But Greg Golebiewski, the founder and CEO of a micropayment provider, thinks this conventional wisdom is wrong, and that media companies are missing a lucrative opportunity.

Golebiewski’s company is called Znak It, and he says he has spent the past five years or so trying to convince publishers and media companies of all kinds that they should at least experiment with micropayments — and that they could actually make more from such a model than they do from a paywall, while also attracting new readers who might never get beyond the subscription barrier. But with only a handful of clients using his system, most of them located in eastern Europe, the Znak It founder is still very much a lonely voice crying in the media wilderness.

“I’ve been trying to sell this idea for the past five years — it’s extremely difficult to break that notion, the theory that micropayments don’t sell. [Critics] don’t have any data, it’s just conventional wisdom or common knowledge, but it’s very difficult to go to them and say we have a flexible system for payments and then when they figure out it’s micropayments, they stop listening.”

Micropayments equal being “nickel and dimed”

The idea that micropayments are unworkable for content stems in part from a piece by media theorist Clay Shirky in 2009, in which he said that users “don’t like being nickel and dimed.” The psychological friction created by this perception, he said, meant that very few people would go through with a micropayment for content. Suggestions that Bitcoins (as described recently by Jeremy Liew of Lightspeed Venture Partners) or some other system could make the idea more feasible are routinely dismissed by media-industry insiders.

Golebiewski, however, says that his research shows that when given a choice between a paywall or micropayments, readers are overwhelmingly in favor of paying for specific pieces of content rather than signing up for a monthly or annual subscription plan — and that this is particularly true for younger users, who are often thought to be opposed to paying for content online.

Znak It published a white paper last year (PDF link) based on the results of five pilot projects involving a variety of different kinds of media such as videos, music and text content. Out of a total of 43,000 unique users there were 1,281 buyers and the largest single group was 18-24 years of age, although that number could be skewed because music was part of the trial. In that age category, as many as 5 percent of the unique users wound up becoming buyers (paywalls usually get about one percent conversion).

Part of the problem for Golebiewski and Znak It is the chicken-and-egg factor: there are so few companies using micropayments that it’s difficult to come up with any comprehensive research to prove that they work. Znak It’s white paper is based on such a small sample size that it’s hard to use it as an argument for why the New York Times or another newspaper should go with the micropayment model. But the Znak It founder is adamant that publishers need to try it, if only to increase their reach.

This is a challenge that I discussed in a recent post — the idea that paywalls are good for monetizing your existing readers, but not particularly good for encouraging new readers (apart from the occasional dropping of the wall for breaking-news purposes). Part of Golebiewski’s point is that allowing readers to pay for a single article encourages browsing, which makes it more likely someone will convert into a regular paying customer.

Micropayments aren’t a quick fix

The Znak It founder admits that he has so far only had success with a few eastern European media companies — including a national weekly publication in Poland (where Golebiewski is from) and some small newspapers in other countries — and blames this on the deep-seated dislike of micropayments in North America.

“We started in some of the countries in eastern Europe and elsewhere that were a bit more responsive to our ideas — a bit more desperate if you will. It was easier to go to those smaller countries and start there, they’re a little more open to experiment — they don’t have the big brands and massive traffic, so they are a little bit more receptive.”

The company’s system has two different models: in one, users create accounts with Znak-It and can then use its payment process with any site that supports it, while the second is an “earn free access” option in which advertisers subsidize access for readers who provide some kind of information or engage in some kind of task — such as reading through an ad or filling out a survey. Part of the challenge for Znak It as a small provider is signing up enough clients to make it worthwhile to have an account there (Google has also experimented with micropayments via Google Wallet, and has a “survey wall” service as well).

Despite his lack of substantial progress, however, Golebiewski says he remains convinced that some form of micropayments has to be part of the future of media and content online, since subscription models are only going to appeal to small sub-segment of the total population:

“Many publishers are looking for a quick fix, and I don’t think this logic we are trying to sell is attractive enough — but it will be. It’s inevitable. Maybe if we don’t call it micropayments, maybe we should call it flexible payments. But study after study shows that flexible payments are more popular with users… it has to be the future of the internet as a marketplace.”

