Business/Finance

The pay wall: Good idea? Or too little, too late?

The word carries a sense of enforced separation — walls, as in pay walls. Keep out those who don’t belong — meaning those who don’t, won’t, or can’t pay.

Managers of content-provision corporations — there’s no point any more in calling them “newspaper companies” — are desperate for revenue after enduring print ad losses. So, after 15 years of giving away the milk for free online, they’ve finally mustered up the cojones to at least talk about charging for content on their websites. They speak of this in a language the reporters they’ve fired would never use — the content provision managers talk of monetizing their sites, of incorporating paid-content strategies, of generating additional digital revenue.

And if you believe pay-content impresario Steven Brill of Journalism Online, about 1,000 publishers — er, content-provision specialistsexpect to make $900 million at $8.33 a month from the 10 percent of online website visitors Mr. Brill thinks would be willing to cough of up the cash. But an American Press Institute study says only 51 percent of publishers (who voluntarily completed a survey) think they can charge successfully for online content.

But what does “successfully” mean? And who gets to define it? Easy: Cui bono?

Those at the top of many content-provision corporations believe they would benefit. Mr. Brill says he has 1,000 publications signed to non-binding agreements. Others aren’t so optimistic. Consultants for the American Press Institute, in an early study with admitted weaknesses, suggest only readers would only pay $4.64 — nearly halving Mr. Brill’s nearly $1 billion estimate.

Content-provision corporations are eager, nay, slaked with thirst for advertising revenue to replace the dollars that have fled print newspapers. Although a few large content-provision corporations have managed to hold share prices lately despite tumbling profits, managers need that pay-wall revenue to reinvigorate investors who lost a bundle on newspaper stocks over that past five years. (And let’s not forget some argue consortium-set, pay-wall prices are tantamount to collusion in pricing.)

Because sound data to predict pay-wall success, erecting that wall risks revenue flight as much as revenue restored. Respected analyst Alan Mutter (“Reflections of Newsosaur“) has written extensively in the past few months about pay walls. Mr. Mutter says:

But what, publishers rightfully wonder, will become of the other 90% of website visitors – and the $3.1 billion in advertising revenues the U.S. newspaper industry generated on the web in 2008?. … Here’s why publishers are sweating: While Brill argues that newspapers can preserve some 90% of their page views and online advertising after erecting a pay wall, publishers consistently have told me that they fear they could lose 75% or more of their traffic and banner revenue if they started to charge for content.

Readers — at least those who pay the toll to cross the pay-wall moat — get to define success. (Here’s a look at what some smaller, rural newspapers in non-competitive situations have done in terms of content behind the pay wall.) Remember that “Members Only” clothing line of the ’80s? That’s what a pay wall promises: Uniqueness. Frankly, that’s always been a good local newspaper’s strength — unique content. Local news about local people and local issues.

Erect a pay wall. Promise quality, unique, premium content. That’s the formula the content-provision corporations promise. Will they deliver in terms of what the readers accept as a fair exchange for fee paid? It’d be easy to snark here. For example, in May more than half of the 45 million visits to the online Palm Beach Post linked to the police mug shots the Post runs online. (It’s not the only online paper that does this, too. And a host of ethical issues are involved.)

Is this the quality, unique, premium content that lies behind the pay wall? No, not really. Most of that unique content will be locally generated news, features and “service” information — school lunches, entertainment listings. But will that local behind-the-wall content have quality in quantity?

If the pay walls had been erected 15 years ago — even five years ago — then the answer would be more yes than no.

In this still-dawning century, thousands of the skilled, experienced professional practitioners who produced the quality, unique, premium content no longer work for the content-provision corporations. That’s because the corporations fired the producers. To maintain profit levels to satisfy the investors to whom content-provision management sold its collective soul, it cut expenses — firing the professionals it desparately needs now to make good on the pay-wall promise.

A successful business model? Or crap shoot?

Even if content-provision companies have that $900 million fall into their laps as Mr. Brill suggests, which is more likely to happen? Stock buybacks and dividend increases? Or investment of at least tens of millions of dollars into hiring professional newsmen and newswomen to make good on the promise of quality, unique, premium content?

Yeah, right. It won’t be the latter.

Recommended reading:

Alan Mutter’s excellent series on arguments for and against pay walls:

Why aren’t we paying for news?
What stops publishers from charging for news?
How publishers can make Web content pay

Paul Farhi of the American Journalism Review, arguing for reinvigoration of the print newspaper:

Build that pay wall high

4 replies »

  1. Most of the stuff you read in the paper is crap anyways, and the free market sees this. The NYT isn’t even worthy of lining a birdcage. It’s sad when you see more people carrying the Post than the Times.

    As for turning a profit, Rogers is long a lot of crappy stock and is talking his book. I wouldn’t put it past him to be touting the companies and selling into any strength.

    Jeff

    Jeff

  2. The irony for me is that the thing that will be necessary to make pay walls work – unique, quality content that people need and can’t get free somewhere else – is the very thing that content provisioners have been mercilessly hacking at over the past 15-20 years.

    And getting rid of it is a big part of why they’re so deep in the kim-chee.

  3. It will be interesting to see what happens with this. From that same study, apparently 22 percent of papers said they had plans to have paywalls up by the end of the year, and another 26 percent of those who are putting them up by the middle of next year.
    http://wheremedia.wordpress.com/2009/09/21/a-tumltuous-next-three-months/
    What will be really interesting is to see if this just drives the traffic to other sites, or if the newspaper business will learn to provide a unique product people will pay for, rather than relying on a payment scheme that was built around the information delivery method.