Wednesday, February 03, 2010

Why many newspaper pay sites may fail

If modern publishers shared the smarts of Benjamin Franklin, one of the shrewdest of their number who ever lived, they might today be selling content successfully on the web.

“Gentlemen,” intoned Franklin, urging fellow patriots to sign the Declaration of Independence in the sweltering summer of 1776. “If we don’t hang together, we most assuredly will all hang separately.”

While Franklin evidently wasn’t the first person to utter the immortal line widely attributed to him, things would have gone better for todays publishers if they emulated his wisdom when they began trying to sell their valuable content.

Instead, newspapers are embarked on a scattered number of half-baked, one-off pay schemes that for the most part are doomed to fail. It didn’t have to be that way. But the outcome isn’t particularly surprising, given the inability of publishers to successfully collaborate, even though this is the most difficult time in the history of their business.

Newspapers lost their last chance to hang together when it became clear yesterday that the wheels seemingly have come off Journalism Online, the ambitious, global pay-wall initiative launched last year by serial entrepreneur Steven Brill.

After a year of trying to persuade publishers worldwide to join the universal content-vending system that he envisioned, Brill told the New York Times the only committed client he could identify was a Lilliputian daily in Lancaster, PA. Brill said more affiliates are on the way for a service he christened Press+.

While Brill barnstormed unsuccessfully in support of his idea, papers great and small embarked on – or at least started the final boarding process for – a plethora of pay schemes that they each cobbled together for themselves.

The profusion of pay plans has produced a welter of home-grown offerings that will be alien, confusing and generally repugnant to consumers who have been gleefully consuming content for 1½ decades without having to pay for it.

Fortunately for piqued consumers, they can quickly click to any of the thousands of free sites that will be eager to welcome them. Newspapers won’t be so lucky.

The value of Journalism Online – and the similar but different ViewPass project I abandoned last fall when it became clear the industry could not rally around a common pay platform – is that either would have been a widely available, highly visible system that surfers would recognize all over the web.

These trusted, ubiquitous brands would have made it easy for consumers to buy content at any participating site by simply clicking a button to activate a previously authorized credit card.

Instead of coalescing around one or two universal payment systems, the publishers elected to fire off in all directions:

:: The New York Times will wait until next year to introduce a metered system that requires visitors to pay after taking advantage of a still-to-be-determined number of free peeks at the site. The solution may work great for NYTimes.Com, but there appears to be no plan to extend it to other publishers.

:: Newsday already has implemented a protocol that requires visitors to subscribe in order to read anything more than the few paragraphs running in the clear on its site. The scheme, which has resulted in a 41.5% drop in site traffic since it debuted in the fall, has gained a whole 35 subscribers willing to pay $5 a week. This system might work for Newsday, which is giving free online access to anyone who subscribes to its print product or the cable services owned by it parent, CableVision. But the plan doesn’t seem the least bit extensible to other papers.

:: At least three dozen small- and medium-dailies around the country have deployed individual systems to sell some or all of their content for prices ranging from $1 a year to $400 a year. The response? On average, an amount equal to only 2.4% of the print subscriber base of the papers is paying for online content. Inasmuch as there is no common thread among the various solutions, there’s scant chance an industry standard will emerge.

While publishers in certain isolated markets may employ successfully Newsday-like plans to stanch the erosion of their print circulation, none of the schemes to date is helping turn interactive content into the potent new revenue stream it ought to be.

Had publishers agreed to build a unified pay system, they could have created a marketplace to syndicate articles among themselves and to target articles to readers according to their interests. Newspapers could have collected premium prices for ads served alongside the targeted content and might have been able to curb a bit of copyright poaching, too.

But the publishers never got it together. Now, they’ll be hanging separately.

25 Comments:

Blogger oraclenude said...

So, without monopolistic collusion news can't thrive commercially? Hmmm.

6:17 AM  
Blogger Reg Chua said...

Not that I agree 100% with Alan, but the point he's making isn't about monopoly, but about shared standards. Could railways have reached their full potential - and society benefited - if they didn't share a common gauge? Is there real value in the EU having one currency rather than a dozen? That's not monopoly; that's lowering frictional costs of an economic ecosystem.

7:53 AM  
Blogger Greg said...

Imagine that all newspapers are behind a paywall. You as an individual publisher have a huge incentive to become the one newspaper that gives away content free, as you'll make a killing on ad revenue as the only free source. Soon, other people follow you, and the pact falls apart.

