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Summary:

The news that Canada’s largest newspaper is launching a paywall brings back memories of an earlier paywall attempt, and how that led one GigaOM writer to the discovery of blogging — and three reasons why paywalls are not the solution to the newspaper industry’s problems.

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We’ve written a lot at GigaOM about the rise of newspaper paywalls, a trend that seems to be accelerating as the financial health of the industry continues to deteriorate, and in particular I’ve written a number of posts about what I see as the downsides of paywalls. But the announcement this week that a paywall is coming to Canada’s national newspaper, The Globe and Mail — where I spent a large chunk of my career as a journalist — made me stop and think about my opposition to them in a more personal way than I have in a while.

Do I think that all paywalls or subscription plans are wrong? No. In fact, I am in favor of newspapers charging for access to specific kinds of value-added content or services. But when it comes to broad, general-interest paywalls around all of a newspaper’s content, I’m not in favor of them for a number of reasons.

The first reason is personal, and it’s connected directly to my experiences at the Globe, where I worked from 1994 to 2010 — because a paywall that the Globe erected in 2004 led directly to me becoming a blogger. Like the New York Times, which had a subscription plan called Times Select that lasted from 2005 until 2007, the Globe had a paywall around some of its content for several years before it was finally removed in 2008.

Paywalls restrict the flow of content, and that’s bad

I was a business columnist when the wall went up, and afterwards I started noticing that the number of visitors to my column had fallen dramatically. In fact, on average it looked like I was getting about 90 percent fewer readers than I had been before — almost exactly the same dropoff that the Times of London would see years later, when News Corp. instituted a paywall there. And as much as I wanted the Globe to make money so that it could continue to pay my salary, I didn’t like that at all.

As a writer, the thing I am most interested in is reaching as many people as possible with my writing, regardless of whether they pay for it directly or not. That’s one reason why I was so attracted to the Internet when I first discovered it, and to technologies like RSS. So I started a blog — partly as an experiment, but also as a way around the paywall, since columns were behind the wall but blogs were not (partly because no one really knew what a blog was at that point). Needless to say, I got addicted to the format.

Do I want my former colleagues at the Globe to lose their jobs? Of course not. I’d like to see the paper remain healthy and successful, but I don’t think paywalls are the answer — and I think focusing on them too much can distract a newspaper from doing the other things that are necessary to survive. And that leads me to reasons #2 and #3.

Paywalls are backward-looking, not forward-looking

The second reason I don’t like paywalls is that I think they are a step backward rather than a step forward — a “line of sandbags,” so to speak. Whether or not the newspapers that implement them are willing to admit it, one of the primary features of a paywall is that it keeps people in, not out. In other words, it makes it less likely that they will quit the paper and go digital completely, and thereby protects the printed newspaper.

That may be a smart move in order to stem the decline in ad revenue, but it isn’t even remotely forward-looking or adaptive. In other words, it does nothing to help a paper adapt to the web and to changing market conditions. As Clay Shirky has pointed out, the reality for newspapers is that the service they used to provide — in which they aggregated content from across a broad range of topics — isn’t really cutting it any more, when anyone can become an aggregator and advertisers are looking for more targeted audiences.

To me, it makes more sense to try and figure out how to take advantage of the Web in order to provide something that the current market is likely to value, instead of focusing on how to squeeze as much as possible out of a declining market. What is The Huffington Post doing right, or Buzzfeed, or Politico, or The Atlantic? Why don’t they need paywalls? Coming up with creative answers to those questions is likely to play a much larger role in the survival of traditional media entities than a paywall.

Maybe it’s trying a number of small things, as Ken Doctor wrote recently — like e-books drawn from the archives, or live events that cater to a specific crowd, or partnerships with online retailers for affiliate sales. Or maybe it’s the kind of “reverse paywall” that Jeff Jarvis and former Washington Post managing editor Raju Narisetti have talked about, where members get perks based on their interaction with a paper, rather than getting penalized for their loyalty by having to pay. In other words, a velvet rope instead of a wall.

Newspapers need to adapt, not retrench

The third reason I don’t like paywalls is that I don’t think they are going to work — and by “work,” I mean solve the problems that most newspapers are facing. Everyone seems to have decided the New York Times paywall is a success because it has about 400,000 subscribers and it is bringing in an estimated $35 million in revenue. But that is still a drop in the bucket: according to the paper’s recent results, one of the world’s most successful paywalls is not even making up for the continuing decline in print ad revenue.

And even if the New York Times can cut costs dramatically or boost its online ad revenue to fill that gap, what happens to other newspapers? Not everyone is going to be able to convince hundreds of thousands of readers to pay for their content. What happens to medium-sized or regional newspapers that don’t have the same brand name, or the ability to produce as much unique content as the Times or the Wall Street Journal? A paywall is just as likely to kill them off completely as to save them.

