from New Brunswick, where in November, the Irving-owned Brunswick News company shut down free online access to its eighteen English-language papers, and eight editions of its French-language paper L-Etoile.

It’s an audacious gamble for Brunswick News.  No one will ever mistake the Irving papers for the Globe and Mail or the New York Times.  The content is largely mediocre.  They have prospered primarily because they have long enjoyed a virtual monopoly on local news in the province.

But the barriers to entry that have prevented others from challenging the Irvings in print don’t exist online. By moving its online content behind a hard paywall, Brunswick News risks losing readers to hyper-local sites that will offer readers free content without a significant loss of quality.    

This is one reason why former Globe and Mail columnist Matthew Ingram argues that despite some success stories, paywalls are still a bad idea. They may work for papers that provide high quality unique content, but for smaller papers, making online readers pay will simply drive them into the arms of free competitors like AOL’s Patch or the Huffington Post, which are increasingly becoming viable local alternatives in many smaller markets.

“If you are a small-town or even medium-sized metro paper,” Ingram concludes, “walling off your content could be a recipe for disaster, by giving your more nimble competitors exactly what they are looking for: readers eager for a free alternative.”

Perhaps the most hopeful sign to emerge out of 2011 is that there is now a growing realization amongst readers that when it comes to news, they will get what they pay for. 

They won’t pay for junk, but they understand that high quality journalism doesn’t come cheap and advertising will no longer cover as much of the cost as it used to.  And they will reward publishers who provide value added content for people who want to get their news on tablets, e-readers and smartphones.  There needs to be a lot more of those people to brighten the gloom that still surrounds most large media companies, but their numbers are growing.     

In 2009, Araianna Huffington proclaimed “the paywall is history.”  In 2011, it appears that she may have been wrong.  And that’s good news for anyone interested in the future of quality journalism, and the journalists who provide it. 

 

Comments

What I wonder is how much should a digital newspaper cost? If you eliminate the printing plant, and eliminate distribution via home delivery, newsboxes and corner stores, and if the cost of downloading has been downloaded onto the customer, what is the true cost of creating a newspaper? The difficulty in figuring this out is is that papers got used to gigantic yearly profits - for big U.S. newspapers these was near to 30 per cent in the 1990s. If in a digital universe that number was required to inch closer to 5 per cent, could newspapers owners and employees learn to live within a fundamentally tighter budget? I for one don't know the answer to that because I believe the whole of old newspaper business model was based on a clay cliff that is eroding away. In many ways it seems easier to start again rather than to fix the old.

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