Paywalls: a real ‘fiscal cliff’ for a plunging news industry

You’d have to be as rich as these well-dressed young readers to manage multiple newspaper subscriptions online! Below: P.T. Barnum with Commodore Nutt, the well-known newspaper paywall technology entrepreneur. Warning: potential profits may be smaller than they appear in newspaper publishers’ rear-view mirrors. Beneath Barnum and Nutt: some comments from yesterday’s Globe and Mail story about newspaper paywalls.

As was so famously observed, or not, by Phineas Taylor Barnum, the 19th Century American self-promoter, showman, scam artist and newspaper publisher better known as “P.T.,” “There’s a mark born every minute.”

We refer not to the minuscule group of newspaper readers who have actually paid on-line subscription fees to the likes of the Globe and Mail, but to the credulous newspaper publishers who have been persuaded by technological hucksters and scamsters to invest millions in “paywall” schemes in hopes of resuscitating the lost era when readers actually paid for news.

Alas, those days are gone like the manual typewriters on which I used to write my newspaper stories – for which readers happily paid a dime, quarter, four bits or even a whole dollar – and the 8-track tapes I enjoyed as I drove in to work.

I mention this again today only because the Globe and Mail proudly and self-servingly trumpeted yesterday how the entire newspaper industry now seems to have made the decision en masse to retreat behind “metered paywalls,” and if you want to read news on line, by golly, you’re just going to have to pay for it.

But the reality is that thanks to the metered paywall idea – a system by which one supposedly can allow online news readers to look at a few stories each month, and then try to force them to pay for more – many North American newspapers are about to plunge over a real fiscal cliff while they tell their remaining readers to worry about the mostly imaginary one in Washington, D.C.

The arrival of the metered paywall, the Globe’s stenographer explained, “means 2013 could be a make-or-break year for many in the industry, as they scramble for alternative streams of revenue to make up for lost print advertising.”

Well, it’s likely true that 2013 will be an importantly unhappy year for the newspaper business. What’s more, it’s obviously a fact that a lot of newspapers are indeed slipping behind paywalls. But there is little evidence to suggest wholesale adoption of this dubious technology by newspaper owners will amount to anything more than mass suicide by a once-profitable industry.

There are numerous economic and practical reasons for this reality. These include:

Readers won’t pay for a product they can get somewhere else for free. In other words, unless you’re a publisher like the New York Times that can make a believable case your product is superior and unique, consumers will be reluctant to pay for the same wire stories they can read online on publications that for business or other reasons have made the decision not to erect paywalls.

It may be a business like Metro Newspapers, it may be an ideological, religious or political group, or it may be a national broadcaster like the BBC, but it’s a given that the same stories are going to remain available for no cost on line.

The Globe and Mail may be able to fool a few readers into thinking its product is different enough to pay for online, but does anyone seriously think anyone will pay for the right-wing drivel produced by Sun Media’s understaffed tabloids and myriad other publications of their ilk? If you do, take a deep breath right now!

Moreover, the high cost of printing presses served as a barrier to entry that kept the publishing club tiny – and hugely profitable – for years. But even if paywalls work, and they won’t, those days are gone. The price of admission is as cheap as it was to one of P.T. Barnum’s freak shows.

Back in the day, most newspaper readers subscribed to only one newspaper. Online readers read dozens – and dozens of subscriptions simply cost too much. I might be crazy enough to subscribe to the New York Times, but the Times, the Toronto Star, the Globe, the Edmonton Journal, the Guardian, the Independent, the L.A. Times, my local weekly and so on? Get real!

And if you can only afford to pick one or two, so sorry, but they’re not very likely to be the low-quality local rags in most Canadian cities, are they? This is especially true when they’ve been giving it up for free for a generation – during which you discovered the product wasn’t really worth paying for!

Psychologically, it’s said here, it’s one thing to throw down two bits for a newspaper you can also use to line you bird’s cage, quite another to use your credit card to commit to paying two bits a day for a year to a low-quality local paper with almost no real journalists on staff.

Indeed, the rush to paywalls has some of the characteristics of a Ponzi scheme – the first papers in might be able to get a return on their investment, although it’s doubtful they’ll ever really pay for themselves in most cases. (The Globe article claims the New York Times has managed to sign well over 560,000 subscribers – although they’ve only done it at a promotional price of 99 cents a month.) But late entries are going to find subscribers are unwilling to spend more again for essentially the same thing. Saturation point is coming already in this game.

