Tuesday, November 03, 2009

Pay walls never may come at some papers

The resolve to charge for most interactive content is dissolving at some newspapers, potentially thwarting the plans of other publishers who still hope to erect pay walls on their sites.

Despite determined statements by several publishers earlier this year that they intended to make consumers pay for the valuable content newspapers have given away for more than a decade, the managers of some newspapers have come to realize that they can’t afford to lose the traffic that pay walls almost certainly would turn away.

So, the executives are scrapping plans to charge for most, if any, of their content. The latest thinking – which, of course, is far from unanimous across the industry – is illustrated in two fresh data points:

:: Goli Sheikholeslami, the general manager of WashingtonPost.Com, told a conference at the Shorenstein Center at Harvard last week that “not enough people are willing to pay” to make the sale of online content a viable business. If could get 5 million people to pay me to visit my site each month, I would be done,” she said. But Sheikholeslami said she has no hope of doing so.

:: Although Hearst Corp. attracted headlines in February when its top newspaper executive said he aimed to start charging for content, Mark Adkins, the president of the San Francisco Chronicle, told me last week that “we believe in being a free website” but plan to develop supplementary “premium content we will charge for.”

The Chronicle plan sounds a lot like the decision of the Minneapolis Star-Tribune to continue to run a free site while charging $19.95 a year for access to premium coverage of the Minnesota Vikings. The Viking package emulates the long-running Packer Insider at the Milwaukee Journal Sentinel, which grosses more than $1 million a year.

The hybrid free-plus-premium approach, which seems to be where the industry is heading in several large markets, may be one of the reasons the Gannett Co. recently urged its editors to get their “swagger back” by stepping up the production of unique and differentiated content.

Not all publishers are backing off pay walls.

Newsday recently began charging a stiff $5 per week for access to all but the first couple paragraphs of each story on its website. But Newsday is giving free web access to both its print subscribers and the Long Island residents who connect to the Internet via the broadband service sold by its parent, Cablevision Systems. Between the newspaper and the cable service, Newsday potentially will be available for free in three-quarters of the households in its market, an advantage not available to most publishers.

Pay walls were erected this summer in places like Harlingen, TX, and Schenectady, NY, suggesting that it may be possible for publishers in isolated markets to execute a strategy that retards the shrinkage of their print readership until the last generation of print-oriented readers dies off. This defensive, backwards-looking approach hardly seems to be a recipe for future success in the interactive marketplace.

The decision not to charge for most content at papers like the Washington Post and the San Francisco Chronicle means that competing publications will have to think twice about pursuing aggressive pay strategies.

If the Washington Post continues to freely give away its political and international coverage, can the New York Times get away with charging for essentially the same content? If the Chronicle gives away its regional coverage, would competing papers in Oakland, Santa Rosa and San Jose dare to go the other way?

Apart from such competitive considerations, a growing number of newspapers are coming around to facing the harsh reality of the marketplace. This, more than anything else, may be influencing their reluctance to press ahead with aggressive pay strategies.

Once upon a time, publishers coulda woulda shoulda charged for their content. But the web today is awash in sites offering free access to world news, national news, sports news, business news, entertainment news and, increasingly, local news produced by a growing host of start-ups. Further, an entire generation of those under the age of 30 has been conditioned to expect the news to be free.

While publishers ought be able to collect premium prices for unique and valuable content, most of them have whacked their news organizations to such a point that they produce very little original, premium product. Without an investment in creating valuable content – which most publishers can’t comfortably fund – most efforts to charge for content will shrink audiences and advertising revenues at a time publishers can least afford to lose them.

Nearly half of the newspaper publishers in the United States stated in a recent poll that they are not convinced they should try to charge for content. A lack of resolve among not just newspapers but also publishers across many media almost certainly would undercut the efforts of the organizations that did attempt to implement a pay strategy.

To be sure, some publishers continue to be intrigued by pay walls.

