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Summary:

As media-industry veteran Alan Mutter points out, the vast majority of newspaper paywalls are only reaching a tiny fraction of the overall potential audience, which is a problem for a growing number of publishers that are relying on them

As advertising revenue in the traditional media industry continues to decline, more and more newspapers and other publishers are putting up paywalls of various kinds — porous ones, rock-hard ones and loosely-metered ones. But veteran media executive and analyst Alan “Newsosaur” Mutter has some sobering news: while some newspapers like the New York Times are reaching a substantial number of readers with their metered plan, most other newspaper publishers are likely only going to get a tiny fraction of their readers to pay.

Take Gannett, for example. The newspaper chain is the largest newspaper publisher in the U.S. as measured by circulation, with more than 81 daily papers, and it has been betting heavily on paywalls to drive additional revenue at its various properties. So after two years or so of trying to push its paywall strategy, how many of Gannett’s newspaper readers have been convinced to sign up for digital access? According to Mutter, that number is a little over 2 percent.

People pay for entertainment, not news

When it comes to the broader market of people paying for access to media content, Mutter notes that even the New York Times — which has had a remarkable amount of success with its digital-subscription plan, with almost 35 percent of its total readership paying for online and mobile access — pales next to a giant like Netflix, which has approximately 40 times more subscribers than the NYT:

Netflix vs. News

This might seem like an unfair comparison, since Netflix specializes in entertainment content and not news, but I think Mutter’s point is a good one: plenty of people are willing to pay for movies, TV shows and music, but a dramatically smaller number of them are willing to pay for news. Why? In part, because those other forms of content are, well… entertaining. News, in most cases, is not. Many consumers are more than happy to watch or listen to the same TV show, movie or song multiple times — something that almost never happens with a news story.

“Given their importance and power, you have to wonder why the Journal and Times aren’t doing better. But the simple answer may be that most consumers would rather pay for movies and music than for news, which is widely available for free at any number of sites ranging from Yahoo and Google News to Huffington Post and the Drudge Report.”

Find other things to charge for

For Gannett — which Mutter argues is large enough to be a rough proxy for the U.S. newspaper market — most of its titles are getting low single-digit numbers of people to sign up for their paywalls. Some newspapers appear to have decided that putting a wall around their commodity news is a bad strategy altogether: the San Francisco Chronicle essentially dismantled the paywall on its news site earlier this year, and is trying to develop a separate site with more unique content.

Mutter’s analysis fits with the results from a global survey of people’s attitudes towards paying for news that the Reuters Institute for the Study of Journalism did earlier this year: it found that on average about 5 percent of people were paying (although in certain countries that number was as high as 20 percent), and that less than 15 percent of those surveyed said that they could ever see themselves paying for online news content in the future.

One possible solution to this problem, as Ken Doctor has pointed out, is to stop trying to sell just access to the news and think of other things you could sell — such as access to your journalists on special topics, events and other types of content.

Post and thumbnail images courtesy of Shutterstock / Voronin76

  1. very well written and understood … innovation is needed, but big shots are too lame to try a few things

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  2. I glossed over the article briefly, but the reason Netflix does so well is not because it’s entertainment. It’s because they’re offering up something that you can only get in a few other places on the internet (legally) and they do it well. Apple, Amazon, Netflix, that’s about the only places I know to rent shows or movies in qood quality and legally.

    By comparison, there are 9,203,834 websites (give or take one or two) that offer similar news stories. That’ll never change, therefor people paying for news will always remain exponentially smaller.

    It’s got nothing to do with wanting to watch things multiple times.

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    1. I believe Frank hit the nail on the head. It has been demonstrated over and over again on the Web. People will pay for content that is compelling, reliable, and exclusive. News, as reported by many news organizations is usually compelling, sometimes suspect when it comes to reliability, and is almost never exclusive.

      Many organizations outside the pornography industry have made, and continue to make a lot of money charging for online content. America Online and Consumer Reports spring to mind. They know and understand the rules of the Web when it comes to charging money for content.

      The author is also correct. Human events (aka News), almost by definition aren’t exclusive anymore given the worldwide penetration of camera phones combined with social media.

      I’m continually amazed that the leaders of newspaper organization, either because of ignorance or hubris, continually violate the rules of the Web related to paid content and then over-and-over again act surprised when their pay wall initiatives fail because they’ve failed to deliver content that is compelling, reliable, and exclusive.

