In a dying industry, the sensible thing to do is to maximize your revenues before you die. Paywalls might well make money for newspapers. But that doesn’t mean that newspapers aren’t dying. Quite the opposite.
—Felix Salmon, Reuters
That quote, which we first saw in this Mathew Ingram piece on paidContent, gave us new insight on why we dislike paywalls so much. Yes, the newspaper industry seems to be adopting them at a rapid pace, and yes, the paywalls at The New York Times and Financial Times are reportedly successful, but there’s something about putting the subscription genie back in the bottle that strikes us as a step backward.
Salmon puts his finger on one of the weaknesses of most current paywalls: They are defensive strategy. They’re designed to keep loyal readers on board, but they repel potential new readers.
Alan Mutter shares worrisome statistics: More than two-thirds of regular newspaper readers are over 45, their average age is 57 and the average age of the online newspaper audience grows one year older every year. This industry is still headed toward a cliff. Unless those demographics turn around, it’s only a matter of time before the audience dwindles to a size that is no longer economically sustainable.
What’s the answer? Unfortunately, no one has come up with one. In another piece this week, Ingram criticizes paywalls for being a no-growth strategy. His article is mostly a restatement of Mutter’s analysis, but the really interesting part is in the comments section that follows. Both critics and supporters of paywalls vigorously debate the alternatives, and both sides make good points. Done right, it seems that paywalls actually could attract new subscribers, but no publisher is reporting the kind of circulation gains that will be needed to replace this rapidly aging audience.
The time seems right for micro payments, but that idea has never gained any traction. Kachingle was one of the early players in newspaper micro payments, but it has now morphed its business model into a co-marketing app content somethingorother that we can’t figure out. People seem to be OK with using Google Checkout for 99-cent purchases, but not for five-cent purchases. We think there’s a psychological barrier to micro payments. Below 99 cents, people don’t want to be bothered to think about paying. In fact, charging a nickel to read a 5,000-word article seems a little absurd, as if the article has no value. At some point, micro payments work against you.
Reuters’ Salmon argues that paywalls as currently implemented are too inflexible. They impose a limited number of subscription options on visitors regardless of what the visitors want or how they behave. Paywalls should use a sliding scale that maps to the needs of the individual reader, he suggests. People with an intense interest in sports will pay more than those who care deeply about entertainment, so they should pay a different price. Few publishers understand their audiences in that kind of depth, though.
We did see one bit of encouraging news this week. The Newspaper Association of America reported that advertising revenues continued their seven-year-long string of declines, dropping 6% in 2012. However, overall revenues were down only 2%. The reason is that publishers are finally diversifying their revenue streams, and not just by charging readers:
These new revenue sources, which include such items as digital consulting for local business and e-commerce transactions, now account for close to one-in-ten dollars coming into newspaper media companies. They are significant enough in scale that NAA has begun to collect detailed data about these revenue categories and track their trajectory year-to-year for the first time.
Consulting? Affinity programs? Marketing Services? Where have we heard those ideas before?
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This entry was posted on Saturday, April 13th, 2013 at 10:31 am and is filed under Fake News. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
Paul,
I think that the problem with the newspaper business was/is that, even during the decline, there was a great deal of money to be made. It’s only as things really began to be dire in the past few years that publishers had to start getting creative about their revenue streams. Even in online, publishers got lazy and depended on banner ads long after they started their inexorable slide to the bottom of the pricing/effectiveness scales.
A lot of people in the industry scoffed at John Paton’s stack of digital dimes. Now, it seems, everyone wants to stack them. That’s good, but there’s still a need for more creativity in building a sustainable revenue and new-user stream for the coming years. As you point out, the “new ideas” aren’t exactly new to those of us who have been haunting these blogs and comment streams for years, but even that will not be enough. It’s merely a good start.
“Unfortunately, no one has come up with one.”
I have come up with the answer.
Eventually, enough others will also come up with the same answer, that it will treated as more than an irritating mosquito buzz.
Journalism for money, money for journalism.
When you have no 18th century monopoly, you have to revert to the voluntary exchange of the free market.
Journalists invite those who want them to produce journalism to pay them to do so.
You don’t charge people for access to news. The people pay journalists to produce it. Given the people have paid for it, you can’t expect to charge them a second time to access what they’ve already paid for (unless you’re still hung up on copyright).
Think crowdfunding Amanda Palmer, but more fluid…
Good to hear from you, Tim. You’re correct that success creates the illusion of invincibility. As Clayton Christensen points out in “The Innovator’s Dilemma,” successful tech companies often enjoy their most profitable years right before the bottom falls out of the business. It’s not that the people running these businesses don’t see the fissures forming. Often they do, but their investors won’t give them leeway to reinvent the business and disrupt the profit stream. Therefore, they collapse.
I agree with Crosbie’s comment, and would expand on it by saying that I think journalism or any media in the not so distance future will be funded mostly by individuals in the market viewing a particular blog, article, aggregate website, show, movie, video game, apps, etc., rather than by advertisers.
The way of how content is made and paid for all media is changing, because the internet has aggregated and streamlined how we want our media and when we want our media. For example, my parents in their 50’s and 60’s don’t even read a newspaper and barely watch the local news anymore, and I don’t now, because I know and they know if something is really big happening in Phoenix that we should know about like the Jodi Arias trial, we will see it on the internet somewhere because the aggregated websites have our location or I will hear about it on cable news.
I sell print advertising for a Regional College Coupon Book, and there is no longer a need for a print or online newspapers and that’s the just of it. So for better or for worse, people want to read, watch, and hear what they’re interested in, not what publishers or producers want to tell them. For example, I think print newspapers are dinosaurs and I can’t believe people still pay for local newspapers, thus I Google “Newspapers going out of business” and this entertaining blog pops up and cost nothing.
Anyway, I’m sorry for people that are losing their jobs, because I may someday lose my job if we can’t make it being completely online someday and by continually being able to be a local community marketer. Bottom line, the internet has given the individual a voice more so then any media has ever done, and that’s why the traditional media in a lot of cases is losing to the internet and will lose.
Why would sensible companies pay newspapers, rather than PR firms, branding firms, or whatever, for “digital consulting”? (That doesn’t include any editorial ethics issues.) And, e-commerce transactions? Surely that’s a dog-eat-dog world.