It’s time: 5 reasons to put up a metered paywall

For media executives awaiting reassuring evidence before experimenting with digital subscriptions, the time has arrived.

Simply put, their more adventurous colleagues at other companies have discovered multiple paths around the biggest risk attached to the pursuit of subscription revenue: diminished audience reach.

Here’s how they’ve navigating that tricky challenge:

  • They’ve adjusted their paywall meters to permit whatever number of monthly free visits makes the most sense in their balance of reach and revenue. The trend, by the way, is definitely toward leaky walls rather than hard ones.
  • They’ve recognized that, financially, their sites could afford to lose substantial traffic because their “sell-through” of online ads rarely approached their inventory anyway.
  • They’ve made smart decisions, journalistically, about what content should remain outside the wall.

Companies big and small are discovering that their pre-wall fears of precipitous drops in traffic just haven’t materialized. Metered walls are not the only paths into paid content, of course. Today, the Boston Globe will begin charging a flat fee of $3.99 a week for access to BostonGlobe.com, a new site spotlighting content from the printed newspaper. The company’s existing Boston.com site will remain free but will include much less content from the newspaper.

Editors Dirk Nolde, Jim Roberts and Matúš Kostolný say their paywall fears have faded (Wan-Ifra)

The comforting news about the limited downside of paid says nothing about the potential upside of the subscriptions themselves. But one thing at a time.

For now, the reduced risk of losing audience — coupled with modestly encouraging early subscription results — should be enough to provoke some serious strategy sessions among the late adopters.

Given the long-term vulnerability of their online advertising prospects, news organizations owe it to themselves — and more importantly, to the future of independent journalism in the public interest — to explore the possibilities for online subscriptions.

Two caveats: Even the most promising streams of digital subscription revenue can’t compensate for the declining print revenues for advertising and circulation. But as news organizations begin assembling hybrid collections of revenue to make up as much of that ground as possible, digital subscriptions will surely have a role.

Based on recent conversations with builders of paywalls of various sorts in various circumstances, I see at least four more reasons — in addition to the reduced risk to reach — to experiment with digital subscriptions:

  1. The evidence indicates that some portion of online audiences — the percentages vary widely — are willing to pay for online content. Some money is on the table, in other words, and news organizations should have pretty good reasons if they’re just going to leave it there.
  2. As news organizations continue in their unpredictable transition from analog to digital delivery, they need to establish a paying relationship with their digital customers – and not just their advertisers — sooner rather than later.
  3. Putting a price on their digital wares is encouraging newsrooms to step up the quality — in economic terms, the new value — of the online experience they expect people to pay for.
  4. As social media plays a larger role in the distribution of and traffic to digital news, media companies need to develop strategies that generate revenue without impeding the social networking of their content.

These and other reasons were confirmed for me over the weekend in Vienna, where I moderated a paywall panel at the World Editors Forum that included representatives from The New York Times; SME, one of the leading daily papers in the tiny country of Slovakia; and Berliner Morgenpost, one of several local and national papers covering news in the German capital.

Dirk Nolde, digital managing editor at Berliner Morgenpost, told me in an email before our session that he and his newsroom colleagues were “terrified” when the business department at the 123,000 copy-a-day paper proposed the paywall. Their fears were intensified, he said, by the lack of paid content in any of the competitors’ sites.

“We are doomed,” he recalled thinking. “But we were not.”

As Rachel McAthy recounts in her good coverage of the session, monthly visits have grown more than 100 percent since the wall was erected in December 2009. That’s partly because of the substantial content residing outside the wall, of course.

Nolde said the paper wants to pursue even more audience growth, though, and intends to tweak its meter after the first of the year. “We’re going to get leakier,” he said.

Interestingly, all three of the participants in the Saturday panel agreed that paid content has improved digital attitudes in the newsroom. Said Jim Roberts of The New York Times: “There is more of an investment I feel in the newsroom among our journalists since the introduction of the paywall. They feel a greater stake in the product. People seem a little more willing to work on a piece of video, file early for the Web, etc.”

Roberts, who said he originally opposed the idea of the wall but has become a believer, added: “There is an overall feeling we’re creating a digital product that has value. We’re feeling that sensibility very strongly.”

Roberts, Nolde and Matúš Kostolný, editor of SME.sk, all offered lessons learned for news organizations considering a move to print, beginning, as Nolde put it, with “communication, communication, communication” with readers about why you’re doing what you’re doing.

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  • http://twitter.com/tinypass TinyPass

    Hi Dave, and Bill —

    We couldn’t agree more regarding the importance of making micropayments quick and easy for both the publisher and the reader. Here’s an example of how my startup tackles that task: 50¢ to see a photo gallery at Seattleite.com: http://bit.ly/v8quDK

    Thanks for a great conversation!

