Tuesday, September 15, 2009

Ideal pay-wall fee may be less than you think

If the willingness of consumers to pay for online news turns on how much it will cost, a bit of early research suggests the ideal price may be less than some pay-wall proponents might hope.

In work conducted in the course of his newly completed study for the American Press Institute, Greg Harmon of Belden Interactive gathered some of the first actual sentiment from real consumers as to what they might be willing to pay for online content.

Harmon cautions that his early soundings are not sufficiently complete to draw any hard conclusions, so consider yourself warned. But real-world market intelligence has been so rare in the emotional paid-content debate that it’s worth discussing, with the explicit understanding that more research properly lies ahead.

Here is what Harmon found in quizzing a sample of 450 people in what he called one “typical” newspaper market:

Asked what they would spend for a monthly subscription to the newspaper’s site, the respondents willing to pay for news said that they would cough up an average of $4.64. But, Harmon noted, 211 respondents, or fully 47% of the group, said they would not pay at all.

Repeating for emphasis: Forty-seven percent said they would not pay at all.

The price point Harmon identified contrasts significantly with the assertion by Steven Brill, the founder of Journalism Online, that newspapers could charge an average of $8.33 per month for access to secured websites.

In announcing last month that some 500 publications had signed non-binding letters of intent to explore the possible use of his planned payment service, Brill said the publishers (whom he declined to identify) collectively stood to generate $900 million in content payments. This week, Brill upped the number of unnamed papers to 1,000.

If Harmon’s findings prove to be accurate, then Brill’s $900 million estimate would be aproximately 1.8 times the size of the market opportunity suggested by Harmon’s research.

A shortfall in anticipated online content payments of this magnitude would be a major setback for publishers, given that Brill’s projection is equal to almost a third of the $3 billion in online revenues the industry books in a year.

If a substantial number of consumers shunned newspaper sites requiring payment, the revenues gained from selling access to content might not make up for the decline in advertising sales that would result from the resulting drop in traffic. The failure of pay-wall revenues to equal or surpass online ad sales would spell disaster for any publisher.

In fairness, if must be noted that Brill may be right and Harmon’s work-in-progress research may be wrong.

Because no one knows for sure, it is perhaps understandable that Harmon discovered nearly half the publishers in the United States can’t decide what to do about charging for the costly-to-produce content they now give away for free.


Anonymous Ohoomoos said...

4.64 or 8.43 -- the real point is that nobody is going to pay that much per site. It seems more likely 10 sites might get $5 collectively.

7:52 AM  
Anonymous Anonymous said...

I think it revolves around the definition of news. The WSJ and the FT are proving there is a way of making money from putting some of their content behind pay walls. But the question is whether local people will pay for local crime, government, traffic, etc. news. It works for the financial papers because there is a value to the content for their paying readers. But will readers pay for a local column or a local sports story?
I also fret about another undiscussed side of this, which is the natural response of publishers and editors will be to pile on stories that get greater hits, at the expense of the routine stories that make newspapers and news tick.

8:12 AM  
Anonymous Anonymous said...

Ohoomoos, do you regularly read 10 news sites now?

Perhaps you do, but if so, I suspect that you are not a typical consumer. And if typical consumers don't read 10 news sites now while they are free, it is not likely they will want to pay for that privilege.

9:33 AM  
Blogger Unknown said...

While the survey is instructive, there's a lot of details that may impact the decision to charge, and a lot of marketing miinds will have their say.

News Commonsense

9:35 AM  
Anonymous Anonymous said...

From a personal standpoint, I think an online news reader will want to have a variety of inline sources---not just the Washington Post or the WSJ or the NY Times. Otherwise, you're going to be paying for each paper. Would a simple "All You Can Eat Buffet" style fly? $44/year and read any paper you want?

11:09 AM  
Anonymous Anonymous said...

"I also fret about another undiscussed side of this, which is the natural response of publishers and editors will be to pile on stories that get greater hits, at the expense of the routine stories that make newspapers and news tick."

Time out, there. Are you saying we should write stories about things people don't want to read about? Because that's what "online" has given us, instant market research on what stories people find compelling. Hint: It ain't borough meetings or long thumbsuckers on stuff only journalists seem to care about. What "makes newspapers tick" is readers. What makes readers tick is stories they want to read. In the absence of readers, what is it you think this job is all about, anyway?

And if you can't figure out how to make covering the civic franchise as interesting as the average car wreck, whose fault is that? Certainly not the readers. They didn't make the story boring. We did. It's the greatest experiment in self-empowerment in the history of the world and we've made it as exciting as a glass of warm spit.

11:20 AM  
Anonymous Geoff Dougherty said...

I'm going to go ahead and guess that the average age of the folks who would pay is 60+, and that the average age of folks who won't is under 40.

