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Summary:

Critics of the Washington Post say that the only approach that will solve the newspaper’s financial problems is to put up a paywall around their content like everyone else — but while that might buy time, it’s not a long-term strategy for new-media success.

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As paywalls continue to spring up at newspapers both large and small, like mushrooms after a rainstorm, those who have chosen to take a different path — the Guardian in Britain, the Washington Post and Digital First Media in the U.S. — start to stand out from the crowd even more, and inevitably their decision gets painted as a failure to adapt or a sign that they are not very bright, or both. A recent post in the Columbia Journalism Review takes this tack on the Washington Post, saying the paper has to set up a paywall immediately or risk disaster. But this focus on a paywall as a magic solution misses the point about the larger risks facing both the Post and the industry as a whole.

In his piece, Dean Starkman of the CJR uses the departure of editor Marcus Brauchli as a hook for his argument that the Post needs to have a paywall. He tries to make the case that editor’s removal — over what appears to have been a disagreement about cost-cutting at the money-losing paper, among other things — is just a smokescreen, and that the real issue is that publisher Katharine Weymouth and CEO Don Graham’s decision to avoid a paywall amounts to a “strategic failure.” As Starkman describes it:

“The paper has become the American newspaper industry’s poster child for the folly of clinging to a free digital strategy… As Monty Python would put it, the free strategy is a dead parrot. The illogic of giving away something online that you charge for elsewhere is now coming home to roost.”

Of hamster wheels and original sin

In just a few paragraphs, the CJR writer manages to hit nearly all of the major notes of the pro-paywall lobby: namely, that the free approach to content has been proven to be a total failure (Starkman later also reiterates his argument that free content turns newsrooms into a virtual “hamster-wheel,” which I have taken issue with in a previous post), and that publishers of all kinds were wrong when they committed the “original sin” of not charging for their content in the early days of the internet, a theory that others have successfully debunked a number of times.

Starkman also dismisses the idea that there is any value in the digital-first approach, arguing that the recent bankruptcy filing of the Journal-Register Co. — a unit of Digital First Media — proves this beyond dispute (even though it only affected a small portion of the larger company and was a symptom of the legacy-cost problem that all newspapers suffer from, rather than a problem with a digital-first model). He also dismisses the proposed solutions that I and others have suggested, such as a membership or “reverse paywall” model or any attempt to reinvent what the Post does:

“To say, in the absence of supporting data, that the answer for the Post is to ‘commit’ to an anti-paywall strategy, to ‘push the innovation meter to 11,’ and make ‘digital first a core mandate’ is to say nothing at all.”

In other words, Starkman sees only one potential path forward, which is that the Post has to erect a paywall just like everyone else, and that this will solve its financial problems better than any other competing strategy. But is this actually true? For all his commitment to arguments that are based on facts, there is little to support Starkman’s conclusion — except the argument that the New York Times has a paywall and it seems to be doing pretty well, which is the same argument that newspaper publishers all over the U.S. are using to justify erecting them, as though anything that works for the NYT will work for them.

Sandbags don’t solve a rising-water problem

sandbags

Does that mean the Post will have similar success, or that other strategies are not worth pursuing? I don’t see how. I’ve tried to make the case before that paywalls are a sandbag strategy — one that can help keep the rising waters (in this case, the ongoing rapid decline in print advertising revenue) at bay, but not much else. Sandbags don’t solve a rising water problem, just as paywalls won’t get rid of a declining revenue problem: you need to figure out how to get the water to stop coming in, or find out what is causing it and adapt to that. Paywalls do neither.

Even the New York Times — which has what is probably one of the world’s most successful paywalls for a general-interest newspaper — is finding that the revenue from its plan is barely keeping pace with the decline in print revenue, and meanwhile digital ad revenue is also falling (possibly as a result of the decline in traffic caused by the paywall, as I described in an earlier post). As former news executive Alan Mutter notes, the failure to adapt to the rise of digital advertising is the biggest single long-term problem that newspapers have. Will a paywall solve that problem?