  • Anonymous

    Point well taken, David. You made a compelling case back in September 2009 in Providence, and you do so now. But I think it’s fair to say that the evidence accumulated since then both reduces the risk and enhances the opportunity for the success of flexible paywalls in ways unforeseen (at least by most of us) back then. 

  • Anonymous

    Bill, thanks for the article. No offense intended, but “it’s not time”…it is overdue. This permeable or leaky pay wall model is precisely what I presented, sitting next to you, over two years ago at the New England Press Association meeting in Providence. What is frustrating is that the vast majority of newspapers have been standing on the sidelines, watching to see what others’ experiences are with pay walls. All the while, they have been leaving incremental revenue on the table and they have been failing to establish the monetary value of their digital content. I don’t know of many newspaper companies today who can afford to leave revenue on the table. Gazing from the sidelines is not innovation. If anyone remembers the Newspapers Next group, the whole concept was to try something new (take a risk) and succeed or fail fast. If the industry is going to move forward, re-inventing itself, finding new revenue streams and re-establishing the value of its content, then bold steps need to be taken. “Gird up your loins” and be BOLD. Try things. If it works, keep going. If it doesn’t, spike it! Being a spectator or waiting for revenue streams to come back is neither innovative nor sustaining. Innovate now!

    As for micro-payments, when I was researching pay wall technologies two years ago, Clickshare and Kachingle both had micro-payment capabilities. They may also be other vendors now.

  • Anonymous

    Bill, thanks for the article. No offense intended, but I find it frustrating that you notes are precisely what I presented on a panel with you over two years ago at a New England Press Association meeting in Providence. While I understand that publishers maybe hesitant to navigate uncharted waters, that taking risks and succeeding or failing quickly–anyone remember Newspapers Next?–needs to start happening in the industry if it is to re-invent itself, develop new revenue streams and have a chance at sustainability. For the few publishers who did take the risk in the past two years, they had incremental revenue, began establishing a monetary value for their product and became comfortable with the concept of permeable or leaky pay walls. For the majority, nervous about taking a risk, you have left revenue on the table and postponed establishing new value for your digital content. Going forward, “gird up your loins” and be BOLD! Try something new and see if it works. If it does, keep on going. If it doesn’t, kill it fast. That is what innovation is all about; it is NOT waiting to see what other people do.

  • Anonymous

    What about charging existing print subscribers something extra for digital access? I received that question by email yesterday and sent back this response: 

    The added charge thing is fascinating. My colleague, Rick Edmonds, did a very good piece about the phenomenon in August: http://www.poynter.org/latest-news/business-news/the-biz-blog/141628/9-reasons-newspapers-are-suddenly-asking-print-subscribers-to-pay-for-full-web-access/. 

    When I spoke with Press+ about it a month or so ago, they said that about 80 percent of their 130 clients are charging print subscribers extra for digital access (down a bit from when Rick spoke with them the month before). Interestingly, they also said that the papers doing this are getting better pickup rates among people not subscribing to print. Theory: Seeing existing customers of the paper pay something for the digital access helps make the case for charging non-customers something more.

  • http://twitter.com/robmitch802 robmitch802

    Agreed on the micropayments…we are asking our provider for the ability to use facebook connect to log in, and then if/when facebook starts facilitating payments, it will be a done deal.

    As for optimizing advertising, the issue we have as a small newspaper is the limiting size of our market – we don’t have the scale to make enough money even if we sold out our inventory – the revenue per customer isn’t enough. It’s starting to get there with online subscription revenue, though.

    The other important point is that for us, the paywall is the “fremium” model. Some content is free, some is paid. Our near-term future will be about expanding the premium paid content offerings that are teased (on blogs, facebook, twitter, etc.) by our free and social media sites. The point, for us, is to remain a strong part of the community, while not leaving revenue on the table.

    Rob

  • http://twitter.com/robmitch802 robmitch802

    Hi 
    Wvvpub – Bill asked me if I could respond b/c we’ve had a paywall at
    our two small dailies (7,000 and 13,000 print circ, respectively), since
    october of 2010. We went with a company called Clickshare
    (www.clickshare.com), which offered relatively low setup and a small
    portion of revenue share(just under 4%). The setup was about $2,500 for
    each paper, if I remember correctly, and that also allowed a sync with
    our print readership database. We went with the straight up paywall,
    although clickshare does support metering, and we may move that way
    soon.
    Here’s why it’s working for us, as small newspapers:

    1. The potential for banner ad revenue scaling up enough to support our
    newsroom just isn’t there. We had about 4M page views a month before the
    paywall, and even if we doubled that and sold out every single
    impression ad, we’d still not cover the cost of even half the newsroom.
    After a year of the paywall, our online subscription revenue is almost
    1.5 times the advertising revenue, and still growing.

