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Summary:

Some newspaper websites made a little ground with their paywall strategies over the past year. But the media industry should be very careful about over-interpreting the successes of a handful over the struggles of the multitude.

great wall

As the year comes to a close, the media is stuffed with pundits proclaiming that 2011 was the year of something or other. For the most part, it’s easy to ignore these trend pieces: Many of them are simply chum thrown in the water to attract readers over a quiet period while giving journalists a chance to take a breather.

Still, there are a few claims that caught my eye. One in particular was Mashable’s assertation that 2011 was “the year the paywall worked.” More particularly, it argued that the New York Times and the Minneapolis Star-Tribune had set a path for others to follow by making money out of paywalled stories:

News organizations stopped using “our content is worth paying for” as a sole rationale, and began strategically providing value for their online content.
While the The New York Times‘s strategy was much-criticized when it launched in March, it has since turned a profit. The Minneapolis Star Tribune made an estimated $800,000 in digital circulation revenue during its first month of having a paywall, despite a 10-15% decline in web traffic.

The numbers may be right, but the sentiment — that these two examples prove that paywalls work — just doesn’t ring true to me. There has been a lot written about paywalls over the past year or two, and our own Mathew Ingram in particular has been covering a lot of ground on the topic over the past few months. As far as I can see, the jury is still very much out on the issue.

The thing is not that paywalls can work — there are countless examples of success here over the years — but that we should be very careful that when they succeed, people take away the right lessons. So I thought I would highlight one small story from a few days ago that may be useful.

How a paywall can kill your scoop

A few days ago, I followed up on a story about British Prime Minister David Cameron getting a custom-made iPad app to monitor real-time stats and news from around Britain. The original story was broken by London’s Times newspaper, which famously went behind a paywall in 2010. But there was a lot of skepticism about it, so I rang around my sources in Westminster and confirmed that work on the app had been under way for a few months.

That was that.

David Cameron by World Economic ForumBut then, as I saw the story continue to spread, I noticed a few things.

First of all, most follow-up reports didn’t give credit for the original story to the Times. Instead, many of them gave a nod to another British newspaper, The Daily Telegraph, which had basically lifted the story from its rival and republished it.

In a world where old media often accuses news of “over-aggregating,” the Telegraph (first published in 1855) has some serious form: Over the past few years I have heard from a large number of individual reporters and news organizations complaining — sometimes officially — that Britain’s biggest-selling “serious” daily paper is systematically ripping them off online and not giving credit.

It’s unethical, but it’s a fact of life. And fortunately, there are still ways to get the right credit out there.

On Twitter, the reporter who broke the story, @SamCoatesTimes, tweeted it once and got a little traction. But with more active users pushing the Telegraph version, the credit kept going elsewhere as more versions of the story spread.

The reality, then, was that the Times was hit by a triple whammy. Because the original was hidden behind a solid paywall, most of the people who heard about the story or were writing the tertiary reports simply couldn’t see it. And because the Telegraph chose to minimize credit for the story it had lifted, it was able to fool readers into thinking that it had originated the story. And then, because the Times wasn’t out in public, owning the story, it was losing at pretty much every step.

When I commented on this fact on Twitter, some interesting responses came back. One person replied that it was “an excellent example of why a paywall is journalistic suicide.” Somebody else said that it was proof that “if your writing goes up exclusively behind a paywall, you can’t ‘break’ a news story any more.”

They are fair points, but I don’t think it’s that simple. However, I do think the incident I described provides some really useful lessons about paywalls:

  • You have to own your market first. The more power you have in your own market before you build the paywall — whether it’s a niche specialism or a particular geographical area — the more you can use it to make it succeed in the short term. The New York Times has a brand power that far outstrips its circulation, and it has tried to use that to implore readers to pay. In Minneapolis, meanwhile, the Strib has to face a relatively low level of local competition: Other than broadcast, its big, direct competitors are really just the Minnesota Daily, a very active campus newspaper, and MinnPost, a nonprofit website. This gives it more leeway when bringing a paywall in. But in reality few outlets have that luxury.
  • You can’t stand still. Even if an organization does institute a successful paywall, it can’t stop there. Many publishers erect a paywall and retreat behind it, but that is what Mathew has referred to in the past as a “sandbag strategy” — a long-term defensive move that may crumble over time. Readers need to keep coming in, or else you are simply working to try to retain the readership you have (something that, by its nature, can only ever go down). For a start, building a wall suddenly opens up a whole new sort of potential competition. Take the Star-Tribune: It has done well so far, but it is now vulnerable to an attack by an aggressive, lean news outlet with serious commercial motivation that offers local news free at the point of consumption.
  • The more you have in the back, the harder you have to work out front. It’s not just publishers who retreat behind paywalls either. Journalists do it all the time, letting their work suffocate behind the barricades. Imagine that a news outlet is like a boutique store, where most of your stock is hidden in the back room. When a customer turns up, do you let them browse on their own and walk out when they can’t find anything? Or do you get out there and tell them what they’re missing?We already know that users on Twitter prefer to follow individual journalists rather than institutional accounts. That gives individual journalists power, but it means they have to work harder to promote their stories — and if the story is paywalled, they have to work even harder still.