Are newspapers going to lay off staff and cut costs until they can manage to survive on subscription fees alone? If so, then they will effectively become small, controlled-circulation newsletters, catering to a tiny constituency. What about the broader ambitions that newspapers were supposed to have, about being a voice for truth, upholding the public interest? What happens to that mission with a paywall?

As web developer Stijn Debrouwere pointed out recently in an insightful post, newspapers are no longer just competing with other newspapers, or even with other traditional media — they are competing with things that don’t even look like journalism. In effect, they are competing with the entire internet. Is it better to try and adapt and meet that competition head-on, or to retreat behind a wall of sandbags and try to compel the waves to stop rising, King Canute-style? My vote is on the former.

Note: We’ll be discussing these kinds of media issues and more at paidContent 2012: At The Crossroads on May 23 in New York City. Register today.

Post and thumbnail images courtesy of Flickr users Giuseppe Bognanni, Brian Snelson and jphilipg

  1. Isn’t this site kinda like a paywall site?

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    1. Did you have to pay to read my post?

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      1. Steve Siverling Saturday, May 12, 2012

        good point

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      2. News should be free and so should knowledge.

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      3. Matt Frehner Thursday, May 17, 2012

        I think the key to the success of The Globe’s paywall is going to be getting the meter just right — so that the vast majority of readers will have free access (like I did to this post), while some will pay for deeper access or exclusive content (like GigaOm Pro).

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        1. I agree, Matt — although of course you can read as many of our blog posts as you want without having to pay for them :-) thanks for the comment.

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  2. Great piece! I agree, paywalls are generally backwards, restrictive and lack creativity and vision.

    To your second point, however, sometimes the bleeding needs to be stopped before you can move forward. If a paper is hemorrhaging subscribers too rapidly, it may not be able to afford to deal with your 3rd point. Sometimes they need a line of sandbags just to buy a little time.

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    1. That’s a fair point, Skip — buying time is a perfectly valid strategy, provided you are also engaged in all the other things you should be doing. But I don’t get the sense that many papers are doing that.

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  3. Interesting point of view, really. I just wonder, if you don’t have anyone who wants to pay of your work… I mean, it has always been SOMEONE who is the payer. In arts you call him/her a mesenat ,but can you really think that there should be a mesenats also in journalism?

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  4. Steve Siverling Saturday, May 12, 2012

    Greetings,

    One thing is that perhaps newspapers should try and bring in more revenue from other sources. For instance posting ads online and in their paper. Then they will be able to get more money for that.

    Another point is that, I don’t feel like buying a subscription for an article I may only read once. Perhaps a onetime fee might be apprioprate. However, I’m not going to buy a subscription for reading one article.

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    1. Greg Golebiewski Sunday, May 13, 2012

      The good thing is there are systems that offer on-demand payments for selected content. Unfortunately, for years now experts, including C. Shirky mentioned in Mathew’s post, have been saying (a priory) they would never work. And, it is almost impossible to break that FALSE claim. No matter what data you show, from the success of iTunes (which uses micropayemnts) to Zynga to Facebook Credits — the experts always say micropayments do not work.

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      1. Yes most experts. An only be experts of what they already know. They know that outright paywalls don’t work so they assume all pay systems schemes will not work. I laughed at the quote that the nyt paywall revenue doesn’t cover ad losses because they aren’t related in that sense. Nyt is getting new revenue for something that was free And also bringing up the ad price on its protected properties, yet no one mentioned this. Again it’s really easy to say fail if you don’t live in this world and know all the facts.

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  5. If these people refuse to adapt to a major change in technology they will drive their businesses into the ground. The smartphone manufacturer RIM provides a good example.

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  6. Most newspapers probably have no reason to exist anymore, other than local-news.

    Perhaps they’ll all become subs of GroupOn…

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  7. “In effect, they (newspapers) are competing with the entire internet.” Very well said.

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  8. I am happy to pay for content – as long as I feel that I’m getting my money’s worth. But I now spend much less than I used to, as I feel I’m getting ripped off. Three examples:

    1. I was a subscriber to the Times Select – at $50 per year. Now a digital subscription is $250/year, so I just bypass their paywall and read as much as I want for nothing.
    2. For several years I subscribed to the Globe and Mail’s GlobeInvestor Gold at about $180/year. Then I discovered to my amazement that their free investor sites had more information, better presented, than their pay site. Now I pay zero.
    3. I’ve been a print subscriber to the Economist since I was a teenager. For the last year I’ve been reading all issues on my iPad. So when I went to renew, I figured I would cancel the paper delivery and go digital. Guess what? No reduction in price. So I cancelled and now buy single digital issues when I feel like it. I guess that this year my payments to the Economist will go from $120/year to $60.