Same reason that oil price-fixing cartels usually fail.

8:58 AM  
Blogger oraclenude said...

I get that standards are win-all-around frequently. But referencing railways as an example of non-monopolization is kind of humorous.

And yet, I agree that track gauge standardization is win-all-around standard. Still, language, the web and currency are sufficient standards for ANY content producer to thrive commercially. The problem is not a lack of standardization. The problem is, as Alan intimates, a lack of collusion.

I'm not saying there shouldn't be collusion. I'm am saying call it what it is.

9:05 AM  
Blogger mgjr said...

The daily in San Francisco is making content only available in print or on their fee based e-reader, an electronic version the print product. http://tweetphoto.com/10169915

They are with-holding content from their website for a few days and making it only available in print or with their paid e-reader which is an electronic version of their print product. This seems a crazy way to do it, but I could be wrong. This is forcing me to use two different products to read the content. They force me to install their e-reader software instead of just charging me on the website. Their is already a limited amount of people that will pay, and now they add an extra step that someone has to do just to read their content in addition to forcing me to read that content on a different platform.

9:14 AM  
Blogger D.B. Hebbard / TNM said...

I sympathize with Alan's position here, but for years newspapers have seen their competition as . . . other newspapers.

Even today, newspapers are loath to look at news aggregators and other web sites and adopt their methods and tactics -- instead they look at each other and argue about who has the right approach.

Rather than trying to construct paywalls to their online content, wouldn't newspaper publishers be better off trying to extend their brands and make sure their content has relevance on mobile devices, tablet, readers and the like?

I'd like to see is the same kind of announcement as this (http://bit.ly/cGYXKk) -- that a group of newspapers have signed deals that ensure that their brands (and content) are available on new mobile devices.

An app, after all, is a kind of paywall, and it has a better track record, as well.

10:29 AM  
Anonymous Ydobon said...

"The Net interprets censorship as damage and routes around it." So said John Gilmore of the EFF, in 1993.

In 1994 the Internet crushed Intel's cover up of its flawed Pentium processors.

The Net interprets paywalls as just another form of damage.

So if a newspaper actually has a worthwhile story behind a paywall, it will get out. By manual re-typing if nothing else.

But that's not the real problem with pay walls. Times Select was abandoned because it showed the NY Times had nothing worth stealing online.

1:10 PM  
Blogger Bill Bennett said...

There's an analogy here with airline booking systems. Many years ago each airline had its own system. One, if I recall correctly it was the American Airlines Sabre system, became the de facto standard for a while being adopted by other airlines as well as hotels and other travel companies.

Sabre won a Darwinian struggle to become a leader - surely a similar Darwinian struggle for newspaper pay walls would be healthy.

1:54 PM  
Blogger chuckl said...

the problem is quite simple: the costs associated with producing content is not balanced by the revenue the publisher accrues from disseminating it. Publishers dug a hole for themselves by basing their revenue model on display advertising, but advertisers are gone and they're not coming back for most part. Subscribers can't and won't compensate for the loss of revenue. So here's an idea for newspapers: figure out what you have that's unique and valuable and build your business model around that. Ditch the movie and dining reviews; you suck at it anyway and nobody pays any attention to what you write. They'd rather go to Yelp. Sports? I don't think so. When you have content that people would write for free and maybe just as well, it's not an asset. Business news? You don't have much credibility there either. The only value a local newspaper has is local news. It's not glamorous covering school board meetings, so probably no one will do it for free. You have connections in the community you can tap into and even now you have some credibility, though it's starting to erode. The days of the mega metro papers is gone and the only thing of value we lose is the news coverage. Put your energy there and you might be able to get by, though at a greatly reduced size.

6:41 PM  
Blogger Dinty said...

Chuckl is right: "The only thing of value we lose is news coverage." Hmmm. Isn't that a more valuable thing than the survival of for-profit newspapers? Maybe his solution solves the wrong problem.

7:32 PM  
Blogger steve said...

isn't it obvious that publishers do not have a strong view about their digital presence? that is, many, perhaps most, are there because it was fashionable. there is and was no model. so they're struggling to impse any model, pay wall or not?

7:33 PM  
Anonymous Bruce Wood said...

Sorry, Allen. I think the industry has enough problems without inventing a new payment system.

