The Pay Wall Debate

Pay walls have become an interesting phenomena to examine over the past couple years. A paywall is a metered pay system that urges viewers to subscribe after a certain number of views . Alan Mutter explains in his blog, that visitors who don’t pay are blocked from some or all of the content on the site for the rest of the month. They have the chance to start again the next month.

Mutter uses the Augusta Chronicle as an example of a successful paywall that actually seemed to increase web traffic. In the first three months, page views rose 5 percent from previous months. The Chronicle’s pay wall still provides a porous system where a considerable amount of articles are accessed for free before a reader learns of the paywall. In contrast, a rival newspaper in Georgia constructed a hard paywall that demands either $2 a day or $9.95 a month on any article accessed. This affected their online visits severely, dropping 47% from the same month of the previous year.

One strategy used by the Augusta Chronicle is allowing access to 25 premium articles, but limited restricted to non-premium articles. Mutter points out that there is little distinction between premium and non-premium articles. The confusion between the articles isn’t considered a drawback to executive editor Alan English, rather a positive.

Some other positive aspects are highlighted by English. “The act of placing a value on our journalism may be more important that any penny we ever collect.” Since the Chronicle’s subscription system is so permeable, the amount of subscriptions it will acquire are difficult to calculate. English stated, “It’s very early in our game and we are still building our strategy. But we are glad to be part of the wave of people who are putting forth the value proposition for content created by professional journalists. Giving it away for all those years was a mistake.”

The emergence of new mediums such as the iPad and the Kindle have also contributed to the larges changes in online news. CEO of LeadBolt, Dave Carr considers paywalls one of the largest experiments in online journalism. He points out the ‘explosion of apps’ available on iPads and Kindles that have made the concept of paying for premium content more acceptable. He told the Christian Science Monitor, “Apps woke the public up to the fact that there are other revenue streams they can create.”

One concern is raised by Thomas Ksiasek, assistant professor of communication at Villanova University in Pennsylvania. “It remains to be seen whether this slighting confusing quota system will lead to more subscriptions or merely more creative access routes.” He refers to the model as a ‘leaky fence’ rather than a blunt paywall. A valid point, it points out that people have a way of figuring out how to maneuverer the internet, especially when it comes to finding free content.

The offset of this concern is website with highly demanded specialized content. ESPN and The Wall Street Journal contain the most successful online pay models. The Journal is a must for high finance while ESPN has severe appeal for sports fanatics.

This is where the New York Times may encounter some problems with their paywall. A widely respected newspaper of record, it is still considered a general interest newspaper. Wouldn’t a viewer just go somewhere else to get free news? “Without offering a specialized product with a clear benefit to the consumer, it’s likely that many users will seek out their news elsewhere,” Ksiasek said.

The Times also created a penetrable subscription wall, letting readers access it from social media sites. Their model has acquired almost 250,000 paid subscribers in first 3 months, along with 750,000 print subscriptions and around 57,000 tablet users signed up for the Times. Considering the domestic and international importance of the Times, many consider a failure of the Times’ paywall not an option. Richard Levick, president of Levick Strategic Communications in Washington, said, “The Times is important to a free society. It is important to a marketplace of ideas that the New York Times share in that pantheon of great leadership.”

While the Times are doing a good job managing their paywall, critics ask why newspapers even need paywalls. Plenty of sites make a decent living though their advertising supported model, and according to a report from Econsultancy, more than half of online publishers have seen increased revenue. This accentuates the growing shift to digital media and that digital readership seems to be increasing. Even though it is increasing, a University of Missouri study found that 50% of newspapers derive only 9% of their revenue from online editions.

One analysis of this problem is that newspaper advertising may just cost too much. Newspapers have a CPM (Cost per mille/thousand views) of $6.99 while online advertising’s CPM is $2.52, and social media’s rate is $.56. Newspapers are 177 percent greater than the national average. IT seems newspapers have priced themselves out of the market. Is a newspaper ad 20 or 100 times more effective than an online or social media ad? A social media ad has the ability to give valuable information about its views and who ‘likes’ it, so is it really justifiable to spend 100 times more on a print ad that can’t tell you if it’s even been read?

Critics claim that unless papers can figure out how to lessen costs, competitively price themselves and offer content worth paying for, paywalls will only quicken the inevitable decline.

In erecting a paywall, all of the previous arguments need to be considered. The most viable and seemingly successful model would have to have a level of penetrability. When a third of an online news site’s web viewership comes from search engines, restricting viewers from that will dramatically affect traffic. As a smaller newspaper, a hard paywall makes no sense unless one is offering specialized content that very few others have. Readers of general interest care less about loyalty and more about price, especially in this economy. The New York Times has created a very stable system of charging for their content, while maintain web traffic. While critics argue that web content should be priced the same as print, the reality of the situation needs to be considered. By allowing social media links to access the site as well as 20 articles before paying helps ‘hook’ the reader. Even with this though, it is not a good idea to try and charge the same as print since the same problems as a hard paywall would be raised.