12 Comments

Summary:

A comment about a Bloomberg story on the New York Times paywall started a debate about the positive and negative effects of paywalls that included some media industry luminaries such as the former CEO of Dow Jones and the former publisher of the Wall Street Journal.

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Debates over newspaper paywalls break out all the time, but not all of them involve a former Dow Jones chief executive, a former Wall Street Journal publisher, the current head of the Wall Street Journal‘s digital arm, the president of BuzzFeed and media writers for Bloomberg and All Things Digital. Just such a debate broke out on Sunday, however, and you can check out an edited version of it below (or there’s also a Storify version.)

I started things off with a critical tweet about a Bloomberg story by Edmund Lee on how the New York Times paywall was working “better than anyone had guessed,” which I contrasted with a post of mine about the decline in traffic to the NYT site (as measured by comScore) and what appeared to be a corresponding decline in advertising revenue — including digital revenue. Edmund responded that his story said circulation revenue has made up for the shortfall in ad revenue.

Edmund is right, of course — he did mention this in his story, using numbers from an analyst (which of course are estimates). And so I acknowledged that saying he “ignored” the shortfall was too strong — but still, his piece made it sound as though all you have to do is put up a paywall and your problems are solved, which I think is a Pollyanna-ish viewpoint. At which point, Josh Sternberg of Digiday noted that ad rates haven’t gone up at the NYT, as detailed in his recent post, even though that was the assumption on the part of many paywall advocates — i.e., that a paying audience would be worth more to advertisers:

At this point, I made the same point I’ve tried to make before about paywalls — that they aren’t a solution for everyone, and that even for those where such a strategy is working, they can’t be the entire strategy:

Peter Kafka of All Things Digital also jumped in to confirm that the NYT says the paywall has had virtually zero effect on ad rates:

Raju Narisetti, head of the Wall Street Journal’s digital unit, responded that one rationale for paywalls is that it allows newspapers to learn more about their readers, and thus hopefully target ads better — which is part of why I am in favor of membership-style approaches rather than blanket paywalls:

I noted that the latest estimates are that the online advertising market grew by 18% in the third quarter to $9.3 billion, and yet few newspapers — including the NYT — have seen anything like that kind of increase. Why?

Former Wall Street Journal managing editor and co-founder of paywall provider Press+ Gordon Crovitz then chimed in with a stat about how most paywalled sites see as much as a 30% premium for their ads — raising the obvious question of why the NYT hasn’t seen that:

Bill Grueskin — former WSJ deputy managing editor and now academic dean of Columbia’s journalism school — also jumped in to add that paywalls can harm a content business because they reduce the number of readers, and that affects the scale of the business:

At which point, former Dow Jones CEO Les Hinton said that quality is more important than scale:

And Crovitz came up with what for me was the quote of the day regarding ad rates and the newspaper business:

I suggested that it would be nice to see the industry spend as much time and resources on trying to get creative about advertising instead of just writing off the whole business as a lost cause, and Jon Steinberg — president of BuzzFeed — agreed:

And Grueskin said that the biggest issue for newspapers and advertising is that they no longer have the kind of pricing power they used to when they controlled the platform:

Post and thumbnail photo courtesy of Flickr user Giuseppe Bognanni

  1. I already tweeted the answer/reason/cause on this earlier to you Matt. If you know my background, you can see it is a more informed POV than anyone else with whom you conversed; who truthfully are all cheerleaders. This all boils down to advertisers judging success on click-through’s. “Quality of audience” as measured by someone sitting behind a paywall is thus irrelevant. I understand that the truth is not as intellectual as anyone prefers, but that’s the real answer.

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    1. Greg Golebiewski Monday, December 24, 2012

      Get used to it, jasonkrebs, the so called paywall discussion has never been about numbers or facts — it is all speculation by the same usual suspects mentioning the same few examples of either “enormous success” or “dismal results” over and over again. And, until we have a third party’s verifiable data on the 300+ publications behind paywalls — including the cost of acquiring a new sub, its life time value and churn — it will be like that.

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      1. “until we have a third party’s verifiable data”

        What do you think of Quantcast’s openly available viewership data (and underlying methodology)?

        It isn’t (directly) cost or revenue data – but it is something.

        (And I’m the guy who constantly goes on and on about churn…)

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  2. Timothy Poplaski Monday, December 24, 2012

    I’d gladly pay for the NYT. Just not what they’re asking. I figure about $12, maybe $25 a year. The $35 a month that they demand is laughable.

    1) They have effectively no distribution cost to reach me
    2) They aren’t (by far) my only news source – one can only cough up $12 a year so many times
    3) The news is a commodity, what the NYT has is better, more honest (IMHO, you’re welcome to disagree), more intelligent and better researched delivery. And Paul Krugman.

    #3 I think is the big point, these places aren’t selling “the news”, their selling their “special sauce”. Whether that’s a liberal or conservative spin, or deeper better writing, or better opinions, what they’re adding on TOP of the news is the value their bringing. Which is why only fairly well off people or true believers in the “special sauce” will ever pay more than a few dollars. Given that both groups are limited in size, so is the success of a high priced paywall.

    Honestly, if it wasn’t so easy to get past the paywall, I’d just have stopped reading them at all.

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    1. That’s it in a nutshell, no? It’s not the news, it’s the quality and the uniqueness of content (“special sauce”) that defines value. A local news organization that pads-out its volume with wire-service filler is serving-up the equivalent of sawdust-filled gulag bread to a non-captive audience.