Subscription payments can be made just fine with VISA, Mastercard, Discover, American Express and/or Paypall if and when the reader wants what we're selling. Except for story archives, I'm not even thrilled with selling individual stories.

Subscription packages to online e-Editions are the way to go. See ours here: http://ee.championnewspapers.com

8:04 PM  
Anonymous Anonymous said...

The message readers are sending is that they are not interested in paying for access to news. The NYT model will fail like all others.

What consumers are interested in paying for is convenience. Our industry will realize this once we look to the music industry and understand that transformtion.

ITunes, bit torrents, napster, and countless other delivery services have meant you do not have to buy the album (cd, vinyl etc), instead you buy the song you want.

The business side of the industry should no longer be about the message or the content - it is about the delivery and how to earn revenue from multiple streams

Once the multiple platform application is available that will let me read cricket news from a uk paper, a market wrap from the WSJ, local content from my community paper all on my ipad, kindle, android phone etc then I will subscribe and pay

The transformation will not happen until the industry is prepared to understand what a consumer wants and deliver it. Newspapers are content providers and there are better mediums than print

I should add that I beleive newspapers will continue in print much longer than predicted. my paper will however be run on a digital press - tailored to my specifications. After 12 hours a day infront of computers I like to disconnect and read the paper and I should add that I am under 40.

9:46 PM  
Anonymous Anonymous said...

It's obvious what is needed. A service similar to Cable- or satellite-TV that provides access to a package (or menu) of information providers, including TV, radio and newspaper web sites, for a fee. Consumers are not going to want to dig out their credit cards over and over again for each provider's web site. The value is already there; the providers simply need to make the payment process simple and economical. And they need to shut down access to all but a digest of content they're providing for free. Until something like this happens, consumers will take the path of least resistance, and more newspapers will go out of business.

5:01 AM  
Anonymous Anonymous said...

I think the industry is still in denial about the impact of this new technology, and determined to try and jam this old printed newspaper down the throats of consumers because it once was so lucrative to the owners. I am still reading about a bounce back that will eventually come, although quarterly reports like Gannett's showing a 20 percent decline in ads would seem to indicate (to me) that the bounce isn't going to happen. So the owners don't want to do anything that would queer their expectations.

6:32 AM  
Anonymous Mark said...

"Same reason that oil price-fixing cartels usually fail."

Greg -
Two problems with your argument.
1. Publishers that gave away content for free would not "make a killing" on ad revenue. They'd still have to compete with Facebook, AOL, LOLcats and a million others for online ads.
2. Publishers aren't making money online now. If they can get enough online subscribers to cover their expenses that's a solid business model, advertising be damned.

6:55 AM  
Blogger Bill said...

Is trust neglected here? People surf the web obtaining viruses at every turn. Build trusted information and safe sites. Make the news trustworthy in every detail and it will sell it's self when the customer is ready to hear the truth.

Newspapers are good at "Local Information" and truthful reporting.

Newspapers are bad at internal communication, prudent budgeting and monetizing on our current internal resources and determining what it costs to produce an ad, publish a single story, sell our products and tracking pennies.

Pay walls are not the monster in the closet we are.

9:06 AM  
Anonymous Anonymous said...

Speak for yourself, Mark. Some publishers are indeed making money online, and while it is not enough to stanch the decline in print revenue, it is magnitudes greater than what they ever could get from putting up a pay wall. With certain notable exceptions, they will never get enough paying subscriptions to cover expenses. The math simply doesn't work, not as long as public has alternatives.

It is an appealing fantasy to envision newspapers coming together like a diamond cartel to control the supply of news in order to drive up the perceived value. Any attempt to do that, however, would fail and would simply pave the way for someone to do to news what Craig Newmark did to classifieds.

9:31 AM  
Anonymous Anonymous said...

Internecine conflict has been a hallmark of the newspaper industry forever, and as Newsosaur's analysis makes clear, the inability to act cohesively severely handicaps whatever opportunity there is for pay-to-read. The obvious alternative is to act cohesively for once. The Associated Press, a cooperative whose ownership is shared by the newspaper industry, is an OBVIOUS platform for cooperation. It seems reasonable that the AP's leadership consider the establishment of a pay platform that can be shared by the industry and then engage newspaper companies in a final attempt to act with cohesion.

10:13 AM  
Anonymous Anonymous said...

