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Summary:

As the financial screws continue to tighten on traditional media companies, more and more are choosing to throw their eggs into the basket labelled “paywall” — including the New York Times. But in the long run, these walls are really just sandbags against a rising tide.

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As the financial screws continue to tighten on traditional media companies, more and more are choosing to throw their eggs into the basket labeled “paywall,” despite a conspicuous lack of evidence that erecting barriers to non-paying readers — or turnstiles that charge them after they’ve read a certain number of articles — has any beneficial effects. The latest to go this route is the Dallas Morning News, which put up its wall this morning, and the New York Times is also said to be close to launching its metered-access plan as well. In the long run, however, these walls are really just sandbags against a rising tide of free content.

The Dallas Morning News paywall, which the paper has been working on since the middle of last year, does have some holes in it that are designed to mitigate the extent to which it shuts out readers. Non-subscribers to the paper will be able to read headlines, blogs, obituaries, classifieds and any syndicated content for free, but local news will be blocked. And the news doesn’t come cheap: A subscription to the print newspaper and all of the Dallas publisher’s digital content (which includes an iPad app) is $33.95 a month, and an online-only subscription is $16.95 a month. By comparison, Rupert Murdoch’s new iPad app The Daily costs $3.96 a month or $39.99 for a year.

Last month, Dallas Morning News publisher Jim Moroney admitted he was unsure whether the paywall would work or not, telling the Nieman Journalism Lab that “This is a big risk — I’m not confident we’re going to succeed. But we’ve got to try something. We’ve got to try different things.” Moroney was similarly blunt in a memo to his newsroom staff about the reasons for the launch of the paper’s paywall:

So why, beginning tomorrow, are we going to require a subscription to access much of the content we originate and distribute digitally? The reason is straightforward: Online advertising rates are insufficient at the scale of traffic generated by metro newspaper websites to support the businesses they operate. We need to find additional and meaningful sources of revenue to sustain our profitability.

The bet being made by papers like the Morning News — and Gannett, which is experimenting with paywalls at a number of its papers, and says it plans to roll the strategy out to other publications — is that a paywall can do two things: One is to keep existing print readers from cancelling their subscriptions so they can read for free online, and the second is to generate more revenue, not just from subscriptions but by convincing advertisers that readers who pay for their content are more desirable.

This is the argument being made by News Corp., which launched paywalls at two of its British newspapers late last year, and saw its online readership plummet by more than 90 percent. The company has said it isn’t concerned about the decline, and that advertisers are proving to be receptive to its claims that the remaining readers are more engaged and therefore worth more. What impact that will have on the company’s actual finances remains to be seen, however.

The New York Times, meanwhile, is expected to launch its “metered access” plan soon, which is based on a similar model used by the Financial Times that provides a certain number of free articles per month before readers hit a wall. The NYT has experimented with a paywall before; in 2005 it launched TimesSelect, which put the paper’s columnists behind a wall, but the service (which former Guardian digital head Emily Bell credits with helping to jump-start The Huffington Post) was shut down in 2007. And some financial analysts are skeptical that the new wall will be any better: William Bird of Lazard Capital recently rated the stock a “sell,” saying it was like buying “a declining annuity,” and that the paywall was unlikely to help.

The reality is that the biggest problem for traditional newspaper companies — a combination of high costs and falling ad revenues — isn’t something a paywall is going to help solve. At best, it’s a stop-gap measure that might slow their decline somewhat, and an ultimately futile attempt to reimpose scarcity on their content in an age when the supply of free content is virtually unlimited, thanks in large part to the rise of new-media entities such as the Huffington Post.

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Post and thumbnail photos courtesy of Flickr user Giuseppe Bognanni

  1. Information online has become free. Even if paid-content is of a better quality, is it better enough to justify the paid subscription? It just does not look enough to me. I’m a subscriber to the paper version of Fortune Magazine but I would never subscribe to an online-only version of it. I don’t know why but when it’s not printed on paper it’s too virtual for me to pay for it with money that is not virtual. I hear you saying that a virtual form of money exists too. However, as long as I can exchange it for tangible goods and services, money is real. Information, on the other hand, when not on paper is over the air. Unless it’s critical or desirable enough (like “Who shot JFK?”), good luck to build paywalls around it. Media companies will need to add a lot more to it or basically to transform it in order to make it sellable.

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  2. $33.95 a month? Whoa. If local content is all they’re selling at that premium, it seems to me that hyperlocal start-ups have an opportunity to fill the content void for readers and do it at a cheaper (or free) rate than that.

    Someone has to pay for content, but this seems heavy handed to me.

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    1. I agree, Chris — at that price, it seems like an opportunity for someone to fill the void.

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  3. A couple of hundred publications will have to band together. Subscription fee, maybe $20 a month = choose from any current issues plus equivalent access to all back issues from day one. To them, that would be $100,000 a month for every 1,000,000 subscribers. And even then it isn’t that attractive to me

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  4. $33.95 a month is far too expensive for a monthly subscription. There are many other hyperlocal news alternatives for people to turn to, and if that’s all they’re selling that is behind the wall I don’t see why anyone would buy it?

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    1. Me neither, Chris.

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    2. It brings up some interesting discussion around hyperlocal businesses like AOL’s Patch. If traditional media organizations are putting local content in a walled garden, it’s likely that people will start to find free alternatives online. Definitely a lot of potential for businesses like Patch, Topix, etc.

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  5. Great piece!

    I have to agree that a pay wall will not solve much. The problem is that the newspaper industry dragged their feet when the Web came onto the scene.

    If they started the pay wall at the very beginning, it would have become common place and maybe more acceptable to readers. Although I’m the first one to admit that eventually other news Web sites would just allow people to read their content for free.

    But since the industry did not do that it is suffering, which is a shame. As a journalist myself, I started out in the newspaper industry and I’ll always have a soft spot for it in my heart, even though I work for a news Web site.

    But as many have already stated, if there is a choice between paid content and free content, people will be going for the free content. And a lot of free content is written by professional journalists, so the quality will be just as good as the paid content.

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  6. I don’t claim to have the answer to keeping newspapers (or old media) viable or even in the black. As an someone outside the industry but a person who watches this closely it is pretty obvious to me that no one in the industry really gets it.

    People will and can shift their consumption of content quickly. How many times have you been excited to find a new website but after a couple of weeks you are onto the next one?

    The question I ask is if I wanted to start a news organization tomorrow what would that look like? How closely would it mirror what the industry is doing today?

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  7. Information online is currently free, but, increasingly, it’s not gonna remain free. The aggregators can get it to you for free, but not the producers—those who report, write, edit, so forth. That stuff is expensive. And if those things fall through, the aggregators won’t have anything to aggregate.

    If providers were in large numbers to start asking for paid content, and if there were an easy way for the user to access this content (a flat-fee subscription model or one-click micropayments, for instance), then it’s probable that people will adjust their expectations of freeness and start paying for at least content. Not all people and not all content. Some of those interested in the best stuff (or the hardest to find, like specialty-magazine articles and local news) will pay a premium for it.

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