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A hard paywall is a cornerstone of that model, said Spitz — who along with Kushner acquired the Register and various associated local papers last year. While many publishers have put up walls that are somewhat “leaky,” in the sense that readers can get in via social-media links and also get a certain number of free articles per month, the Register‘s paywall will be about as hard as they get — non-paying readers get nothing (although they can pay $2 for a 24-hour pass if they don’t want to sign up for a full membership). Says Spitz:

“I fundamentally don’t agree that a newspaper should be in the business of giving away its content to everyone who wants it, regardless of whether they are paying for it — McDonald’s doesn’t give away its burgers, and Boeing doesn’t give away airplanes. When it comes to life and death matters (fires, floods, earthquakes) we have built a mechanism where we can unlock any article and any section, and we will do that as a public service. But do I believe as the owner of a newspaper company that I have a public duty to give my content away for free? I absolutely do not.”

Content is for paying customers only

As part of its commitment to charging for all of its content, the Register has also cut back dramatically on the number of blogs written by reporters or editors on various topics: according to Spitz, the paper used to have over 100 and it killed all but 10 of the most popular ones, a move that at least some of the paper’s writers don’t seem all that pleased with. But the Register executive said it is part of the fundamental focus the paper’s owners have — which is that the only thing that matters is the subscriber, not the advertiser or the larger social “conversation” around the news.

But doesn’t blogging and using social media to engage with readers have value apart from just driving traffic to the website? Doesn’t that have value for journalism and the media in general as well? Spitz says he isn’t convinced:

“If you’re asking me whether I’m a big fan of crowdsourcing and open interaction between the writer and the audience, I wouldn’t say it’s the best thing in the world. Journalists get their information from lots of different places, but do those conversations need to be out in the open through what we call social media? I’m not convinced… I don’t know that I get a whole lot of value from one of our reporters tweeting something so that someone can read our stuff who is not a subscriber.”

Investing in the product is crucial

Unlike a number of newspapers that seem to have thrown up paywalls more out of desperation than anything else, without investing much in the content, Spitz says he and Kushner believe that in order to justify charging for their content they have to make it worth paying for — so the pair have invested tens of millions of dollars in hiring new reporters and editors, launching over a dozen new sections for the paper (both online and print) and adding other features. Spitz says the head count at the Register has increased by more than 300 people — or close to 50 percent since the pair acquired the company last summer — and the number kf newsroom staff has increased by close to 60 percent.

“Our fundamental insight is that the business itself in the newspaper space has been operated for 75-plus years as an advertiser-first, subscriber-second business. We think that’s incorrect, and that they should be run as a subscriber-first, advertiser-second business — and when you make that shift, you see that a lot of other decisions fall from it. The last thing you want to do is cut off more eyeballs if you’re in an ad business. But if you change that foundation and say it is really a subscriber business, then the first thing and the second thing and the third thing you think about every morning is how do I deliver more value to subscribers.”

Spitz and Kushner have also launched a number of features aimed at making their subscribers — whether in print or online — feel special. So in December, every subscriber got an envelope containing a check for $100, which they could donate to whatever charity or interest group they wanted in exchange for free advertising in the paper. Spitz says that move alone cost the company $12.5 million.

If there is value, advertisers will see it

But doesn’t relying more and more on subscriber revenue mean that a newspaper like the Register is doomed to shrink, since advertising revenue — both in print and online — continues to decline? Not necessarily, says Spitz. Unlike the vast majority of industry insiders and observers, the Register‘s owners believe that not only can the decline in print advertising revenue be arrested but revenue from print ads can actually increase, provided advertisers see the kind of engagement they want from readers who are paying for the product.

“Fundamentally, we don’t agree that it is the natural course for print revenue to decline, in fact we think that is at the heart of the problems in the industry… we are modelling for significant increases in print revenue for 2013, and we’re on budget for that for January and February… we believe that as you have more and more engaged subscribers, advertising becomes more valuable.”

Spitz admits that to some extent the Register is unique, since it is one of the few large-scale regional newspapers that doesn’t have much competition from local TV networks and other sources. And he says the model that the paper is relying on also might not work for national newspapers and other outlets, since there are so many free sources of similar content such as CNN. “While I’m a hard paywall advocate, I think it’s smart for USA Today not to go to a paywall — their content is just not differentiated enough,” Spitz said.

It’s more than a little ironic that the two men who seem to be the biggest fans of print and the biggest proponents of making people pay for news aren’t even from the industry, and have never worked for nor run a newspaper. But can they fight the forces that have driven many of their newspaper-owning colleagues into despair, and in some cases financial ruin?