    2. We’re investing in alternate paid delivery methods. When we put up
    the paywall, we also began offering an e-Edition, and in a month or so
    will have an iPad edition (subscription is supported by clickshare, not
    Apple), and will keep adding. The cost of putting those in place is in
    the $1,500-$3,000 range, and the ongoing costs are similarly low. So
    each online edition subscriber is a much better return on investment
    than if we were delivering a print newspaper.

    3. We have kept our newsroom strong. Our content and our brand is what
    drives this, and it may not have worked as well if we weren’t in a
    limited market and didn’t have a strong brand. But that also means we’ve
    got to keep pushing for improvement – like a previous poster said, if
    we could have payments made automatically through a Facebook
    login…wow. We have a day pass option for $1, which does fairly well,
    but still requires a credit card. The future for us involves continuing
    to diversify both the delivery methods and the expert content we
    provide.

    If you have any questions, please send me an email and I’ll do my best to answer.
    Rob Mitchell
    Rutland Herald and Times Argus

    rob.mitchell@timesargus.com

     

  • Anonymous

    Who are the vendors that focus on small papers? We have been toying with the idea of trying a pay wall but the up-front costs have been prohibitive. But the best points are to go ahead and put it in, then monitor it and not feel locked in to keeping the wall in the same place but letting the readership dictate where it should be.

  • Anonymous

    Bill, 

    In terms of micropayments – the issue isn’t necessarily the price, but the convenience of the payment mechanism. People don’t want to go fishing for their credit card to make a $0.50 purchase – any more than they would like to have to swipe a CC to pull a newspaper out of a newspaper vending machine. iTunes is successful entirely because I can just click “buy” and have the song / tv show / movie rental / app that I want right then and there. They take care of the billing.

    That sort of intermediary partner is what baffles me that the newspaper business hasn’t gotten around to building (either as a 3rd party partner or an “industry standard” payment solution). I’d love it if I could get an in-depth news article on a topic that interests me just by clicking “buy” – especially if it automatically synced to my devices and saved to some sort of account somewhere. Maybe if it also included an audio copy of the story that could be downloaded as a podcast. Independent pay walls for each news org seems short-sighted and self-interested (rather than customer-oriented). 

    I definitely do agree that the relationship a news business has with their customer (in the subscriber model) is appealing – but even with one article purchase, that would allow you to notify the user of new articles in the same vein, and perhaps related articles that I might be interested by. Pandora Radio for news, with the opportunity to buy the articles with depth, professionalism, and convenience that I care about. 

    Thanks as well for the great & thought provoking discussion. As a member of the “new media” (blogging / online content) universe, I sometimes scratch my head as to why the newspaper industry hasn’t caught on to all these amazing opportunities. But I’m certain the internal politics, the “old-guard”, and the daily realities of budgets and business slow the industry down quite a bit. 

  • Anonymous

    Good point, Wvvpub. I should have addressed that constituency in my piece. In brief, I think some small newspapers are finding more success with paywalls than their bigger metro cousins are, partly because news of those smaller communities is less of a commodity and closer to the kind of REAL VALUE that people might pay for. From what I can tell, at least a couple of vendors offer solutions that involve a not-that-steep set-up fee and a percentage of revenues — an approach, in other words, that appears workable for small papers. 

  • Anonymous

    One thing left out in all these discussions is how small newspapers can use paywalls. Everything seems to revolve around what the big boys are doing. But it is a significantly different ball game for small papers. The costs to build the pay walls are much greater in relation to the potential revenue and the relationship between the readers and the newspaper are different.

  • Anonymous

    As you probably know, Dave, the news business tried “getting it together,” as you suggest, with the ill-fated New Century Network in the 90′s. More recently, a startup called Piano Media in Bratislava has nine of Slovakia’s leading news sites behind a single wall, accessible for 2.90 Euros a month. I believe Brill & Crovitz may have something similar in mind for Press+, though obviously constrained by US trade regulations as opposed to Slovakian ones.

  • Anonymous

    I think you’ve put your finger on one of the toughest challenges of newsroom management these days, DF. If non-commodity, high value journalism is what the company needs to produce in order to generate subscription revenue, what about all that run-of-the-mill, routine (otherwise known as commodity) coverage. 

    Newsrooms are smart to focus on the high-value stuff, but you’re right that, especially over time, the quality of that commodity coverage is apt to sink and sink. But I think there might be an answer, somewhere in the realm of systems and processes — in simpler terms, new story forms — that deliver commodity news in ways that are both more effectively presented for the user and more efficiently produced by the newsroom.

  • Anonymous

    I think you’ve put your finger on one of the toughest challenges of newsroom management these days, DF. If non-commodity, high value journalism is what the company needs to produce in order to generate subscription revenue, what about all that run-of-the-mill, routine (otherwise known as commodity) coverage. 