And then there’s the matter of the ability of those leaky paywalls to actually keep readers out. Right now, just at the moment so many newspapers are racing to get into the paywall business, they are laughably easy to circumvent.

Indeed, last night, commenters were cheerfully chattering about how easy it is to overcome the Globe’s paywall in the comments section under the Globe’s story. Their advice boiled down to this: delete your cookies and read to your heart’s content.

Finally, there is the serious question of whether newspaper advertisers will pay for ads behind a paywall. Some will, but it is said here that many more won’t.

Anyone who is not selling the equivalent of Rolex watches to millionaires will be reluctant to place on-line ads behind a paywall – or, indeed, in any online news publication that makes an effort to drive away non-paying readers.

So it is predicted here that advertisers will abandon on-line news organizations that employ paywalls in droves – leastways, they will if they’re using their heads.

Remember, paywall technology isn’t cheap. The New York Times has been widely reported to have paid $40 million US to set up their system – although some estimates put that figure as low as $25 million.

Regardless, that’s a lot to spend on a technology that in the end is likely to drive away more revenue than it generates for most news businesses.

Well, good luck to them. It’s a shame you can’t make big profits running a newspaper any more and it would be nice for the folks who own these big businesses if that could all be miraculously turned around.

But if paywalls are the best they can come up with, by this time next year, more of them will be gone like the wind. And, frankly m’dear, who’ll give a damn?

This post also appears on Rabble.ca.

9 Comments on "Paywalls: a real ‘fiscal cliff’ for a plunging news industry"

  1. anonymous says:

    A few years ago the idea of ‘micro-payments’ was floated as a way to monetize news sites. The gist of it was that a subscriber would pay a fraction of a cent for every page they viewed on a news site.

    It seems to me that if they want to monetize then micro-payments would be a better route than monthly subscriptions. But I would never subscribe to either scheme.

  2. Bruce A says:

    “Indeed, last night, commenters were cheerfully chattering about how easy it is to overcome the Globe’s paywall in the comments section under the Globe’s story. Their advice boiled down to this: delete your cookies and read to your heart’s content”.

    Too much work to delete cookies when considering The Mighty Globe’s content. I’ve found that ten articles a month is more than sufficient for that pompous publication.

    If they really want readers, they’d open up Wente’s column to comments. Then again, maybe redacting her ‘award winning columns’ might also work.

  3. CuJoYYC says:

    The Globe and Mail lost any remaining credibility when Margaret Wente went unpunished for her amateur hacking, er, ah I mean writing and lack of attribution.

    Paywalls are to the newspaper industry what Kool-aid was to the followers of Jimmy Jones.

    “… low-quality local paper with almost no real journalists on staff.” Aye, now there’s the rub. No local reporting. Everything from a centralized, national or international news service that’s repeated in print and online publications virtually verbatim everywhere means there’s no reason to buy the local newspaper. There’s virtually no local flavour, or local opinion, or local nuance on the stories of the day. It’s been a long, slow death that started when newspapers shifted from being local businesses that played an important role as the Fourth Estate in our society to minor cogs in some ego-driven corporate raider’s vision of a consolidated media empire. It accelerated when these formerly esteemed businesses failed to grasp the financial costs of losing their cash-cow classified ads business to cheaper or free, more up-to-date and, more effective and more immediate online alternatives such as Kijiji and Craig’s List would be. Add to this, the shortening of society’s collective attention span and our penchant for pictures and video over words and independent thought and you have a toxic brew for the current purveyors of corporate newspeak in local markets.

  4. david says:

    The notions of either the “micro-payments” mentioned by Anonymous 3:12 and subscriptions both depend on the willingness of consumers to provide their credit card numbers, a process that is both risky and complicated. What if I want to stop and the newspaper doesn’t let me? Sure, they can promise, but will they keep their promise? The risk may be moderate, but there is still risk in such a transaction. There was essentially no risk to the idea of paying 50 cents out of the change in your pocket to buy a paper or even $5 for that notoriously expensive cup of Starbucks coffee. Even if the coffee sucks, all that has been risked is the cost of the drink at that moment. So, it’s true, your subscription may “cost less than a cup of coffee,” but the financial risk is much higher.

