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Summary:

This may be the year where newspapers finally drop the idea of treating all news as a product, and all readers as customers.

One early sig…

Money Wall
photo: Corbis

This may be the year where newspapers finally drop the idea of treating all news as a product, and all readers as customers.

One early sign of this shift was the 2010 launch of paywalls for the London Times and Sunday Times. These involved no new strategy; however, the newspaper world was finally willing to regard them as real test of whether general-interest papers could induce a critical mass of readers to pay. (Nope.)

Then, in March, the New York Times introduced a charge for readers who crossed a certain threshold of article views (a pattern copied from the financial press, and especially the Financial Times.) Finally, and most recently, were a pair of announcements last month: The Chicago Sun-Times was adopting a new threshold charge, and the Minneapolis Star-Tribune said that their existing one was working well. Taken together, these events are a blow to the idea that online news can be treated as a simple product for sale, as the physical newspaper was.

For some time now, newspaper people have been insisting, sometimes angrily, that we readers will soon have to pay for content (an assertion that had already appeared, in just that form, by 1996.) During that same period, freely available content grew ten-thousand-fold, while buyers didn’t. In fact, as Paul Graham has pointed out, “Consumers never really were paying for content, and publishers weren’t really selling it either…Almost every form of publishing has been organized as if the medium was what they were selling, and the content was irrelevant.”

Commercial radio is ad-supported because no one could figure out a way to restrict access to radio waves; cable TV collects revenues because someone figured out a way to restrict access to co-axial cables. The logic of the internet is that everyone pays for the infrastructure, then everyone gets to use it. This is obviously incompatible with print economics, but oddly, the industry’s faith in ‘every reader a customer’ has been largely unshaken by newspapers’ own lived experience of the move to the web.

A printed paper was a bundle. A reader who wanted only sports and stock tables bought the same paper as a reader who wanted local and national politics, or recipes and horoscopes. Online, though, that bundle is torn apart, every day, by users who forward each other individual URLs, without regard to front pages or named sections or intended navigation. This unbundling leads to the odd math of web readership – if you rank readers by pages viewed in a month, the largest group by far, between a third and half of them, will visit only a single page. A smaller group will read two pages in a month, a still smaller group will read three, and so on, up to the most active reader, in a group by herself, who will read dozens of pages a day, hundreds in a month.

Against this hugely variable audience behavior, a paywall was all-or-nothing: “If you won’t give us any money, we won’t show you any ads!” Offered this all-or-nothing choice, most readers opted for ‘nothing'; the day they launched their paywall, the Times of London shrank its digital audience from a large multiple of its print circulation to a small fraction of it. This isn’t a problem with general-interest paywalls – it is the problem, widely understood before the turn of the century, and one to which there has never been a convincing answer. The easy part of treating digital news as a product is getting money from 2 percent of your audience. The hard part is losing 98 percent of your advertising base.

To understand newspapers’ 15-year attachment to paywalls, you have to understand “Everyone must pay!” not just as an economic assertion, but as a cultural one. Though the journalists all knew readership would plummet if their paper dropped imported content like Dear Abby or the funny pages, they never really had to know just how few people were reading about the City Council or the water main break. Part of the appeal of paywalls, even in the face of their economic ineffectiveness, was preserving this sense that a coupon-clipper and a news junkie were both just customers, people whose motivations the paper could serve in general, without having to understand in particular.

The article threshold has often been discussed as if it was simply a new method of getting readers to pay, to which the reply has to be “Yes, except for most of them.” Calling article thresholds a “leaky” or “porous” paywall understates the enormity of the change; the metaphor of a leak suggests a mostly intact container that lets out a minority of its contents, but a paper that shares even two pages a month frees a majority of users from any fee at all. By the time the threshold is at 20 pages (a number fast becoming customary) a paper has given up on even trying to charge between 85 percent and 95 percent of its readers, and it will only convince a minority of that minority to pay.

Newspapers have two principal sources of revenue, readers and advertisers, and they can operate at mass or niche scale for each of those groups. A metro-area daily paper is a mass product for customers (many readers buy the paper) and for advertisers (many readers see their ads.) Newsletters and small-circulation magazines, by contrast, serve niche readers, and therefore niche advertisers – Fire Chief, Mother Earth News. (Some newsletters get by with no advertising at all, as with Cooks’ Illustrated, where part of what the user pays for is freedom from ads, or rather freedom from a publisher beholden to advertisers.)

Paywalls were an attempt to preserve the old mass+mass model after a transition to digital distribution. With so few readers willing to pay, and therefore so few readers to advertise to, paywalls instead turned newspapers into a niche+niche business. What the article threshold creates is an odd hybrid – a mass market for advertising, but a niche market for users. This is the commercial equivalent of the National Public Radio model, where sponsors reach all listeners, but direct suport only comes from donors. (Lest NPR seem like small ball, it’s worth noting that the Times ‘ has convinced something like one out of every hundred of its online readers to pay, while NPR affiliates’ success rate is something like one in twelve. Newspapers with thresholds now aspire to NPR’s persuasiveness.)