If what Starkman envisions as the future of the Post is a much smaller entity that subsists primarily on reader subscriptions, then that’s fine, but that’s not what he’s saying. He seems to be suggesting that a paywall can somehow stop the bleeding (i.e. the declines in revenue) and remove the need for cuts to payroll, and maintain the Post‘s presence as an “important institution” in national journalism. But unless it achieves unheard of success — beyond even that of the New York Times — there is no way a paywall is going to accomplish all of those things.

In an essay about the Post that Starkman (wrongly) cites as support for his case, Clay Shirky talks about the problem confronting the newspaper, which is a smaller version of the same problem that is confronting the entire industry: namely, the fact that the way information works has changed, and newspapers have to figure out how to give up their traditional role as gatekeepers of that information and find a new role where they can add value. Starkman’s urgent advice that the Post immediately put up a wall around its content does exactly nothing to solve that larger problem.

Post and thumbnail images courtesy of Flickr users Zert Sonstige and the U.S. Army

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  2. The rising-water analogy is apt. It’s like the dam has burst and water is flooding the valley. All the bit players and poorer families have been submerged. The better-off have fortified their dwellings and are safe – for now. But the water is still rising. Newspapers can either flee or adapt to their new circumstances. Fighting the inevitable will lead to failure.

    I live in DC and want the Post to survive. The current Post website is a usability nightmare, an ungainly structure of articles, blogs, comments and ads all mixed together with what seems like absolute randomness. Ironically, the Post publishes a free paper called Express. It’s simple and well-designed. That’s the model that they should follow. Simplify their business – why have a giant building full of people downtown? Why not do everything remotely? And then simplify their website to concentrate on what they do best, which is covering Washington’s impact on the world.

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    1. Some great points, Joe — thanks for the comment.

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  3. so what should the post do?

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  4. As I keep telling people, most of whom respond with a blank stare, we get the journalism we deserve, especially if we’re unwilling to pay for it.

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    1. We do pay for it, the same way we always have — with our attention, which is the only truly scarce (and therefore valuable) commodity online.

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      1. Yeah, well, attention doesn’t feed anybody. And neither does $4 CPM.

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      2. My point is that attention is the only thing that can be monetized — and if banner ads aren’t doing it, then maybe we should think of other ways to do so, instead of just slapping up a paywall and thinking we have solved the problem.

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      3. Attention does feed people– just like it does on television, on youtube, on facebook, on google, and frankly as it has in newspapers and magazines, it does so through advertising. It’s not as though we didn’t have decades of a model of content paid for not by subscription, but by advertising: it was called the golden age of television. Saying that suddenly a paywall is the only successful model, when in fact it is the *only* unproven model, is deeply silly. Also, we are hardly getting the journalism we deserve; the place *that* is coming from these days is the independent, non-paywall media, not the corporate-run view-from-nowhere-ists who specialize in telling us the establishment consensus. Please.

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    2. Attention does feed people– just like it does on television, on youtube, on facebook, on google, and frankly as it has in newspapers and magazines, it does so through advertising. It’s not as though we didn’t have decades of a model of content paid for not by subscription, but by advertising: it was called the golden age of television. Saying that suddenly a paywall is the only successful model, when in fact it is the *only* unproven model, is deeply silly.

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      1. Sure, attention is monetized through ads, but like I said, $4 CPM is no way to feed your family.

        And who said a paywall should be the only strategy? No one, that’s who.

        It seems just as silly to say it’s the one solution that shouldn’t be employed.

        The persistence of this writer and others to contend that paywalls just can’t work, won’t work or shouldn’t be tried baffles me. A lot of people said it couldn’t work at The New York Times, and now people are saying it can work _only_ at The New York Times and nowhere else. Well, guess what? We’ll find out. Just as we did with the New York Times.

        Oh, and let’s not forget that GigaOm has a paywall.

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      2. GigaOM doesn’t have a paywall, Chuck — it has a proprietary research arm called GigaOM Pro, which produces in-depth research on industry sectors on a subscription basis. In other words, it is a completely separate content business that is related to the free (or ad-supported) part of our business, which is a model I think more media companies should pursue.