Steven Brill, the chief executive of Journalism Online, said in an email on Friday that inquires are brisk from publishers interested in evaluating the pay service he plans to deploy.

“You are misinformed about folks being less inclined” to charge for content, said Brill, who intends to begin beta testing his pay system within eight weeks at selected publications. “We are fielding calls from, and doing meetings with, publishers (blogs, online-only websites, newspapers, magazines, for-profits and non-profits) every day from here and overseas.”

The question they ask, said Brill, is not “if” but “how” to charge for content.

But the biggest question for Brill is how many of his prospects actually will elect to move forward. Given the challenges described above, wanting to charge for content may be a long way from actually being brave enough to do so.

22 Comments:

Anonymous Anonymous said...

I agree with you that the pay wall idea is dead. What is killing it is that publishers are realizing they can make money on the Internet. Look at Gannett's third quarter report, and we see that digital operations made $143 million, compared to $77 million last year. That's a healthy piece of cash, and it is increasing in size as ad revenues have declined.
The pay wall is yesterday's idea. The Washington Post is less concerned about the New York Times political coverage these days as it is concerned with the upstart Politico, which has stolen some Post staffers and has become a Washington phenomenon. Politico is cheeky and agile covering political stories, while the Post looks grey and stodgy. It is also a fun read and breaks stories.
As with the Internet, publishers waited too long to protect their print monpolies, and so lost them to these Internet upstart. A pay wall might have been a great response a decade ago. It isn't today.

6:45 AM  
Blogger Mike Donatello said...

Brill may find continued interest in charging for content among many publishers, but I doubt he will located many consumers interested in paying. Why is this so hard for publishers to understand?

8:34 AM  
Blogger jgfellow said...

I haven't seen you comment on The Economist recently. It just decided to re-erect its pay-wall (~$90 a year).

Although The Economist is my favorite journal, I can't justify spending money on content that is better than free sources in some ways and worse in others. So, alas, I shall leave The Economist for such sources as Yahoo! Buzz and Digg.

I'd love to hear your views on that journal with its history of trying several different things.

10:07 AM  
Anonymous Anonymous said...

I think there is no other solution for the papers but to get readers to pay a subscription for their content; it is just a matter of how you do it; what do you exactly offer (new tools, funcitonality, services and analysis that you can bundle with the more mundane news).
There's no other route for many publishers unless they are happy to disappear.

10:41 AM  
Anonymous Anonymous said...

Brave or fool-hardy?

12:23 PM  
Anonymous DaveB said...

It's nice to see that common sense is rearing its ugly head again.

TV, radio and many newspapers or shoppers have always been free, supported by advertisers.

Newspapers, almost alone among media, seem stuck in the mindset that because they've built massive infrastructure and hired lots of people, they deserve to keep all of it.

Technology enables small publishing facilities to have the same advantage of speed as large ones. The internet's core competency isn't depth and detail, it's speed. Speed is not a function of size.

Instead of looking for ways to make a website generate the kind of obscene profit margin newspapers used to, newspaper executives would be best served by brainstorming towards the smallest operation necessary to get both jobs done.

Publishers continue to look backwards while walking forwards at their own peril.

12:28 PM  
Blogger MICHAEL said...

And a significant factor in the discussion is that there is no convenient micropayment system widely available. Would I pay two cents to read a NYT article of interest? Users like to pay for things they need now, not an annual subscription that requires personal and credit card data left behind.

12:39 PM  
Blogger Janet said...

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Strategic planning sessions assist intelligent professionals immersed in the current model to think out of the box. When companies want to re-brand and open new lines of business or when innovative marketing disrupts the industry status quo establishing new competition, many choose strategic planning professionals. Consider working with a session leader that has never worked in your industry, a professional strategist may question perceptions and find marketable assets where none were visible before.
Consider that you build widgets. In your case it happens to be news, and like many engineers and other developers, you are enamored with your widget. However, like every widget, your widget needs to be marketed, sold, and supported etc, to generate cash flow and a long-term healthy balance sheet so you can build more widgets. Once you commit to developing business models you will progress forward. Think about blog readers as an incredible resource. Think different.
A ship in the harbor is safe. But that's not what ships are built for. - Anonymous

1:32 PM  
Blogger John A. Newby said...