Paywalls held out the possibility, however illusory, that if all readers could be treated as customers, the organization wouldn’t have to pay much attention to them, except in aggregate. Threshold charges blow that up; a single fee-paying user will generate hundreds of times the revenue of the median, ad-viewing reader. This subjects the logic of the print bundle – a bit of everything for everybody, slathered with ads – to two new questions: What do our most committed users want? And what will turn our most frequent readers into committed users? Here are some things that won’t: More ads. More gossip. More syndicated copy. This is new territory for mainstream papers, who have always had head count rather than engagement as their principal business metric.

Celebrities behaving badly always drive page-views through the roof, but those readers will be anything but committed. Meanwhile, the people who hit the threshold and then hand over money are, almost by definition, people who regard the paper not just as an occasional source of interesting articles, but as an essential institution, one whose continued existence is vital no matter what today’s offerings are.

In discussing why the most loyal subset of readers would pay for access to the Times, Felix Salmon described some of the motivations reported by users: “I like the product, understand the incentives involved, and want its production to continue” and “I feel that maintaining a quality NYT is immensely important to the country as a whole.” Now, and presumably from now on, the readers that matter most are disproportionately likely to score high on the God Forbid index (as in “God forbid the Sun-Times not be around to keep an eye on the politicians!”)

The people who feel this way have always been a minority of the readership, a fact obscured by print bundles, but made painfully visible by paywalls. When a paper abandons the standard paywall strategy, it gives up on selling news as a simple transaction. Instead, it must also appeal to its readers’ non-financial and non-transactional motivations: loyalty, gratitude, dedication to the mission, a sense of identification with the paper, an urge to preserve it as an institution rather than a business.

Thresholds are now mostly being tried at big-city papers – New York, Chicago, Minneapolis. Most papers, however, are not the Minneapolis Star-Tribune. Most papers are the Springfield Reporter, papers with a circulation 20,000 or less, and mostly made up of content bought from the Associated Press and United Media. These papers may not do well on the God Forbid index, because they produce so little original content, and they may not find thresholds financially viable, because the most engaged hundredth of their audience will number in the dozens, not the thousands.

On the other hand, local reporting is almost the only form of content for which the local paper is the sole source, so it’s also possible to imagine a virtuous circle for at least some small papers, where a civically-minded core of citizens step in to fund the paper in return for an increase in local coverage, both of politics and community matters. (It’s hard to overstate how vital community coverage is for small-town papers, which have typically been as much village well as town crier.)

It’s too early to know what behaviors the newly core users will reward or demand from their papers. They may start asking to see fewer or less intrusive ads than non-paying readers do. They may reward papers that make their comments section more conversational (as the Times has just done.) The most dramatic change, though, is that the paying users are almost certain to be more political, and more partisan, than the median reader.

There has never been a mass market for good journalism in this country. What there used to be was a mass market for print ads, coupled with a mass market for a physical bundle of entertainment, opinion, and information; these were tied to an institutional agreement to subsidize a modicum of real journalism. In that mass market, the opinions of the politically engaged readers didn’t matter much, outnumbered as they were by people checking their horoscopes. This suited advertisers fine; they have always preferred a centrist and distanced political outlook, the better not to alienate potential customers. When the politically engaged readers are also the only paying readers, however, their opinion will come matter more, and in ways that will sometimes contradict the advertisers’ desires for anodyne coverage.

It will take time for the economic weight of those users to affect the organizational form of the paper, but slowly slowly, form follows funding. For the moment at least, the most promising experiment in user support means forgoing mass in favor of passion; this may be the year where we see how papers figure out how to reward the people most committed to their long-term survival.

Clay Shirky is a writer, consultant and teacher on the social and economic effects of internet technologies. He has a joint appointment at New York University (NYU) as a Distinguished Writer in Residence at the Arthur L. Carter Journalism Institute and Assistant Arts Professor in the New Media focused graduate Interactive Telecommunications Program (ITP). His courses address the interrelated effects of the topology of social networks and technological networks, how our networks shape culture and vice-versa. You can follow him on Twitter @cshirky and on his blog.

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This article originally appeared in Shirky.com.

  1. As publisher of a 10,000 paid circulation weekly that stands on its 99-percent originally-produced content, I can state that a 20-article threshold would destroy our revenue and put us out of business in less than two months.

    We’re currently looking into a weekly access code published inside the front page of the paper to allow anyone who picks the paper up the ability to read our entire site, archive and all else for the week that edition is current, coupled with a regular subscriber all-access login. On the main page, we plan to have three to five articles available for general readership, but as our local advertisers also have zero interest in online advertising, giving ourselves over to a 20-article monthly limit would cause even more problems on that side of things, since I’ve already had some of our largest advertisers inquire how they would be able to retain their large-scale advertising campaign online in a format that readers wouldn’t revolt over. Our budget, staff and coverage area are simply not large enough to afford the amount of web engineering and online marketing solutions that this system would impose upon us, as can a publication like the New York Times or your other examples.

