Tuesday, April 10, 2012

Debating with myself: Paywalls

The great thing about publishing an industry website is that one gets to act as an authority on all topics under discussion – even if one really isn't all that sure of one's position. In fact, readers expect it and judge your work based on their own experiences. But the reality is that sometimes one is a bit less sure of where they stand on certain topics – this is especially true of New Media.

For instance, TNM has always been an advocate of native tablet design. The reason is simple: I believe that every platform is a new medium that will require the publisher to create products that work best in that environment. This isn't some new concept, but just an extension of the idea that TV isn't radio, which isn't the movies, which isn't... you get the idea.

But there are also situations where I haven't really drawn a firm conclusion yet. So I thought I'd entertain myself by writing a couple posts about those areas that are still be argued in my head – and maybe your's, too.

Newspaper paywalls are the solution-du-jour of the industry, the thing that promises to reverse the perceived error made years ago when newspapers launched their website and did not require a subscription to access the content.

Like most industries, the newspaper business has a pack mentality and today it is fashionable to say one is launching a paywall.

Press+ has helped make this possible with their metered paywall solution – a way of letting in many readers but forcing many others to pay if they prove to be regular readers.

Few newspaper executives want to take the contrary view that paywalls make little sense on the web. Alan Rusbridger of The Guardian is an example of someone holding the contrarian viewpoint.
But like many debates concerning publishing theory, the paywall tries to simplify a very complex issue.

Had newspapers embraced digital in the late nineties and sought to drive advertising online we might live in a world where your local newspaper still has a monopoly on advertising and Google was frantically trying to convince advertisers of the merits of search engines. But papers sought to protect their print advertising by discounting digital, leading to a situation where many papers enjoy good readership online with very little revenue to show for it (at least as compared to print).

I continue to see both sides of the equation and feel both have merit – but only in certain circumstances.

Having been both a newspaper and magazine publisher, it is easy for me to see that certain kinds of publications will be able to drive digital subscriptions, while others will struggle. In B2B, for instance, a product that has information that is considered financially beneficial to the reader is worth paying for. The newspaper I published for McGraw-Hill, for instance, cost the reader a fortune to subscribe to. But companies needed the information found inside the paper in order to bid on construction jobs – no bids meant no work. So, in the end, the cost of my paper was just the price of doing business, like buying asphalt to pave a road.

No wonder then that papers like the WSJ and the Financial Times are doing well in digital. The FT, it always amuses me, brags about their digital strategy, especially their decision not to cooperate with Apple and sell subscription through Newsstand. I think they are fooling themselves. Being a financial paper means you can sell digital subscriptions – so they would have found success inside or outside of Apple's platform. Bragging the you've found a way to sell food to a starving rich man seems to be going a bit too far.

But I'm less convinced of the merits of paywalls for everyone else. Newspaper publishers and editors have always, always over valued the content of their news pages. Occasionally a little light comes in when research tells them that their readers really like the coupons, the classifieds (in the old days), the comics. That content they are really proud of is nice, but for many readers is less of value than they think. Besides, if that content were so valuable why would a publisher ever consider downsizing their newsrooms?

In the end, the biggest factor that will determine whether a paper can succeed in erecting a paywall will be in the value proposition: does the reader really value that product. If you are NYT you have to feel that you can sell digital subscriptions. But what if you are the Tribune Company and you want to erect a paywall at the L.A. Times?

Two decades ago the L.A. Times completely dominated the L.A. basin. So much so that Hearst closed my old paper, the Herald Examiner, and Copley closed a daily paper in one of the wealthiest communities in the region (Santa Monica). But ownership mistakes, followed by the purchase by the Tribune Company, has combined with all the other factors influencing newspaper economics to lead to a situation where many readers just don't feel that reading their local paper is as essential as it once was.

I know the Angels won last night because my mobile app told me so; I know L.A. County is going to experience a tax short fall because your metered site will let me in just often enough to get the news I feel is important.

So a paywall can't work for the L.A. Times? I can't go that far for several reasons. One is that the rules of the game for these metered paywalls are so loose that one can open up a site in order to prevent losing traffic. Then the publisher can explain away the lack of subscriptions with the line that they were not willing to sacrifice web traffic. One can also bundle services in such a way that eventually the digital subscription seems worth the investment for the reader – like adding just enough channels to justify cable TV.

The NYT is trying this approach, even with its built in advantages. Every time they launch a new mobile app, such as its election year news app, they are including access the content in with their other digital offerings. A reader might not pony up for just web and mobile news access, but the election year content might push them over the edge and make them buy. It's a smart move.

So paywalls can succeed, even if I remain skeptical overall. I can see plenty of scenarios where I would recommend charging for digital. But none of them would alter my view that publishers continue to under emphasize digital advertising and creating new digital advertising products. The two things – a paywall strategy and a digital advertising strategy – can go together.

Next time: is B2B media still worth investing in?

1 Comment:

Stephen said...

The vast majority (~75%) of daily papers in the United States are still totally free online. I wouldn't quite say that the paywall people are the staid, self-satisfied majority.