Thursday, February 18, 2010

Constructing the Great Paywall: TBI Research study claims that it may not pay off for newspaper publishers

Greg Mitchell today called attention to this new survey conducted by TBI Research that concludes paywalls just won't work.

(Mitchell is not a big fan of paywalls.  I am trying to keep an open mind on the subject. I am a strong believer that if the information you are publishing can be directly tied to income or profit -- like the WSJ or other investment news -- then a paywall makes sense. In just about all other cases I am a skeptic.)

Rory Maher, writing on the TBI Research web site, states that newspapers in small markets are in the best position to utilize a paywall system. On the other hand, in larger markets, the paywall's effect on traffic would result in more lost revenue in advertising than would be gained from subscribers.

The study also claims that mobile "could be the driver that makes the paywall model achievable (but we're likely years away from usage levels making mobile material)."  I would add that if you include tablet publishing in this category, then I could see where a subscription paywall, or charging for an app, could produce enough revenue to justify the practice. (See this recent story concerning turf wars over pricing for the new NYT iPad application.)

The study also concludes that "every executive we spoke with believes there is more potential for newspapers in mobile phones than PCs. The executives were particularly excited about downloadable apps." They look for newspapers to move away from free phones app towards a paid model. Interestingly, the Times offers a free iPhone app, but plans to erect a paywall online, while The Guardian charges $3.99 for its iPhone app.  The Guardian's Alan Rusbridger has also come out strongly against paywalls online.

I side with Rusbridger, on this: charging for mobile makes sense -- assuming the charge is a one-time only fee for an application. On the other hand, I believe a subscription might just work on tablets and readers, as long as the fee is lower than the print price.