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Summary:

Estimates are that a paywall at the Times of London has led to a drop of 65 percent in online readership. But owner Rupert Murdoch may not care, because the wall is as much about keeping existing print readers in as keeping new web readers out.

The paywall at the Times of London’s web site has led to a drop of at least 65 percent in the newspaper’s online readership, according to early estimates. Although the paywall is still very new and these numbers are not official, they seem fairly plausible compared to some other paywall experiments in the mainstream media. By most normal measures, losing two-thirds of your readership would seem like a huge blow, but managers at Rupert Murdoch’s News Corp. are said to be satisfied with that figure. Why? Because the Times’ paywall is likely just as much about keeping existing print readers in as it is about keeping freeloading web readers out.

The whole structure of a paywall like the one recently instituted by the Times appears to be aimed at keeping casual web visitors away from the newspaper’s content. In most cases there is either a block that appears when you try to read any story or a graduated block — like the one that used to be in place at the Financial Times and is expected soon at the New York Times web site — that kicks in after you have read a certain number of stories in a particular month (these paywalls rely on the use of cookies to track how often you visit). Readers have to pay a monthly fee in order to access more content.

In reality, however, blocking casual readers — who are seen as less valuable to advertisers because they don’t spend as long on the site and aren’t regular visitors — is just one by-product of having a paywall. And even generating income from those readers by convincing them to sign up for a monthly subscription is only a by-product. For many newspapers, the main driving force for instituting a paywall is to keep print readers from migrating away from buying the physical product (which still generates the majority of advertising revenue at most newspapers) to reading for free online, where their eyeballs are worth less than they would be in print. Think of it as eyeball arbitrage.

Take Newsday as an example: The daily newspaper covering Long Island, N.Y. instituted a paywall in October of last year. After three months, it had driven away a huge number of online readers and accumulated a whopping 35 subscriptions for its efforts. But as Techdirt noted in a post about the site, erecting the paywall was as much about preventing churn among Newsday subscribers as it was about actually generating revenue from subscriptions (Newsday’s parent company is a cable provider; subscribers to the cable service get free access to the newspaper site). Newsday said as much itself.

The problem with this strategy is that it is fundamentally a retrenchment approach — in other words, a fall-back rather than a move-forward strategy. While it may be true that keeping out casual web users and forcing regular readers to pay may improve online advertising revenue somewhat (since advertisers will perceive paying readers as more valuable than non-paying users), and putting up a wall may prevent some continuing slippage in print readers (although not as much as the paper probably hopes it will), it does little to grow the online side of the equation. Contrast that with the approach taken by The Guardian, which is making its content freely distributable through an open API.

If anything, in fact, the paywall approach prevents further growth for an online entity because it puts a wall between the content and those who might help to spread it — in effect, marketing it to others — by linking to it, posting it on Twitter and other social networks, etc. It is fundamentally a resignation from the open web.

Related content from GigaOM Pro (sub req’d): What We Can Learn From the Guardian’s Open Platform

Post and thumbnail photos courtesy of Flickr user Roy Costello

  1. I think one of the interesting questions that the Times paywall experiment will allow us to answer is whether “the open web” is capable of encouraging “user loyalty” in the form of regular readership.

    Network effect sharing tends, I’d say, to only impact on single content items. A story gets shared, and generates a lot of traffic – but if a fraction of those new readers don’t start to keep coming back for more, then it’s very low value traffic.

    The Guardian is better that network effects will, in the long-term, grow regular readership. The Times, on the other hand, thinks the opposite: That readers coming to you through sharing and network effects are, and always will be, so low-value that they damage your ad sales proposition rather than improve it.

    I’m glad that two strong media brands are taking such opposite approaches – and it will be interesting to see which business model works out. Of course, it could end up with both working out :)

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  2. The problem with this notion is that once people figure out that they can get the same news for free elsewhere anyway, then they’re more likely to lose the customer entirely, from both their print and their web versions.

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    1. Well, I’d argue that if you’re doing “the same as everyone else”, you shouldn’t really be in the publishing business :)

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  3. What’s going to happen when Times journalists and columnists begin to lose national readership and influence in their new hot house? That’s what happened when NYT and the Globe and Mail tried paywalls a few years ago, causing the publishers to rethink. Ultimately, journalism has never been a profit center and has always been a loss leader, for a more profitable media product stream, and journalism will have to find another sugar daddy: I think eventually it will be the ISPs and/or the large aggregators like Google, Yahoo, MSN, even Amazon and Apple, that will foot the bill for it.

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  4. if you think about it, it’s a actually pretty smart way of doing business – avoid criticism and keep your loyal readers propagandized. the sheep who eat up Rupert’s garbage will be happy to pay for their slop, meanwhile everyone else with half a brain will be unable to even access the material, let alone call it out for the filth that it is. it’s a win win for Rupert. makes perfect sense why he doesnt want his content to be open and free – the truth usually wins in those situations.

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  5. That final paragraph really nailed it. In an industry that has been bleeding out for years, bandaids aren’t going to be an effective strategy. You need to be looking for infusions of new blood.

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  6. The problem for The Times is the dramatic decline in the quality of its journalism since Murdoch bought it. When Harold Evans was editor it was a must-read, undertaking important investigations. These days it just dishes up generic lifestyle churnalism one can read anywhere. It wasn’t The Times who broke the biggest story in British journalism for years — the expenses scandal story — it was The Telegraph. Under Evans you could be sure the papers banners would flag the latest discovery by it’s Insight team: these days they flag a Nigella feature or AA Gill travelogue. It’s barely worth clicking, let alone paying for!

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  7. [...] Ingram suggests the object of the paywall is not so much to keep people out as to keep people in: For many [...]

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  8. [...] papers in the Gannett chain. In many cases, however, these experiments seem aimed as much at keeping existing readers of the printed version as they are at extracting money from online [...]

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  9. Peter Reynolds Monday, August 16, 2010

    I think that we all have to work together and put our hands in our own pockets to make this work.

    http://peterreynolds.wordpress.com/2010/08/16/the-times-will-charging-for-online-news-work/

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  10. [...] will show Janet Robinson and the rest of the New York Times executives that paywalls are “fundamentally a retrenchment approach, a fall-back rather than a move-forward strategy.”  That a true online conversation deserves and requires new thinking, not a reliance on [...]

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