    Bruce A’s comment goes to what I think most newspapers with paywalls are counting on, that it’ll be too much trouble for readers to figure out how to delete their computer cookies. Fair enough, but I suspect Bruce’s reaction will be the more common one. Moreover, the New York Times tries to give readers the impression they get more for their subscription, but do they really? Many subscribers who try lesser papers will let their subscriptions go at a convenient moment – say, when they change their credit card – as soon as it sinks in they’re not using it or getting the same old dreck.

    CuJoYYC makes me think of how well the production of centralized copy worked in the print era, when most readers bought only one newspaper. Who knew? Ironic that the newspaper industry waited until it was obvious what they were doing to adopt this little scam so wholeheartedly. Another example of the deeply ingrained stupidity of the newspaper industry’s management, if you ask me.

    Finally, although I didn’t mention this in the post, I continue to think it’s a prtoblem for newspapers that they continue to give their product away to well-off people (like those free Globes in luxury hotels) but make the rest of us pay. Surely I am not the only newspaper readers who resents this and refuses to subsidize the wealthy few. Hell, I HAVE to subsidize them through my taxes – why would I do the same with my news reading habits?

  5. Alex P says:

    Every browser now has a ‘private browsing’ or ‘incognito’ mode that doesn’t exchange cookies. And sorry, Globe, Times and all, this totally messes up your reader profiling and targeted ads.

  6. Libarbarian says:

    “the New York Times’ paywall is not only valuable, it’s helped turn the paper’s subscription dollars into a significant revenue-generating business. As of this year, the company is expected to make more money from subscriptions than from advertising — the first time that’s happened.Digital subscriptions will generate $91 million this year…” http://bloom.bg/Vo4vCO

  7. The New York Times’ strategy was always to be the first one in and the last man standing, so if the information reported by Bloomberg and passed on by Libarbarian is true, this would seem to be working, Maybe.

    First, though, befre we break out the bubbly, how does Douglas Arthur come up with the revenue figure of $91 million US for digital subscription revenue? The Times is charging 99 cents a month and is said by the Globe and Mail to have just over 560,000 subscribers – $6.7 million in rough figures. Are Europeans and 25,000 Boston Globe subscribers really paying more than $84 million to read the International Herald Tribune and the Boston Globe? I’m not saying this figure is wrong. I am saying it requires explanation. You will find it includes many more revenue sources than the paywall.

    Second, consider the reasons the paper is making more money from subscriptions than advertising. Subscription costs for the paper – the one made of paper – have gone up in the past year. But advertising revenues have fallen significantly. The company reported third-quarter net income in October down 85-per-cent from the year-earlier period. “Print advertising at the company’s newspapers, which include The New York Times, the Boston Globe and The International Herald Tribune, shrank 10.9 percent, and digital advertising across the company fell 2.2 percent.” http://nyti.ms/X3F7ov It is said here one of the reasons for the shrinkage in digital advertising is the paywall. Another is that newspaper people don’t get it that digital is different from display.

    I see no reason based on the claim in Bloomberg’s article to modify my analysis of the value of payrolls. Time will show that I am right!

  8. ronmac says:

    I’m no Nostradamus but I remember having a conversation with an editor with the Edmonton Journal about 15 years ago now and announcing the days of printed newspapers were nearing an end because of this thing called the “internet” then still in its infancy.

    I pointed out it would be no big deal since newspapers were already undergoing a huge transformation with the arrival of desktop publishing and making the leap to a “paperless world” merely meant eliminating the final stage, transferring the electronic edition to paper.

    As for the future I can only quote Francis Bacon 500 years ago commenting on how the printing press was changing “the whole face and state of things throughout the world.”

    I won’t be surprised if financial elites start transferring a portion of their considerable wealth to keep established newspapers afloat because it’s an efficient way of getting their message out.

    If you go back 10 years when Iraq and WMD’s were all the rage. The Bush White House was leaking false reports to the New York Times and then Dick Cheney would be holding a press conference the next day and saying, “I see the New York Times is carrying a story this morning that Saddam Huessein is importing uranium dust…accelerating his program of weapons of mass destruction…we are very concerned…”

  9. Alex P says:

    First in may have been Salon.com. When they went subscription only they found that some interesting reporters left them and they we’re no longer getting traffic from clickthoughs on blogs. Obscurity hurts.

    Now Salon looks like a race car driver. Buying a membership drops the ads and adds some perks.

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