In other words: Enjoy that expensive pay-wall software your newspaper just installed while you can. You'll probably still be paying off the investment when the last reader willing to use it dies.

11:59 AM  
Anonymous Anonymous said...

The NYT and WaPo didn't report on the Van Jones scandal, and still he was forced to resign.

Now the NYT and WaPo aren't reporting on the ACORN scandal, evan as it fills up the web.

It's too late, the newspapers are finished. They're just irrelevant now -- nobody will pay for useless information.

4:13 PM  
Anonymous Anonymous said...

Paid content must be unique content. Most likely national stories will remain free because there are too many sources distributing national news. Local news is another story (no pun intended). Well written local news would be unique and is worth paying for by readers who want to know what's going on in their community. Almost all of our news is behind a pay wall. While our web site traffic is not very strong, our newspaper readership remains robust.

Bruce Wood

6:46 PM  
Anonymous Anonymous said...

Anonymous has got it nailed...

Between creating/exploiting their oligopolies/monopolies mercilessly for decades and their increasingly laughable political bias (to wit, read NYT on Van Jones/ACORN - or rather read their ass covering on VJ/ACORN because NYT didn't cover VJ/ACORN to begin with...) the dying MSM has *millions* of enemies who are much more invested in its death than its survival.

Even if some sort of universal pay wall/micropayment system theoretically could bludgeon internet readers into compliance (hello antitrust case), how exactly is the cut/paste and fair use (no matter how narrowly defined) combination going to be slain?

And even if we went back to the bad old NYT/WaPO/LAT American mind control days (*we* define the agenda, peons...if we don't cover it, it doesn't matter/exist...) how hard is it really to fund a new AP, owned by non-MSM overlords?

The internet has made anyone who can type into a potential stringer and dropped the cost of distribution close to zero.

Any serious reassertion of MSM power will face internet based competition that will cost them at least 50% of their remaining audience/revenues.

6:58 PM  
Blogger Steve Ross said...

The lesson is that people are not willing to pay much, but they don't really understand the product and its value... and that publishers keep devaluing what they have to offer. Why should I continue to receive the Boston Globe and the NYT on slivers of dead trees if they are morphing into the same paper?

More to the point, if circulation drops to half because of the paywall, what will advertisers pay to reach them? Really more than they pay now for a larger online audience?

Personal aside: Forget the politics and MSM. Here's a non-political example of mind rot. Norman Borlaug died this weekend. His half-page obit did make the front page of the NYT but few other papers. We've already moved on to Patrick Swayze's death -- and given it a lot more space than Borlaug's. Swayze was a great guy. Borlaug, father of the Green Revolution, saved a billion lives. More lives than anyone in human history. But that's NEWS and MSM is really on an entertainment kick. (BTW in India, where I teach a few weeks every year, the government declared a national day of mourning for Borlaug. It was front page news all over India.)

7:10 PM  
Anonymous Danny Sullivan said...

Paywalls aren't expensive. They can be done cheaply, and plenty of sites have run them for years.

Paywalls also don't have to be exclusive. You paywall some stuff, leave other stuff free. I ran a successful niche news site with a paywall for a decade. We had the best of both worlds -- ads & subscription revenue.

Half being willing to pay is actually positive, to me. If you lose half your readership but gain recurring subscription revenue, might be worth it. Do a hybrid, you can have cake and eat it too.

The issue of not wanting to pay for multiple sites is a good one. I'd like to see more research into it. Personally, I'd probably pay for one local resource (say the LA Times, local for me) and one national resource (the LA Times could double, but I might also take the WSJ -- I take both of these in hardcover already).

7:40 PM  
Blogger Unknown said...

"It ain't borough meetings or long thumbsuckers on stuff only journalists seem to care about. What "makes newspapers tick" is readers. What makes readers tick is stories they want to read."

I don't want to read too much into what you're saying here. But there is a place between thumbsuckers and What People Really Want to Read!!!

Even "inquiring minds" might want something useful, but easily digestible. Newspapers are dying in part for a lot of reasons, but one is that no one wants to read about important stuff delilvered as if it were WWE.

I'd like newspapers to adopt more tables, graphs, bullet points and eschew the catfights. Yeah, USA Today has something to teach us, and believe me I wouldn't have said that 27 years ago.

More imporant, many journalists are writers first and reporters second. Find people who, like Robert Krulwich, can deliver complex info. in a way that engages people, instead of wasting newsprint on the next great American novelists, which alas is what they become when delivering all atmosphere.

News Commonsense

9:03 AM  
Blogger Carla Sarett said...

Survey results need to be taken in context: in the context of a world in which almost all online news is free, only half say they would pay. But that's high when you consider that news is free right now.

12:06 PM  

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