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As newspapers around the world rush to erect paywalls to bolster their declining revenue — with Britain’s Telegraph and Sun papers just the latest to join the parade, along with the Washington Post — there are a few holdouts who insist on generating revenue the old-fashioned way: namely, through advertising. One of the most prominent proponents of this model is the Daily Mail, which has become one of the world’s largest news websites. The Mail’s approach may not be for everyone, but according to the paper it is working extremely well, thank you very much.

The data behind that boast comes from an investor presentation that Media Briefing sat in on recently by the paper’s parent company, DMG Media, in which the company projected that its digital revenue could soon exceed its print revenue — a transition that few newspapers could even think about realistically at this point, let alone forecast for the near future. And the Mail says this isn’t happening as a result of declining revenue overall, as it is with some newspapers.

So what accounts for this kind of success? Critics would argue that it is the Mail‘s somewhat lackadaisical approach to accuracy, since a number of the newspaper’s most popular stories consist of rumors or salacious tidbits that in some cases turn out not to be true. But is this any different from any number of tabloid newspapers before the web came along? It may not be the course that the New York Times or Washington Post want to take, but there is no arguing with the results.

In a nutshell, the Mail‘s approach is to give the web what it wants — interesting stories, many of them about celebrities or odd events, and plenty of variety: the paper says it updates the home page every 30 minutes at least, which it believes is part of the reason it gets over 100 million unique visitors a month. And the engagement levels aren’t just orders of magnitude larger than other newspapers, but impressive even compared to sites such as Yahoo:

Obviously, not everyone can be (or wants to be) the Daily Mail. But whatever its flaws, the paper has done a pretty good job of being web-native, not just recreating a paper experience online. It’s the same approach that digital-only content publishers like BuzzFeed and The Huffington Post have taken, and while it may not produce as much revenue as print advertising does, the Mail has shown that it is possible to grow that business.

And what about a paywall? Editorial director Michael Clarke said during the presentation: “We’re not throwing in the towel because we don’t have to. We don’t feel at the moment that’s the way to go… We have scale, engagement and growth.” (Note: We are going to be discussing different models for monetization at our paidContent Live conference in New York on April 17).

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Variety announced the moves early Tuesday, saying the tabloid will drop its daily print edition as of March 1 and publish only a weekly version on paper. The paywall, which charged users $250 a year for access to Variety content, comes down at the same time — Penske called it “an interesting experiment that didn’t work” — and in a somewhat unusual decision, the paper’s editor has been replaced with three editors, each of whom will run different sections of the magazine.

Penske, the son of famed race-car driver and NASCAR operator Roger Penske, isn’t a newcomer to the power of digital: he was a co-founder of Mail.com, which he sold to a German internet company in 2010, and before that helped start a mobile company aimed at children called Firefly.

We're all going to miss Daily Variety in print but now we'll be faster and more nimble. It's a good move.

—
David S. Cohen (@Variety_DSCohen) February 26, 2013

The new owner bought Variety in October from owner Reed Elsevier for $25 million, after the European publishing conglomerate reportedly cut the price it was asking for the magazine — once reportedly valued at more than $200 million — by 25 percent. Penske added it to a stable of online properties that includes the Deadline site and MovieLine.com, as well as the well-regarded technology blog Boy Genius Report and HollywoodLife.com, a site run by former the former editor of Cosmopolitan, Bonnie Fuller.

If Penske was hoping that his moves would be applauded by his other sites, he doesn’t know veteran Hollywood gossip writer Nikke Finke, who runs Deadline Hollywood. In a scathing post about the dropping of the paywall and the decline of what she called “the beleaguered trade,” Finke said editorial morale at the entertainment trade magazine “is at its lowest ebb and anxiety is running sky high,” and described advertising as “non-existent” and readers as “few and far between.”

Sharon Waxman, who runs an online competitor called The Wrap, also warned that Variety could have a lot of work on its hands, since — like many other newspapers and magazines — print advertising in the daily edition likely made up a large proportion of its revenues.

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This might not be easy to do — especially since many media outlets seem to have their hearts (and wallets) set on paywalls as a solution — but the industry is in such dire straits at this point that almost any reasonable idea probably shouldn’t be ruled out. Some publications are betting on sponsored content, some are relying on real-world events and others are looking at affiliate links or “brand journalism.” Why not personal paywalls? (Note: We’re going to be talking about alternative monetization strategies at our paidContent Live conference in New York on April 17).