    A 20-article threshold is good for some, not for all. A better solution for us would be a 5-article per-month threshold. There’s also the ability for people to get around the article limit by wiping their internet cookies/settings et cetera without initially facing a login. If a system were built somewhat easy enough to do that to, we’d be toast again.

    Thoughts?

  2. Clay, that was a great article. Thanks. I’d like to know more about the cost structures of newspapers and how that affects their potential to make money through advertising. My hunch is that all of the entrenched costs of physically producing and distributing a newspaper are the real issue, not the cost of doing great journalism. What the internet is taking away from them in terms of revenue, it should also be able to take away form their costs. No?

  3. Leigh Ann Kristiansen Wednesday, January 4, 2012

    The paywall is an absolute must if newspapers are to survive.  How can a publisher pay writers and editors if the general public is going to go online and read their work for free.  I’m glad to see more publishers embracing the idea of paywalls. Provide good quality content with less distracting ads.  Maybe this will help save a struggling industry.

  4. Greg Golebiewski Thursday, January 5, 2012

    I have a standing argument with Clay who first tried to convinced everyone that “digital copying and distribution” does not cost anything, so the Internet can be for free. Then he started with a “theory” that “people hate to be nickled and dimed” (and he made a buck lecturing about it). Now, he is trying to push readers’ engagement as the Internet currency — anything, it seems, but a fair pay for a good quality content. 

    Engagement is good. Necessary. But  who has ever said that paying for online media would reduce engagement? Those who advocate paid vs free emphasize that shifting the newspapers’ source of revenue from advertisers to readers will foster more engagement, especially when the content monetization model is based in small and micro payments made directly by the readers, as they surf the Net. Not in long term subs and paywalls, whcih, I agree, create a silo effect and might cripple a publication.

    But then Clay has said that micropayments would never work, and it seems he is trying his best to fulfill this own prophesy.

  5. That surely is not the main point Clay was making unless I missed
    something? The issue that newspapers have hid from for years and what
    has stopped most people buying them now is value. When cover prices were
    low because the advertising funded distribution and content – the fact
    that I read barely 10% of the newspaper didn’t matter. Now cover prices
    (in the UK) have doubled/quadrupled people are making value judgements
    about buying a newspaper less often (i.e when they have time to read more of the paper)
    or not at all – I have stopped buying a Sunday paper because I never
    have time to read it and you get a better roundup of all weekend sport
    in a Monday paper. Plus of couyrse the BBC does a better job of sport
    than nearly everyone but Sky (oh btw. that costs me £40 per month!) The
    irony of the web is that this value proposition is unpicked – as Clay
    says single page views are the majority of user engagement because they
    are chasing a particular story about a particular issue. The business
    model for news that makes money from the selective reader or
    economically uninteresting reader (the majority?) hasn’t been invented
    yet and probably never will as broadcast economics rely on wastage being
    affordable/engagement being high enough by scale to still be value. As
    newspapers lose broadcast scale – they fall further behind an
    advertisers requirements. The irony that strong content from highly
    targetted, business critical/useful websites (like paidcontent) have the
    only chance of making paywalls and high yields stick (imho) is not lost
    on me as the link to the Guardian (of paidcontent) ensures it will
    continue to be free…..

  6. Thank you for the article.  Another way to appeal to diverse reading audience segments and monetize each of them is to create an app for each section of paper, whether business, local sports, events, politics, columnists, etc.   Build the mobile audience, then sell targeted ads.

  7. Newspapers just have to realize that they no longer have the type of monopoly they once had.  These discussions are always depressingly short on talk of how to cut costs and produce quality for less.  Certainly the newspaper is not the most efficient business out there.  Technology and the industry has changed.  It’s not about what anyone thinks is fair…it’s about reality. 

    Everyone runs around saying, “quality content,” as if saying it makes it true that everything in every paper is such a vital and engrossing item that readers can’t do without.

    Face it, there are many places people can get media, news, and information today, and it is only going to get worse as new, slicker, and more portable devices come along.

    All this talk of paywalls always leaves me feeling like there is this sense of entitlement, like, “we need this much money to run things the way we have, so someone is obligated to give it to us.”  It also feels like people are determined to put their heads in the sand.

    I find it hard to believe that anyone thinks that long term there is a business for getting people to pay for general bulk news and the like.  Even the papers having some success…how much of this is just the exploitation of pre-existing loyalty.  Do you really think that today’s ten year old is going to pay for news when he/she is 30?

    The industry needs to accept that they are no longer a monopoly, and get creative.  Take advantage of the exposure and base they have and try to sell more focused sub-publications to segments of the market.

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