The ship has left the harbor, the only remaining question is who is on board.

2:20 PM  
Anonymous Anonymous said...

... There's no other route for many publishers unless they are happy to disappear. ...

You know, it's quite possible that by taking the pay route, these newspapers are still going to disappear. Many of their online readers will ...

Downsizing to a sustainable size is the answer. It will hurt.

2:54 PM  
Blogger kob said...

I pay for content but the news organizations don't get the money.

I spend about $35 a month to have digital Web access on my handheld, Verizon/Motorola Q. I use that net access, almost exclusively, to read newspapers, NYT, Washington Post, and many others. I rationalize that expense because I don't pay for the newspapers.

As you point out, perhaps news organizations are too crippled to justify charging for content and too vulnerable to new entrants to risk a paywall.

But perhaps there is a model. The Star Tribune's idea of charging for sports coverage access is a bold idea, but competition for independent sports bloggers is likely fierce and the teams are willing to give bloggers locker room access.

Although paywalls may be seen, as you point out, as a defensive strategy, in the absence of another option it may provide enough revenue to transition to a new strategy and maintain staff in the process. But I really don't know if that's true.

And what is this new strategy? I don't know. But I keep seeing curious things that make me think that there are ways to stay alive.

In one community I once reported at, the chain-owned newspaper went bankrupt and broke off some of the formerly independent newspapers it had acquired. One person bought the former chain owned operation and now publishes it with a far small staff. And, surprisingly, a weekly has started up as well, so all of a sudden there are two newspapers in this community.

In the city where I live today, DC, there is one neighborhood blogger with an active following that has about 10 or so ads from local businesses on his blog. I have no idea what he charges, but suspect there are many other local bloggers that can do as well. Will this be the future local news: solo operations of one or two people covering a very discrete area but covering it well? It might be for a time but then the economies of scale will kick in and the small local bloggers will be networked, perhaps acquired in some cases, and out of it a new kind of local news gathering operation will emerge.

Who knows how this will turn out, and perhaps the future of news is you work an unrelated day job and cover a town meeting at night for your neighborhood blog, and perhaps -- with luck -- make enough to justify the part-time work.

Perhaps the news industry will be taken over by retiring baby boomers, ex-newspaper types, who will venture out and practice this loved craft on their own blogs without reward and with a freedom they never thought possible. It's a delicious thought at least for me. Maybe they will help keep its traditions alive until the transition, to whatever it may lead to, is far enough along to sustain a career for the young men and women who have been hurt the most by this.

5:37 PM  
Anonymous Ian Hill said...

- I think you'll still see several papers go to paid content by Q2 of 2010, right or wrong.
- The talk by those who support paid content has been about a new "business model" for the industry. Have any of them tried using paid content to create a business plan? That might change some thinking on the matter.
- Brill talks a lot of game, but has anyone heard of a newspaper admitting it's going to use his service? If not, doesn't that seem strange, considering how relatively open some publisher/owners have been about paid content?

7:13 PM  
Anonymous Anonymous said...

Newspaper executives are already "brainstorming" about "sustainable" staffs of web only newspapers. It means gutting newsrooms down to 10 or 15 percent of what they were. That's what the web model will support. The web model is built on aggregation (a.k.a. "stealing") and unfiltered PR releases. Readers and advertisers will flee.

8:42 PM  
Anonymous Anonymous said...

Alan: How about a look - a hard, real "give me the numbers" look at the Seattle P-I experiment. How long is Hearst going to put up with it?

8:43 PM  
Blogger Texorama said...