    Newsrooms are smart to focus on the high-value stuff, but you’re right that, especially over time, the quality of that commodity coverage is apt to sink and sink. But I think there might be an answer, somewhere in the realm of systems and processes — in simpler terms, new story forms — that deliver commodity news in ways that are both more effectively presented for the user and more efficiently produced by the newsroom.

  • Anonymous

    Good issues, Dave. I need to learn more about micropayments. Two or three people in the audience at that Vienna conference over the weekend raised questions about them. At least a couple mentioned their success in gaming and app environments. 

    I believe they hold potential for digital news orgs, but a bit further down the road, and then mostly as a form of modest monetization of drive-by traffic. (Some are doing this already with day passes.)  If the key to successful revenue strategies lies in solving fairly specific problems for fairly specific audiences — and I obviously believe it does — I wonder if micropayments might work with this fairly big audience: occasional visitors who end up returning several times during a month. 

    The possible revenue strategy might unfold along these lines: Keep access free to content found via search and social but consider adding a micropayment option to the first warning screen en route to the monthly article limit. If 20 articles brings down the wall, at 10 the user is shown a screen that invites them to buy a subscription or, alternatively, pay for an individual article. A number of sites, e.g. the Worcester Telegram, offer a day pass at $1 or so as an alternative to a monthly or annual subscription. That strikes me as a better alternative than a micropayment of 25 cents, but I’m guessing here. Does significantly more price resistance kick in at $1 than a quarter?

    One of the big advantages of the subscription approach is the opportunity to maintain or establish an ongoing relationship with the user. But you’re right to suggest some first dates that might also ring the register a bit.

    Re your second point, you’re clearly correct that many (nearly all?) news organizations are maintaining a digital editorial overhead that is not fully supported by their online advertising. But given the long term limitations on online ad revenue — in an online world of unlimited ad inventory — why not try to improve ROI with additional revenue streams?

    Thanks very much for your thoughtful read and comments.

  • Anonymous

    DF, I think the real competitive advantage that journalist-hubs (read: newspapers) have versus the “upstart” is that they really do have the ability to generate non-commodity content. And that’s the key. “News” has been commoditized & aggregated. A major news story breaks on Twitter and is picked up by everywhere. But where the classic news organizations can play to their strengths is in investigative journalism and high-quality deep-coverage of a topic / issue / event. That’s worth something, and is something that the upstarts can’t easily compete with (directly). Like I said, I think micropayments reduce the purchase objection significantly, because the value / depth of the article is proportional to the exclusivity of the material being covered. 

    Frankly, instead of fragmented paywalls, I’m baffled that the newspaper industry couldn’t get together and build a uniform news micropayment currency (again, emulating an iTunes-style “pay-per-episode / pay per article” type of model). “News” is a commodity (and like all un-branded commodities the price pushes to zero), but information is not. But a fragmented universe of newsroom paywalls will lead to exactly the scenario that you describe; because the customer will feel like they’re not getting a high-degree of ongoing value if they see similar goods offered for less (or free). 

  • DF

    Here’s the catch-22 with paywalls:  In almost every case, some upstart source of news will seek a competitive toehold against established sources by offering its news for free.  The more established, higher quality sources with paywalls will lose readers, because users won’t want to pay (even $0.25) when someone else is giving the functional equivalent away for free.  The upstart, of course, eventually intends to erect its own paywall when it builds a decent following, but the cycle repeats when yet another source (or aggregator) seeks its own toehold.  And on and on.  Gresham’s Law is vicious when new competition has so few barriers to entry into the marketplace.  The degradation of quality is sufficiently gradual that readers barely notice that the upstarts deliver somewhat lower quality.  Things were easier when newspapers had the cushion of classified ads, but Craigslist killed that.  Yes, a few readers will want to pay, but not enough.  So what’s the answer?  Hint:  There isn’t one.

  • Anonymous

    Bill,

    Appreciate your insight to the paywall debate. Isn’t it really throttled by 2 main areas?

    1. (STILL) Lack of micropayments: Paying for a subscription creates an array of purchase-decision fears that immobilize prospective buyers. But $0.25 or $0.50 to access & read a compelling piece of content – preferably with diminished intrusive advertising sounds quite appealing. Sort of along the lines of downloading a single-episode of a TV show on iTunes. But where is the micropayment provider? PayPal? Facebook credits?

    2. Effectiveness / Profitability of advertising: Ultimately, I perceive paywalls as a failure to optimize advertising on non-walled content. Any time I see a paywall, I immediately think that this is merely a mis-alignment of overhead to output to advertising revenue. Too much overhead (perhaps tied up in the paper-printing legacy business), insufficient output (of premium, non-commodity news & content), and the advertising revenue doesn’t cover the first two factors. 

    While I think metered paywalls are better than all-or-nothing walls, I’m still not convinced that it’s the right direction to head the business. Micropayments and improving ROI seems like a preferable direction – where the industry & the consumers interests are aligned.