Reading this blog and the comments gave me a sense of deja vu. We have been here before _ many, many times. How many times do we need to debate the merits and demerits of pay walls? If I look at the NYT's previous paywall efforts, plus the Newsday project with its 35 subscribers, it doesn't look like paywalls have much of a future. But let's try and see what happens.

12:47 PM  
Anonymous Anonymous said...

So Alan is advocating illegal collusion on the sell side in both labor (all writers should charge for their work) and in the information (all news outlets should together charge). What the heck was CEO of?

4:39 PM  
Anonymous Anonymous said...

Supply and demand is a simple rule. So...let's look at some simple facts instead of conjecture.

1. Pew Research found in a recent study of the news ecosystem in Baltimore that 95% of the news in that city originated with the daily newspaper.

2. Online advertising rates are incredibly low. And for good reason. The 'blue sky' of most advertising has been revealed to be what the great bulk of it is. Pointless. Not that all advertising is bad or doesn't work. It does...but MOST of it doesn't for a variety of reasons. Online most of all doesn't work. Because we can apply better metrics to it...it's clearer that it doesn't work.

3. When content is duplicated either through a capsule synopsis on google or by a blog that simply credits the story (or even a "news partner" ie; TV station or radio station) the value of your news is not increased. It is devalued in direct proportion to how much more the reader wants to know. If they regularly go to another site....having a link from that site to yours is simply not going to make them a regular visitor for you.

4. The ease with which photos, text, video, (read content) that you pay a lot to produce can be stolen, reproduced and profited from by someone who did NOT pay to produce it devalues your product. If it's news in high demand, more people will steal it.

5. The culture of the internet has evolved around the maxim "Information wants to be free" which is code for saying people are cheap and would rather get it for free than pay for it.

6. If we could provide content in a NON-COPYABLE format, prevent LINKS except to headlines, and put it behind a reasonably priced pay wall (with a rigorous pursuit of anyone stealing the content without authorization)...Information providers would make more money. How? The answer MAY well be the iPad. Have you ever tried to steal content from an iPhone or iPod Touch? Hard to do. Have you
ever downloaded a song illegally from Napster? Don't do that much anymore since the iTunes 'paywall' went up do you?

10:34 AM  
Blogger Bill said...

@Anonymous
"5. The culture of the internet has evolved around the maxim "Information wants to be free" which is code for saying people are cheap and would rather get it for free than pay for it."
Access to the internet for most people is not free ($45 monthly on average) consumers feel that they should receive a benefit from the purchase of said product. I pay my ISP for access to the internet and my implied value is 7 email in-boxes, unlimited spam from my ISP and a crappy anti-virus program which if you bought yourself it would cost $40 for 2 years.
Applying the same business model to the internet was a mistake for the newspapers caused by lack of insight, innovation, research and development to enhance the news product provided to the customers.
Newspapers have to get serious about research and development then become more agile for the times they are a changing – or- go out of business. Break down the walls that impede innovation and develop a social relationship with those who are engaged in our communities and want the news. Then newspaper can develop a product that can be enjoyed using the new mediums and the old to inform our communities.

12:02 PM  
Anonymous Anonymous said...

@Bill,
Absolutely right Bill...the social interaction interaction with readers is vital to the success of newspapers but frankly it matters less than controlling access. Rupert Murdoch is no idiot believe me. What the iPad represents is a way to prevent easy information theft.
So...high quality publications, dealing in their own facts and data ie; original reporting, will be fine if they can compete and attract people to their service. The days of high quality information and FREE access are drawing to a close. Bloggers (proud, free and deluded) notwithstanding...you can count on it. So...get your information from citizen journalists with a healthy dose of rumor, chatter, and drivel...or pay for something better.

5:45 PM  
Blogger momus1 said...

Fascinating stuff, and I have throughly enjoyed reading the comments on the article, but I must be dumb because I don't see the problem here. We're talking about people who read the online editions of a newspaper, right? I am willing to bet the house that these readers are outside the delivery range of the newspapers in question. So it isn't the paper's real readership market we're talking about anyway.

When I lived in frisco, for instance, or when I visit, I pick up a Chronicle paper. It's there, it's cheap, and it's the preferred way to read the news. I don't go to an internet cafe so I can read the online edition of the paper. I want it in my hand, w/ my coffee, at that cafe. The only people that read the online papers (or at least the vast majority) aren't people in that city anyway, so they wouldn't have bought the paper to begin with. So the paper lost no money.

12:58 PM  

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