Bad news for paywalls? Not necessarily

None of this is to say that paywalls can’t work. But you have to understand what it is you are offering rather than blindly follow examples put forward.

When they are done well, paid products have real value to both readers and creators: After all, here at GigaOM, we have GigaOM Pro, a subscription-only product aimed at technology industry insiders for whom deep, sharp analysis of trends and news isn’t just interesting — it’s vitally important.

But, like so many other things in life, the question of whether paywalls can work is a complicated one that probably has no single answer. This wasn’t the year that paywalls paid off: It was the year that some paywalls paid off for some specific outlets while the rest struggled. That’s not such a catchy headline. But then again, we all know that sometimes reality doesn’t match the simplicity of the news.

  1. Well thank God the tone has changed around here, and we’re not so sure that paywalls are not an awful idea anymore. 2011 certainly wasn’t the year of the paywall. That’s because 2012 will be. The NYTimes paywall isn’t just successful… it’s crushing it- it has literally been the one thing that has brought the flagship paper into revenue positive territory. They withered enormous criticism from non-paying, non-customers online, but when it comes to business, you can get the sentiment wrong as long as the numbers are hugely right.

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    1. Bobbie Johnson Friday, December 30, 2011

      Interesting you take it that way, Stephen. Did you read the post fully? I’m largely skeptical about the success of paywalls in general news, and even more particularly skeptical about the way the industry looks at the small number of successes.

      I’m not going to speak for Mathew, who has written much more about paywalls here than I have and knows the numbers better than I do, but I think it would be a stretch to suggest that the NYT’s paywall is “crushing it” at all — let alone interpret that as a sign that the glory days are on their way for the rest of the industry.

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      1. Absolutely I read it. It’s a good article. Matthew has some fine articles as well. The paywall is gonna do about 60-70M this year and its growth is showing no sign of slowing down. They had one of their biggest subscriber weeks around thanksgiving (granted with a one-day discount- sorry, can’t find the link now). They are also seeing revenue growth and circulation growth at the flagship paper for the first time in 12 billion years. No, paywalls will not initiate glory days for newspapers. Those days are over. The future is digital, as Matt reminds us. But paywalls are the one thing saving the Times right now. Just that and only that.
        This story is being repeated at the Times of London, though at a smaller scale. I expect them to go metered at some point.
        Online competition has been meagre thus far.
        MinnPost has about 1/20th the visitors of the StarTrib (quantcast), Patch.com did 8 Million in revenue in all of 2011, so we can call them a hearse. This is NOT to disparage online journalism. Both of those I mentioned (yes, even Patch) and many others (voice of San Diego- AMAZING) have done some remarkable work that I respect. I just don’t see where the dollars are.

        P.S. I have no affiliation in any way, shape, or form with the NYTimes, other than going on the site. HA! I don’t even subscribe to the paywall! Someday I will though…promise.

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  2. Mark my words… every website is going to start charging for at least SOME of their articles or content in the future. The model simply generates far more revenue per visitor – by 10X+. The easiest and best way to test this and see the resulting revenue increase is using http://www.MediaPass.com

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    1. Bobbie Johnson Friday, December 30, 2011

      That would be the MediaPass of which you are Chairman and CEO, I presume?

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      1. Yes, I am the Chairman, not the CEO. Anyone can compare MediaPass to other options. There is literally nothing better out there. Some of the publishers are literally making 20x the money there were from just running advertising alone.

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  3. Cynthia Typaldos Friday, December 30, 2011

    The irony around paywalls is that the more sites that put them up, the less they will succeed. Death by a thousand cuts IMHO.

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  4. Old media is winning again dude, deal. They still have the horses.

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