Why personal paywalls? Getting to know readers

I’ve tried to argue in the past that one of the biggest weaknesses of traditional paywalls or subscription plans is the undifferentiated quality they bring to a newspaper’s content: everyone hits the same wall and is asked to pay the same amount, regardless of their interests. This reinforces one of the overall weaknesses many traditional publishers have, which is that they know virtually nothing about their readers — or at least not enough to take advantage of that knowledge in any meaningful way. They are about as personalized as a street-corner newspaper box.

This is important because advertisers in particular are looking for personalized targeting, which is one of the reasons they are looking to new providers such as Facebook and Twitter for their business — those outlets can give them targeting based around an almost infinite number of variables, from income and geographic location to voting behavior. In other words, newspapers and other traditional outlets would benefit from getting to know their readers better in just about any way they possibly can.

One of those ways is to take advantage of the increasingly social nature of media in a digital age, and build monetization strategies around individuals rather than the artificial package of news and other content known as a newspaper. Many readers — particularly younger ones — consume media based not on corporate brands but on individual writers that they feel a connection to, and I would argue that is becoming the norm. We read the New York Times as much for Tom Friedman or Nick Kristof as we do because it is the NYT.

Five ways to create a personal paywall

Not all of these will apply to every writer at every publication, but many will. The overall idea is to take a lesson from the music industry in how to make money from content — the music business has spent a decade figuring out (painfully) that the songs themselves are not what people want to pay for. What they want to pay for is access to artists, both virtual and physical, and for ways of deepening that relationship. So here are some ways newspapers could take advantage of the same principle:

1) Allow readers to pay for an all-in-one package: If what readers identify with is Nick Kristof at the New York Times or Walt Mossberg at the Wall Street Journal or Felix Salmon at Reuters, then give them a way to get that writer’s content — in whatever form — in one easy package. Maybe they blog, write news stories, do video interviews, post on Twitter, etc. Provide all of that for a fee, and make it as appealing as possible and as easy as possible for readers to find and consume it.

2) Create new forms of specialized content: Maybe your wine correspondent is the star attraction for many readers — so why not provide early access to their reviews for readers who sign up for a membership in a personal paywall plan? This is also a model that many musicians have used to their advantage, by providing early access to music (or to better quality files) for members of a fan club.

3) Host live events featuring your writers: Plenty of publications, including The Atlantic and the Texas Tribune, are looking to monetize their content by putting on events that appeal to readers. But not everything has to be a 500-person conference — why not have smaller events that cater to a more exclusive reader group, where they can listen to an interview with a prominent figure in a particular area, and then mix and mingle with other readers who share their interests?

4) Create a virtual community worth paying for: Plenty of newspapers have topic pages or even author pages, but they do little to develop a real feeling of community for readers that justifies an extra fee. This is about more than just content — it’s about providing user forums, or wiki pages about a topic that readers (who pay a membership fee) can contribute to, or a chance for a one-on-one discussion with the writer. In other words, a real community that the writer in question is a part of.

5) Provide access to your writers’ expertise: If you have a writer who has some specialized expertise, whether it’s financial analysis or political savvy or technological knowledge, why not let them provide some of their professional advice to paying customers? This would be similar to a service like Gerson Lehrman or a startup called Clarity, where people buy a specific amount of time to ask an expert questions. Some might see this as a conflict for journalists, but it doesn’t have to be if it’s handled properly.

Offer your core readers more, not less

The bottom line with all of these suggestions is to look at membership or a subscription as a way of offering your readers more than just the regular news and content that you publish — an approach similar to the “reverse paywall” model that Wall Street Journal deputy managing editor Raju Narisetti and journalism professor Jeff Jarvis have both suggested in the past. This bases the monetization on a relationship with readers that is focused on rewards, not just putting up a paywall that everyone runs into after a certain number of pageviews.

Will this prevent some star writers from doing what Andrew Sullivan did and going solo? That’s not guaranteed, but if a writer sees themselves as being in partnership with the newspaper or magazine they write for — something that might even include a share of the extra revenue from the personalized-rewards model — they might be less likely to consider setting up shop on their own, especially if they saw a benefit from the marketing muscle that mainstream publications can provide.

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Let me say that again: a door-to-door salesman.