Why, oh why, hasn't some newspaper tried voluntary micropayments? Would I resist a pay wall and seek content elsewhere? Yes. But would I chip in for what I consider a worthwhile and well-written story, accompanied by an appeal? Absolutely! Here in deteriorating Detroit, a couple of reporters have done superb work in exposing the corruption of the city government, and we saw the results in a sweep-them-out election last night. Would I "click to pay" and throw in a buck every few days for their stories? Sure.

4:22 AM  
Blogger Janet said...

Build a new ship. Build a fleet of agile yet powerful vessels.

The knowledge available on this blog site is formidable; exceptional. “Normal” corporations would kill to be able to tap this source.

You have the capability right here and now to figure out the business models for the future, and kick some tooshie. All you need is an infrastructure to collaborate and the will to do it; I outlined a working model for you that utilizes blog readers and keeps all involved.

I vote Alan and Steve Ross as members of the strategic planning team.

I vote Huffington Post and a person of the caliber of Steve Buerger, President and Chief Strategy Officer at Starcom as guest speakers.

Think different. There is nothing stopping you.

6:10 AM  
Anonymous Anonymous said...

Read Ken Auletta's new book "Googled: The End of the World As We Know It," and you will see how publishers gave away $21 billion of their advertising revenues to Google. The $21 billion figure is the amount of money Google makes from those little ads that run alongside Google searches for news stories or whatever. When Google started 11 years ago, publishers could have stopped this ad revenue bleeding by adopting paywalls or disconnecting their newspapers from Web searches. It indicative of the arrogance of the media barons that they did not, and did not see the threat of this new technology. It is far too late to shut the door now. There are too many alternatives. Newspaper publishers will not get that $21 billion back, and they are probably kicking themselves for their short-sightedness and how much they discounted the impact of the Internet on their business.

6:12 AM  
Blogger Charo said...

Harlingen, Texas isn't an isolated market. 30 minutes in one direction is Brownsville and in the opposite direction is McAllen. All 3 cities newspapers are owned by Freedom Communications. All 3 have 99% of the same identical stories both in the print and Internet versions of the paper.

And you can also get the news on the 4 TV broadcast network Internet sites.

It you still want more, the Internet only RioGrandeGuardian.com is available.

6:52 AM  
Blogger Bill Bennett said...

I can't speak for the Northern Hemisphere, but in Australia and New Zealand some publishers are erecting pay walls and charging readers more than the price of a printed paper.

It doesn't makes sense to me that news delivered over the internet should be more expensive than something squirted onto mashed, dead tress, loaded into trucks, distributed and sold through retaillers who take a 30 or 40 percent cut. But Hey...

9:16 PM  
Blogger beebs said...

Re: google ads on webpages.

Get firefox web browser.

Get the addon "adblockplus"

Add the easylist addons to adblockplus.

Get customizegoogle addon.

Web page ads majically disappear.

9:54 PM  
Blogger Dave said...

Most newspapers in the country are small dailies and weeklies. Yet we continue to hinge everything we think and do on the ways and woes of the metro. Local content is available in a variety of ways in those places. But go out into the hinterlands - where community newspapers thrive - and you will see a much different picture. That is where content will most assuredly command a price if those newspapers choose to put up some kind of a pay for play arrangement. But instead, all we hear is how so and so at some huge operation decides they can't because of traffic loss. It begs the question how much are thay spending to get that 'traffic' and does it make any money. If it's upside down, which I suspect it is if they are allocating any content costs to it, what business model does that follow? Newspapers need to man-up and decide to get paid for their work. How many businesses do you know that stay in business by selling out the front door and giving the same products away out the back? Kick us!

8:20 AM  
Blogger Michele said...

Go to nna.org and read BRian Steffens nov. 2 piece on health of small dailes and weeklies. He makes some good points comparing the decreases in the newspaper industry with other industries, like realestate, auto, but no one is declaring those "dead."

4:03 PM  

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