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  5. The future of content is data walls.

    Newspapers should be acquiring interest graph data.

    Enables them to sell native, social, and commerce-fueled products.

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    1. Great point, Chris.

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  6. Greg Golebiewski Monday, November 26, 2012

    It does not miss the point, not completely.
    It is true that digital subscriptions work for a relatively small group of readers, about 1% of the monthly uniques; paywalls have other problems as well — however, when you add on demand micropayments, and opt-in advertising, the paid-for site’s outreach and conversion increase to 20% of its pre-paywall audience. The WoPo should try the three-pronged approach. It works.

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    1. Thanks, Greg — I agree micro-payments for specific content are something more media companies could stand to experiment with.

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      1. Greg Golebiewski Monday, November 26, 2012

        It is not micropayments alone, as it is not a long-term subscription only. The key is to try several different models. Each works differently with different populations and/or kind of content. One day it will be so obvious.

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  7. Since you raised the legacy cost problem, how will pensions, retiree health care, etc., be paid for in a digital-first world?

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  8. Mathew – I am deeply moved by your brave (and truthful) writing.
    I have read you for years – you’re the best.
    You also care deeply about the media industry. You’re right on this.
    Yours, @teawithcarl
    Carl Levinson
    http://alpha.app.net/teawithcarl

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    1. Thanks, Carl.

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  9. Mathew – I am deeply moved by your brave (and truthful) writing.
    I have read you for years.
    You also care deeply about the media industry. You’re right on this.
    Yours, @teawithcarl
    Carl Levinson
    http://alpha.app.net/teawithcarl

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  10. Mathew, really? We pay for newspapers with our attention? Seriously? How did that work out for newspapers pre-internet? Oh right, people bought the newspaper to read ‘em. Ok, so the paradigm has shifted and papers have to adapt. Does the WP have the branding to support a pay-wall. Absolutely. Does the Bergen County Record? Maybe not so much. But clearly banner ads are no longer the solution and with rising legacy costs, there had better be a solution or the public will end up being served by bloggers who base their “facts” on their opinions or on the opinions of other bloggers, a vicious and self-serving circle. Instead of decrying pay-walls, come up with a better solution.

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    1. Circulation revenue accounts for only 20-30% of total newspaper revenue. Mathew is absolutely right that newspapers primarily support their work through reader-user eyeballs (i.e. “attention”) sold to advertisers (70-80% of revenue).

      Also, the current revenue mix showing ~30% from circulation is only because advertising revenue has cratered so dramatically. The big pie that once was is now more like a tart, going on tartlet.

      http://stateofthemedia.org/2012/newspapers-building-digital-revenues-proves-painfully-slow/newspapers-by-the-numbers/

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    2. David, as you probably already know, the subscription fees that readers have paid only accounted for a fraction of the cost of a newspaper — the rest was paid for by advertisers, who based their deals with newspapers on the attention that the paper could bring to their ads. That’s what I mean by paying with attention. Should newspapers just throw out that entire model and try to subsist on reader subscriptions alone? And if you have read anything I’ve written on this topic, you will also know that I’ve provided plenty of alternative approaches, which too few newspapers are trying in my view.

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  11. Garve Scott-Lodge Tuesday, November 27, 2012

    The main problem with paywall is that they don’t recognise the reality of most ‘news consumers’ today. Most don’t want their news from a single source. I’m in the UK, I might read a single WaPo article a month. I’m never going to pay for a subscription. Here’s my solution.
    http://garve.scott-lodge.com/blog/index.asp?id=4

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  12. Absent in the CJR article: what exactly does the Post do that’s worth paying for? At this point you can get better politics coverage elsewhere. The sports coverage is good but it’s not like nobody else is writing about D.C. sports. WaPo is famously terrible at covering local news in the suburbs. The Style section has some unique stuff but it’s a shell of its former self and not exactly giving readers a burning desire to come back day after day. If you want inside coverage of the federal government there are niche publications that cover it better. Who is going to pay to read the Post online?