I think that’s a first, for me at least. While lots of internet services market heavily — television ads, radio spots, billboards, leaflets and print — I have never come across this sort of feet-on-the-street approach before. Trying to prevent customer churn is one thing, but this just has the ring of desperation about it… and comes as another piece of anecdotal evidence that suggests Lovefilm’s feeling incredible pressure from Netflix.

When Netflix launched in the UK and Ireland a year ago, it was a clear who would be in its sights. Reed Hastings and his team may say they are targeting the bigger pay-TV services, such as Rupert Murdoch’s Sky, but their first hurdle was undoubtedly trying to surpass the Amazon-owned rival.

Lovefilm has been competing where it can, particularly in trying to head Netflix off at the pass by signing exclusive content deals with Universal, Fox, and others. But it’s also trying extremely hard to defend itself by stopping customers from fleeing: when I tried to unsubscribe a while back I realized it was one of those irritating services that forces you to phone up to cancel (a surefire sign that I will never go back).

And you can’t blame them: it would take a brave gambler to bet against the American company right now.

Netflix is storming on almost all fronts, from its acclaimed original programming, to its balance sheet: Wall Street loves it again, as it finally recovers from the farcical series of events it inflicted upon itself in 2011.

And that is having an impact on its rivals.

Former Lovefilm boss Adam Valkin told me last year how the company had feared Netflix since 2004. And though Netflix still has some way to go — it’s still unclear whether Netflix is making inroads against its real targets, the broadcasters, and claims almost dubiously high membership numbers across the British Isles — it definitely has some crucial competitors, at least, running scared.

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(Note: We will be talking about paywalls and other alternative monetization methods for content at our paidContent Live media conference in New York on April 18, including an interview with Guardian editor-in-chief Alan Rusbridger about the paper’s strategy)

Andrew Miller, who took over as CEO of Guardian Media in 2010, is intimately familiar with the impact that falling ad revenue — particularly classified revenue — has had on newspaper publishers: before taking the top job at the paper’s parent company (which also owns The Observer), he was Guardian Media’s chief financial officer. In the most recent fiscal year, the company lost $70 million on revenues of about $300 million. And while it is owned by the non-profit Scott Trust, the newspaper is still under pressure to pare its losses and has been making cutbacks for the past year in an attempt to do that.

In the Economist piece — which is mostly about The Guardian expanding into Australia through a partnership with internet entrepreneur Graeme Wood — Miller says that paywalls may work for some publishers, such as the Economist and the Times, but they aren’t likely to work for everyone:

“Newspapers have always used a blend of different funding mechanisms to extract revenues for their ‘product’. That’s why I am unconvinced by those who say that the only model that works is to build paywalls. This is not an area where one size fits all.”

Paywalls work if you want to monetize rather than expand

As Miller describes it, paywalls work well in markets where a publisher has a large existing base of subscribers that it can monetize via subscriptions, and in particular when a newspaper or media entity serves a specific niche like business or finance:

“In some news organisations where growth in readership may not be so important and in particular where there is a strong existing print subscriber base to build on, a pure paywall may make excellent business sense. The Economist and perhaps the Times spring to mind here. On the other hand, if the news organisation is about growing reach and access, then a paywall is not – for the moment, at least – the answer.”

This is fundamentally the same argument that has been used by Don Graham, CEO of the Washington Post, and his publisher Katharine Weymouth to defend that paper’s dislike of paywalls. As Graham has described it, the subscription solution is less appealing for a newspaper whose readership comes primarily from outside its actual geographic market — something that is also the case with The Guardian (although there are reports that the Post may launch some kind of metered paywall this year.

Miller says that Guardian Media is continuing to explore paywalls or subscription models for some of its content (the paper charges for its mobile apps, for example). But it seems clear that for the British publisher, reaching new readers around the globe is still seen as more important at this point than monetizing its existing readership.

Disclosure: Guardian News and Media Ltd., the parent company of the Guardian newspaper, is an investor in the parent company of this blog, Giga Omni Media

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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:

@joshsternberg @mathewi fact is CPMs are going down for everyone -- paid sites at least have stemmed those webwide declines in ad rates

—
Edmund Lee (@edmundlee) December 23, 2012

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:

@joshsternberg @edmundlee: the reason I harp on this is the impression that a paywall is *the* answer -- where is the rest of the strategy?

—
Mathew Ingram (@mathewi) December 23, 2012

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:

.@mathewi @edmundlee @joshsternberg NYT people tell me pay wall has zero effect on cpm.

