Blog Post

John Paton says what most media CEOs won’t about paywalls — they are a short-term tactic at best

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

Digital First Media CEO John Paton — who runs the second-largest newspaper chain in the U.S. — has made it clear in the past that he is not a fan of paywalls, so the news that he is rolling out metered subscription plans at about 75 of his company’s papers might seem a little surprising. But at least Paton is willing to admit something few other media executives have when put in a similar situation: namely, that paywalls are short-term tactic, rather than a long-term strategy.

In his usual fashion, Paton announced the paywall rollout by posting his thoughts about the move on his personal blog. He said that Digital First tried several other approaches to increasing revenue — including “hard” paywalls, which don’t provide any free content at all, as well as “survey walls” created in partnership with Google, which ask readers to fill out a questionnaire before they get access to the paper’s content. But neither worked very well.

“Our experiment with Google Consumer Surveys, while initially a success, gradually fell off in its effectiveness and reduced our online traffic growth wherever the surveys were in place. Our newspapers, which had basic, traditional paywalls… failed to generate any kind of significant revenue.”

Trying to manage the decline of print

As a result of the legacy costs associated with the printed newspaper business — costs that forced Digital First to put one of its papers into bankruptcy protection for the second time last year — Paton said that the company was effectively being forced to add metered paywalls (which will be run by Press+) at all 75 of its major newspapers, in order to shore up its revenue while it tries to make the transition from print to digital.

“Print dollars are becoming digital dimes. But costs are still in dollars and, like most newspaper companies, we are radically reducing those costs. Companies like Digital First Media have to manage the decline of one medium while building for – and in some cases, waiting for – the new revenue streams to grow.”

But while most media executives who have announced paywalls have made it sound as though they are striking a blow for the future of journalism — or that readers should somehow feel grateful that they are being allowed to pay for all the wonderful news these papers produce — Paton went out of his way to say that he doesn’t see paywalls as a long-term strategy.

“Let’s be clear, paid digital subscriptions are not a long-term strategy. They don’t transform anything; they tweak. At best, they are a short-term tactic. I have said that often enough in the past. But it’s a tactic that will help us now.”

In February, Paton said that paywalls were “a dangerous management distraction to the real job of adapting a legacy business to the realities of an Internet world,” and that “you don’t transform from a broken model by tweaking it – you build something else.” If the revenue problems of traditional media weren’t already clear, they would be even more obvious now that one of the industry’s most vocal paywall opponents has had to jump on the bandwagon, even for a short time.

Post and thumbnail photos courtesy of Shutterstock / Voronin76

26 Responses to “John Paton says what most media CEOs won’t about paywalls — they are a short-term tactic at best”

  1. Here’s the deal with paywalls and why most newspaper publishers now love them — they help newspapers push through relatively big subscriber rate increases, on their existing print readers.

    So we can skip all the intellectualizing about whether content wants to be free blah blah blah. Paywalls are effective at getting a fast boost in circ revenue. Period.

    Outside of the Wall St Journal and the NY Times, almost no consumers are buying digital-only subscriptions. Big metro newspapers are lucky if they’ve sold 10,000 after a year of having a paywall installed. And digital-only subscriptions will probably never amount to anything meaningful.

    But that hardly matters right now. What matters now is grabbing more dollars from existing print subscribers. And paywalls are helping with that task.

  2. Why is it an either or situation? Paywall vs. advertising? As this whole debate indicates there are lots of different takes on how this should work, and likewise individuals should be given an effective choice on how they want to get news and information.

    I’m talking about a personalized media model where individuals can make the decision if advertising, subscription, or pay per units makes the most sense to them. There’s a relationship between age and willingness to pay. As people get older they tend to have more money and less time, and will pay for convenience. The young tend to have less money and will tolerate ads. Conveniently this younger audience is what advertisers desire. We’ve gone from an ‘analog dollars to a digital pennies world’ and in order to have the sum ad up to dollars again you have to have lots and lots of digital pennies. That means getting a big audience and then profiling that audience so you’re serving up a high degree of relevancy to each person. What’s more the technology now exists to do this. This is even more critical as we go more mobile as attention there is at an even higher premium.

    But maximize attention is theoretically what journalists are good at, so it really is about producing lots of highly relevant content for an increasing diverse audience and making sure the right content finds the right audience with the correct value proposition.

  3. These comments reflect the fact that the world is changing and the newspaper industry is facing major restructuring. There is no plan B, there is only major upheaval ahead, with almost certainly major job losses and industry consolidation. These things happen when the world changes. Other industries have seen it and worse.

  4. Domino Theory

    Charging the reader for content won’t work, but using the content generating expertise to generate and syndicate content for the innumerable businesses that want and need content on their own sites will Why haven’t more media companies been successful here?

    • Probably because journalists have no interest in doing this. There would be huge push-back, they would leave en mass. It’s not journalism, it’s not what they do. You’d need to hire new people for more money in order to accomplish this, possibly making it non-cost effective. Advertising copywriters make more money than newspaper journalists.