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    1. That’s a great point, Scott — if you are putting up a paywall, your content is going to have to meet an increasingly high bar, and many newspapers aren’t prepared for that I don’t think. Thanks for the comment.

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  13. The idea that the Post gives away for free what they charge for elsewhere is fundamentally wrong, given that the Post is only available in its region as a paid print product. 85% or more of the website’s audience is national. The question is, does that 85% care enough about what the Post writes to pay for it? Remains to be seen.

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  14. Matthew, what GigaOm offers through Pro very much resembles enterprise journalism — behind a pay wall. I’m not sure how that’s different from a newspaper walling off a certain amount of content it deems worth paying for.

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    1. Chuck, I don’t think GigaOM Pro resembles any paywall out there right now — although it does resemble some of what the Economist does with its market intelligence unit. We’re talking about 50-page in-depth industry research, not a column by a market reporter. I think newspapers would be better off thinking about that kind of offering, not a paywall around their commodity news content.

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  15. Although I really appreciate all the theories about how to make newspapers survive. The real problem – according to me – is that there are just way too many newpapers and news sites. News has commoditized and due to the Internet too many businesses think the solution is to jump to the adfunded and social engagement ship. Well the thing is, even with all the attention in the world, that ship is going to be overcrowded. I can’t believe that paying a premium for my shoes, clothes, tools and cars to keep those companies being able to spend an awful lot on advertising is going to carry on for another 15 years. Despite all the strategies, the market will just wipe-out a lot of established players and newcomers until we have a healthy balance again. There is just too much focus on all the individual players and revisionistic approach about what seems to be working. For me, most activities on the Internet are unhealthy financied. It leads people to believe that things are actually free and the value has gone out of the window. You can become very rich with that for the moment. But you rely on the fact that companies selling “physical” goods keep spending an awful lot of money to make their name known. Something, which the Internet has actually proven, is not required at all.

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  16. With the value of those mastheads not on the national radar screen rapidly diminishing, and the industry flocking to gimmicks in order slow the demise of print, I’m convinced it’s time we allowed the marketplace of readers to decide if and when the individual pieces of content produced should be monetized. Not sure how a story or video achieves maximum viral interest and is talked about around the kitchen table or water cooler if parked behind a paywall, and keeping score of how many stories I’ve read or viewed during a publisher-defined period of time is an instinctively negative experience for consumers and technologically porous in practice. And just how many sites will a consumer subscribe to in order to read or view what they want to consume?
    Maybe not yet Armageddon, but the issues mainstream publishers face are debilitating and their way of doing business today, unsustainable: aging printing presses reaching the end of their useful life with a negative future ROI; employees cleverly but indefensibly disguised as independent contractors delivering their products; an archaic belief that readers will continue to support a masthead simply because of its one-time relevance and legacy; and the stark realization that with each readership study commissioned, the demos relied on for their very existence are looking even less like the audience advertisers demand they reach.
    With the proliferation of metered paywalls, the vast majority of media companies appear intent on writing another Darwinian chapter in their history by following the big publishing dogs over what could well be a fiscal cliff of their own making.
    It’s time for innovation that gives publishers the tool to create a new revenue stream based on monetizing individual pieces of content that are credible and virally-certified by the marketplace of readers as worth paying for, rather than replicating failed subscription models of the past.
    Steve Staloch
    President & CEO
    Tolltrigger, LLC

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  17. Peter Weinberger Friday, December 7, 2012

    It’s the statement about “adding value” in the last paragraph that’s the issue. When value is added, a paywall can make sense because readers will pay…or subscribe. Our community newspaper is not as general as these dailies, but the issue of value is the same. Our subscriber base has stayed strong because we add value with all our products…print and online. But without our paywall, we could not generate the revenue needed to pay for a staff producing quality content. But I agree that you just cannot use a paywall to stop the bleeding. That’s like trying to make your products better by slashing budgets.

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