—
Peter Kafka (@pkafka) December 23, 2012

@pkafka @edmundlee @joshsternberg: the assumption was that paying customers would be seen as more valuable -- what happened to that idea?

—
Mathew Ingram (@mathewi) December 23, 2012

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:

@rajunarisetti @davisshaver @edmundlee @joshsternberg: exactly why I think a more membership/tiered approach is better than a plain wall

—
Mathew Ingram (@mathewi) December 23, 2012

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?

@edmundlee @joshsternberg: relevant stat -- digital ad sales up 18 percent. how much of that growth are papers getting? adage.com/article/digita…

—
Mathew Ingram (@mathewi) December 23, 2012

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:

@crovitz @rajunarisetti @pkafka @edmundlee @joshsternberg: so then what does it mean that the NYT has seen none of that?

—
Mathew Ingram (@mathewi) December 23, 2012

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:

@rajunarisetti @mathewi @davisshaver @edmundlee @joshsternberg But scale is so diminished by most paywalls. And advertisers demand scale

—
  (@BGrueskin) December 23, 2012

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

@BGrueskin @rajunarisetti @mathewi @davisshaver @edmundlee @joshsternberg More advertisers are looking for quality not simply scale

—
Les Hinton (@leshinton) December 23, 2012

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

... Of course with plummeting CPMs, flat may be the new premium for paid pages @rajunarisetti @pkafka @mathewi @edmundlee @joshsternberg

—
Gordon Crovitz (@crovitz) December 23, 2012

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:

.@joshsternberg @edmundlee: I'd like to see as much innovation around monetization as there is around display or design like Snow Fall

—
Mathew Ingram (@mathewi) December 23, 2012

.@mathewi @joshsternberg it's amazing pay walls and not better ad products were the solution. Agree that creates a much smaller business.

—
Jon Steinberg (@jonsteinberg) December 23, 2012

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:

@BGrueskin @leshinton @rajunarisetti @davisshaver @edmundlee @joshsternberg: that is the entire newspaper industry problem in a nutshell

—
Mathew Ingram (@mathewi) December 23, 2012

@mathewi @bgrueskin @rajunarisetti @davisshaver @edmundlee @joshsternberg True. Trite, but: quality & ingenuity score - no shortage of them

—
Les Hinton (@leshinton) December 23, 2012

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Dailymotion’s France EVP Martin Rogard tells Les Echos the Dailymotion Kids Plus package, will host a library of over 1,000 videos after acquiring licenses from producers, who will be paid according to subscriber numbers, including Inspector Gadget maker Cookie Jar.

The launch is interesting for three reasons:

1. It shows Dailymotion is searching for more non-advertising income.
2. It further illustrates that operators are attracted to chargeable kids’ content.
3. It comes as Dailymotion’s ownership is likely to change in the next few months.

1. Dailymotion fortunes

Dailymotion recently tied up with Pirate Bay co-founder Peter Sunde’s Flattr system to allow viewers to make micropayment donations to video creators they value.

But that pales against a full paid video strategy, which is ramping up. Dailymotion is likely to follow up its kids’ package with further categories including movies, Rogard tells Les Echos:

“We’re starting to educate our partners on the subject. Systematically, we will propose a mix of free and paid content. For us, it is important to walk on our own two feet.”

2. Kids boom

Netflix recently carved out its kids section with a separate UI. Amazon recently launched an unlimited kids content strand atop Amazon Prime. Each clearly believes  that on-demand cartoons and other shows are assets modern parents will happily pay for.

And why not? Prospects for kids content payment are healthy. FT:

“A study of 2,200 iPad-owning parents in the US and the UK, carried out by Kids Industries, found that parents downloaded an average of 27.2 apps for their children each year, spending about $100 in total.”

3. Investment coming

Today, Orange owns 49 percent of Dailymotion following its €61 million 2011 investment. When it invested, the telco also took an option to buy the remaining 51 percent. That right must be exercised by the looming spring 2013.

Although Orange may soon do so, such a deal would not be forever, 01net reports:

“Orange does not intend to stay a 100 percent shareholder of the site for long.

“The telephone company is looking for a new shareholder, and it has already mandated two banks — Messier, Maris & Associés of France and Raine of America.

“One avenue under consideration is to find a U.S. shareholder which would help to develop Dailymotion overseas.”

The implication here is that Dailymotion’s venture backers want out, and that, in their absence, Orange does not want full long-term ownership either.

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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

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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