  5. I’m also interested on how Paton and Digital First will build these revenues into their budgets – hundreds of thousands of dollars at even the smaller papers – and then forsake them a few years down the road. I’ve done enough budgeting in this business to know how this works. That’s a losing proposition in every way. Can’t see it happening.

  6. How do you explain the success of paywalls, if you can “get the exact same content across the street for free?”

    What is so wrong with asking consumers to pay for content that has value? Judging by the success, readers obviously don’t think it’s such a bad idea.

    We’ve proven for 15 years now that, almost without exception, robust local journalism online can’t be support by advertising alone. Putting your chips in with consumers paying for the product seems like the only chance at a viable business model at this point. Unless something else emerges.

  7. Just because you “need” the revenue doesn’t make it a valid strategy. You used to have a monopoly and now you do not. When you have a monopoly, you can do things like charge for content…
    When I can get the exact same content across the street for free? You lose…The newspaper industry needs the revenue but they still live in an old world. Even John Paton, Mr. Digital, is completely clueless in this area…
    He thinks that because he puts “digital” in his name…that he’s a digital innovator. Based on what they’ve invested in, and on what he has ignored, he’s no digital savior.
    The newspaper industry needs an innovator and they need a better model. Charging for content won’t be sustainable…but Paton is in the dark himself…wouldn’t know an innovative idea or concept if it was biting him in the backside. The trouble is that he (newspapers) want “proof” before they leap, which robs innovation. John, what you’ve “backed” is not innovation…open your eyes.

    • “Just because you ‘need’ the revenue doesn’t make it a valid strategy.”

      Uh, we all need food, water and shelter. Getting food, water and shelter isn’t a strategy, it’s necessary. Are you one of those Internet loons who think that the homeless guys will write the news in their spare time? After all, they’re on the street with a view of everything happening. They’ve got the time. So why not?

      If there’s no revenue, the business dies. If there’s no revenue, the non-profit dies. If there’s no oxygen, the mammal dies. That’s just reality. It’s not a strategy. Charging SOMEONE for content is the only strategy. Otherwise we’re stuck with gossip repeated on Twitter.

      • Your not thinking clearly. Your thinking about YOUR needs, not of the needs of the market. Typical journalist thinking I might add.
        There is the real world, and their is YOUR world. The real world doesn’t exist to service YOUR needs…either personally or in business.
        The paywall will tap into your biggest fans but will limit growth, and will not expand the pie….
        Newspapers need to expand the pie….building a fortress around a small pie is not a good strategy in the long run. In fact, it will drive you into oblivion.

        • I’m using typical journalistic thinking? Nope. You’re using typical Internet-Crack-Smoking thinking. Every single business disappears if it doesn’t get the revenue it needs. And if the people aren’t willing to pay one way or another, they won’t get journalism. It’s that simple. It’s true for all businesses. If people aren’t willing to pay what it costs to make X, they won’t get it.

  8. I haven’t paid for content on the Internet, and I don’t intent to. So when I do get to a paywall, I just close the tab. I think there is enough alternative methods for traditional publishers to make money that they don’t have to resort to paywalls. Maybe they should rather have a look at how new media companies is making money, and adapt accordingly.

      • Agreed – Mr Tightwad is indeed a tightwad. I have paid for plenty of content online, be it music, movies, TV shows, books, and paywall protected content. I did this because I was more than happy to pay to get the content I wanted. We’re not talking huuuuge sums of money, either. Paying for stuff you want – it’s not rocket science!

        • buckjackson

          I pay for music, movies, and books as well but I do NOT pay for paywall protected content because most, if not all, of the time the information can be found elsewhere. If not, paywalls are ridiculously porous.

  9. Really, John. Getting readers to pay for the content we produce is a short-term strategy? What’s the reason it can’t be one part of long-term strategy? We need the revenue now, and I strongly suspect we’ll need it in the future.

    • I agree. The internet lowers the barrier to entry for publishing, but content creation still takes time and money. And since advertisers have proven particularly disloyal, I think going back to basics and building direct financial relationships with news consumers makes sense. Newspaper should seek out ways to provider greater, direct value to their readers. Readers should be rewarded for their support, who will in turn benefit from journalism less beholden to corporate interests.

      • buckjackson

        “And since advertisers have proven particularly disloyal”

        Huh? Advertisers have absolutely NO obligation to the advertising channel providers they use whether it is print, tv, radio, or whatever. Their obligation and loyalty is to their own business and its success.

        Want advertiser loyalty? Give them a product that offers reach (targeted or broad) and frequency. Key elements of every advertising strategy. This is the fundamental flaw with the paywall model. It suppresses reach and frequency making advertising less effective.

        TV Broadcasters LOVE it when the in-market newspaper(s) erect a paywall. It is an immediate advertising revenue windfall and a sales advantage moving forward – “They have a paywall and CANNOT deliver the reach and frequency that your business needs, but we can.”

    • My feelings exactly. The consumer has to pay one way or another. In the past, they watched more ads. If the ads won’t pay, they’ll either get crappier content, less of it, or probably both. Paywalls at least let serious people get a chance at paying for serious news.