    If they’re going to install paywalls they shouldn’t shoot themselves in the foot at the same time.

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  9. I’ve said this before & in other places, but what’s the internet for if not flogging dead horses:

    All these pieces on how newspapers are failing omit to report that titles in developing countries report that paid readership and revenues are increasing.

    A more accurate question than ‘why are newspapers struggling’ might be ‘why are Western newspapers struggling?’

    The developing world is more ‘wired’ than is often thought (although more by phone than PC), so my contention is that if newspapers are more necessary to people in developing countries, the place to look for an answer is at the content, not how that content is delivered.

    The West tends to look down on the developing world, but it’s publishers may be doing something right. Or, *shdders*, is it that fat, comfortable societies don’t really need newspapers all that much?

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  10. If you need high quality news stories or news summaries immediately via a news feed or ticker, then pay.

    If you need something in depth, say an analysis akin to a long magazine article, then pay. As an example, Slate offers 10000 or so word multi-page articles that I don’t even go past the first page. Why offer the whole thing free?

    If you are like the average schmo, you check headlines only every 4-6 hours, graze on a couple of stories, then free.

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  11. Greg Satell Sunday, May 13, 2012

    Great post Mathew!

    I would also like to add my biggest pet peeve about paywalls – the false narrative of print companies somehow getting tricked into “giving it away”

    Newspapers don’t make money on cover prices and subscriptions, in fact after print and distribution is figured in, they are lucky to break even an often lose money. Magazines are even worse. In the US, they often lose 80%-90%.

    So “free” in many cases, is actually a step up.

    - Greg

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  12. Maybe they should develop something like http://paper.li, it creates a custom “Paper” from ones feeds etc…

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  13. Is there any successful example of an Internet-only daily newspaper? HuffPo, Atlantic, Buzzfeed, Politico simply don’t generate new news on a range of beats on a daily basis. Newspapers do, and so do radiop and tv to a lesser extent. Does anything that is Internet-only?

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  14. Jonathan Strang Sunday, May 13, 2012

    I think paywalls will just result in fewer papers. The host of Postmedia regional papers are just lackluster these days. You couldn’t pay me to read the Ottawa Citizen or Vancouver Sun. The Globe is a different matter, although I think you’re quite right that they would be better off giving premium content. Heck, I’ve been shocked that their iPhone app is free. I’d be willing to pay something for that convenient access point, especially if it helped improve their journalistic content and not just go to profit margins. But the smaller Postmedia papers are doomed if they pursue this. I get better local news from the Globe and OpenFile.

    The really frustrating aspect of paywalls for me are international papers. I often reach my NYT limit, but I’m only interested in their special interest articles. Being Canadian, I have no need to read local or American news. But there’s no subscription model for international occasional readers. And if they do open up to people like me, their prime audience will figure it out quickly and complain. That just drives all of us to news bloggers. I’ve got no answers here, but you’re right that the paywall is a really unsatisfactory model.

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  15. I really don’t agree with anything you’ve said. I don’t think there is enough room in these comments for my thoughts so I’ve created a rebuttal on my blog meteredpaywall.com at http://wp.me/p2qoGx-36

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  16. Reblogged this on Metered Paywall and commented:
    Articles like these is like asking a kid why they don’t like something to be answered “just because”.

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  17. Shankar Saikia Monday, May 14, 2012

    HOW THE WALL STREET JOURNAL LOST A PRINT SUBSCRIBER

    Last year I paid $207 for an annual subscription to the WSJ (online and print). This year they were going to charge me $455 to renew my subscription. They said that I was getting a deal because the online-only was about $200 and paper-only was going to be about $430.

    Considering I spend 90% of my “news reading time” and get most of my news from blogs, Flipboard and Twitter, it did not make sense to spend $455 for a news source where I spend 10% of my time. I already pay with 90% of my “eyeballs” on the digital sources. So I cancelled my WSJ subscription. I doubt that I will resubscribe even if they offered me the old price.

    There is a price I will pay for premium online content but I don’t like overpriced paywalls.

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    1. You are not their target audience (even if they think you are). Wsj is targeting price insensitive users; which you’ve proven above is not you.

      That’s a major issue with monetization planning on publisher side: disconnect of who they want as demographic and who they get as demographic. If a publisher simply gates and gouges as much as possible with little planning they risk alienating their core demographic. This isn’t the paywalls fault but the trigger happy implementation.

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