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  3. The general news industry will always have more of a challenge monetizing itself than the entertainment industry. There’s an inherent balance in news — making news free to satisfy the public good, vs. making it paid and targeting a narrower niche of users. Entertainment does not face this challenge. There is no public mandate inherent in a movie or TV show. The Netflix vs. NYT subscriber comparison is awkward and irrelevant.

    So then you have to ask, is a 2% subscriber rate enough to make a digital news site viable? Does that provide enough revenue to cover costs and provide a profit to shareholders/ownership? That is the true measure of success in the news industry — profitability balanced with the public good. To expect the 100% subscriber rate of something such as Netflix is to leave out half of the purpose of a general news site.

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    1. Netflix is Netflix, but apart from a boring Huffpost TV there hasn’t been any real innovation though real news & stories could even take out reality tv ratings with ease … But as said, no balls or funds for innovation will cement the further decline regardless of pay walls whatever.

      Nowadays it is dirt cheap to produce great news shows with real value, but hey the giants know it all and ain’t interested until it takes off …

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  4. The simple solution for the newspaper business is differentiation. Why does your paper exist? What does it provide it’s readers that they cannot get elsewhere? Can you provide value at a reasonable cost?

    If I am interested in getting international news, I’m not going to the SF Chronicle for it. But if I want to know about The America’s Cup or a local school closing or a shooting in the mission, I might. Make it easier to find the local content that you should be good at and ditch the expenses for content that can be found elsewhere. Local politics, scandals, business are very interesting … mix it up and you create value that people will pay for. Trod along with a boring regurgitation of what EVERYONE else is providing and no one will care or use your service.

    I would also look to email list models that are very popular for things to do … restaurants to go to, local events … those are very specialized and can be built up to be very strong brands.

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    1. Very well said, Will, and 100% true. What insight does my local small-city daily have about the Middle East? Why am I paying subscription rate for a half-page clip-art picture of a stethoscope? Why oh why did my local paper decide it was a good idea to report movie titles in print but restrict the show times to their web page (did they think it would make me go there? The theater, Fandango, and lots of other sources have the times – all that trick did was make me mad at the paper.) Why is the lead story in the Faith & Values section a wire-service piece from San Antonio? Did they have to go that far to find a lead? Newspapers seem to be going through the motions these days. Journalism will survive in some form, but newspapers clearly won’t.

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  5. Well said … Internet TV is about to reshuffle all kinds of media and industries and the whales are still slow, but not forever as mobile devices will take over. Folks will be watching it whenever on the road at least in Europe and Asia where costs are very low. Free at airports, on trains, planes, buses etc.

    Completely new dimensions when old school tv and new school will battle.

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  6. Often people who write about paywalls fail to recognize that Apple’s Safari over-rides them with its Reader. @BarryKiefl on Twitter

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  7. MI,

    I enjoy your work a lot but I think you are off base here.

    Netflix doesn’t vastly outdistance news outlets because of the “entertainment” factor – it does so because of copyright.

    Even with its studio crippled, limited inventory, Netflix online provides one of the few portals to legally protected materials (films and TV shows).

    News events, by their very nature and legal ruling, have nowhere near this level of legal exclusivity.

    Thus, a *huge* number of news suppliers are out there – driving prices down to near zero.

    There is only one Netflix (*someday* there may be one online channel for each content holder with a substantial library – there are maybe 6 to 10 in the US).

    It isn’t willingness to pay – it is restriction of supply.

    Think about it – movie reviews are entertaining.

    How many movie review sites online are making a fortune from subscriptions?

    I believe that number to be…zero.

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    1. That’s a really good point — exclusivity or scarcity is a big part of the picture as well. Thanks for the comment.

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  8. Newspapers could generate some extra revenue just by programming their websites to remember every article that their readers print or email. Then these articles could be resold to the readers in an ebook or print on demad paperback book. Some or many readers will be willing to pay a small fee for the privilege of becoming an editor of a book filled with info that they think is important. This option will make them loyal readers always ready to add another aritcle to their personal book. Therefore they will look at more webpages and see more advertising. The newspaper could also email these followers periodically with other products for sale.
    —-
    But no one in the news media will listen to my ideas because I don’t know the secret handshake.

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  9. We pay for news all the time, with our time…

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  10. These statistics are misleading because they don’t account for the paid print subscribers newspapers already have. With most paywalls, these existing subscribers also get access to the digital platform.

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