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    2. “Honestly, if it wasn’t so easy to get past the paywall, I’d just have stopped reading them at all.”

      Heh.

      1) Why do you think they made it so easy to circumvent the paywall?

      2) Precisely because making the paywall into really more of a “picket fence” (1 foot tall) keeps their uniques and pg views/month up (mitigating hit to online ad revenue).

      3) The NYT “playwall” isn’t really about keeping people *out* – it is really about keeping people *in* (you know, like the Berlin Wall).

      4) The NYT’s unspoken goal – Slow the loss of NYT paper addicts to the untolled web (NYT and otherwise) while mitigating the concomitant loss of online drive-by readership that they still want to sell online CPMs against.

      The NYT playwall is designed to do that exactly.

      5) The paywall is designed to (slightly) impede the habitual NYT page-turners (for whom the NYT is viewed as some sort of secular bible) from doing the page-after-page thing without some sort of impediment (which can be lifted by paying a toll). All without turning away the “unique”-spiking drive-by reader (referred by Facebook, Google, etc).

      Granted, the NYT page-flippers can circumvent the system as well…but it is an impediment that the NYT has been able to monetize.

      6) Also, the paper-era page-flippers may – as a class – be less sophisticated about *how* to dodge the paywall – they get electric-access for *free* – so long as they *keep the paper subscription*.

      7) And thus we have arrived at the *true* motivation of the paywall – *keeping paper-subs buying the paper…by telling them they are getting a “premium” of “free” online access*.

      Point #7 is why I am so, so very cynical about the NYT’s unwillingness to disclose *detailed* (and not just top-line) data about the “success” of the paywall.

      By being able to conflate allegedly online revenue sources behind an opaque curtain, the NYT can make the paywall look like much, much more of a success than it really is.

      For instance – are the ballyhoo’ed paying online-subscriber numbers actually *pure* (no paper-subscription) online subs – or, do they include the huge army of long-term paper-based subscribers who have now (motivated by the pay wall) officially signed up for online access?

      I don’t think the NYT has ever been crystal (non-Clintonian) clear about this (or online subscriber churn, tenure, etc.).

      If the paywall were an undiluted, un-manipulated success – I’m pretty sure the NYT would be shoving reams of data down everybody’s throat.

      Not playing Wizard-of-Oz behind a curtain of aggregated stats.

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  3. I visit a wide variety of news sites. I simply can’t afford to pay each one a fee, so if sites put up a ‘paywall’, they lose me as a visitor.

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  4. Barry Graubart Monday, December 24, 2012

    Keep in mind that for the NYT, one of the key drivers for the paywall was to slow the print erosion to prop up print advertising revenue in the short-term. That’s why the cost of a Sunday-only print delivery subscription (like I have), which includes the “all access” digital is less than a third of what it would cost for digital only. The value of propping up the Sunday print edition, which goes right into my recycling bin, is important to them.
    It’s the same reason why Cablevision put a paywall up at Newsweek, but lets Cablevision subscribers access it for free. It was viewed as a barrier to switching to FIOS or Dish for customers in Long Island.

    Will that strategy work for everyone? Of course not. But for the Times, it seems to be working pretty well in the short-term. Of course, they can only stave off print erosion for so long, so will need to come up with other strategies to gain new tablet/digital subscribers. And there’s a whole generation growing up who have no allegiance to any one news source, who will be even more difficult to attract.

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  5. I can’t say I really understand this argument. The NYT is a premium product that is hugely expensive to produce, so if you want it you have to pay the premium (which is a hell of lot more than $25 a year). If not enough people are willing to pay then it won’t work, but that is true in general about the NYT (and has long been true) no matter what the details of the business model. We already know that digital ad revenue alone will not support the NYT newsroom in anything close to its current form and no amount of “creativity” in advertising products is going to alter that (and Buzzfeed is hardly evidence to the contrary). So there is not really much of a choice in the end for the NYT. And what works or not for the NYT says very little about what will work for others, given the enormous (and growing) quality gap that separates the NYT from every other newspaper, and the fact that most newspapers, unlike the NYT, are local businesses. Finally, whether it’s a “membership” model or a “paywall” is really an issue of semantics and pricing details; a membership is just a subscription by another name, one vs. the other is thus a tactical question, not a philosophical one.

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  6. @Jonathan — news organizations produce content that has a cost structure not unlike that of the software industry: it’s expensive to produce the first unit (software in a package, software download, news story printed, news story online) but the marginal costs of producing the second … nth unit approaches zero. It’s the nature of information.

    What @Timothy is presenting is logical from the point of view of a buyer …. and actually matches the theoretical pricing model in perfectly competitive markets. Price at marginal cost. And the marginal cost for one more reader of an online story (digital edition) much more closely approaches zero than one more newspaper being printed and delivered (either to a distribution slot or home). Marginal cost pricing: http://www.britannica.com/EBchecked/topic/364710/marginal-cost-pricing

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  7. The marginal cost of one more newspaper is also close to zero. Does that mean they should give away print subs? I actually agree with Timothy. If not enough people will pay a premium for the “special sauce,” I.e. far superior (not commodity) news coverage, then they are doomed.

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  8. I think the issue of advertising through the value of user interest and for that we must assess the user’s interests.

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