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Will online paywalls protect newspapers from their ongoing earthquakes?

9 juillet 2010

The crisis currently affecting print media has atypical, tsunami-scale dimensions. It is reconfiguring the industry, as for a decade and a half, their readers have become accustomed to access to their contents for free with their computers. “There is no general model for newspapers to replace the one the internet just broke,” new media academic Clay Shirky pointed out last year in his blog. We have to “think the unthinkable” therefore, and anticipate their future disappearance because “society doesn’t need newspapers”. It just needs journalism, from whichever platform it is served.

Shirky’s remarks can be considered as provocative, of course. Because we will continue to value the reading of articles on a paper, even if screens become mobile and malleable. It is nonetheless dramatic how print media have not found the way, yet, to ensure an income for the contents they (have to) post on their websites. The collapse of their circulation and advertising revenues in recent years has only been aggravated, not caused, by the current economic downturn, the worst since the 1929 crisis.

Last January, former editor and Silicon Valley entrepreneur Alan Mutter made some forecasts on the profitability of US newspapers in the next 15 years. He presented three different scenarios in “Reflections of a newsosaur”, his informative website on “the extinction of news-gathering companies”, focused on the economics of US print media. In the most optimistic case, advertising sales drop 10% in 2010 (following the 40% slump experienced since five years), and start growing again at only 2% each year after 2011. The worst scenario predicts a revenue plunge of 20% in 2010, of 15% in 2011, followed by a 5% decline each year after. Only in the optimistic case, US newspapers return to profitability.


Internet advertising growth is too slow to compensate the losses experienced by newspapers, as they compete with an exponentially increasing number of content producers. Users also tend to ignore the ads displayed, more than in print, and as a consequence, the audience is not monetizable according to business models prevailing in the last century. “Publishers will have to innovate, I am afraid they don’t know how,” Mutter notes.

So far, the industry has complained that many newspapers articles are being posted in websites without authorization, and then monetized through ad revenues shared with search engines. Rupert Murdoch, the chief executive of News Corporation (owner of British dailies The Times and The Sun, and of The New York Post and The Wall Street Journal across the Atlantic) accuses aggregators like Google and Yahoo of being “copyright thieves”. Gavin O’Reilly, the president of the World Association of Newspapers and News Publishers (WAN-IFRA) refers to “kleptomaniacs” who have developed “an ingenious model” that broke the “link between audience and success.” The search engines reply that they provide audience to the newspapers’ websites, which are not forced to allow free access to all their productions.

Given this crisis and this confrontation of different logics, newspapers are now pressured to find a way of charging more directly for their articles available online. The term “pay walls” has become so common to describe paid digital content that it is now used as a single world, and 2010-11 are likely to be their test years. News Corporation has proclaimed it will soon erect them at The Times’ website in particular, as this is already the case for the WSJ’s. In Germany, Axel Springer just announced it will charge for the online access to its dailies Berliner Morgenpost and Hamburger Abendblatt (the latter asking a fee for the coverage where it has a competitive advantage, the Hamburg region, but not for national news).

The German group’s CEO Mathias Döpfner declared at a Monaco Media Forum last fall that for “sports, games, regional, sex and crime, people will pay, only web communists think otherwise.” He also said “don’t take our beer and offer it for free” to the founder of free access (and hyped) US-webzine, who does not pay its contributors, and believes in advertiser-supported and shared content.

Newspapers which consider adopting a paywall protocol are taking four directions basically, in addition to the print delivery subscriptions which generally allow total free access to the website (while online-only subscribers have to pay more to get the hard copy). The first system, adopted by The Financial Times in 2002, imposes a flat (and costly) fee to get any article online. Users can read for free only the headlines or a teaser text (summary or extract) at best, which helps to minimize traffic lost from search engines.

The second system is called “freemium”, a term also being popularized in the industry. It was put in place at the WSJ, which leaves part of its electronic content freely accessible and charges a fee for the rest. “Premium articles” for a business daily can be the added value, financial analyses written by recognized experts.

Then comes the metered system, in favor of which the FT switched in 2007. On a monthly basis for instance, it offers free access to a few articles for non-subscribers, and several more to visitors who register without paying (the newspaper using their personal data for lucrative, targeted marketing campaigns). Once a limit is reached, readers have to pay a subscription.

Some newspapers are also thinking about a fourth type of paywall, micropayment. It already exists in television with pay-per-view films, or in music with iTunes. The FT announced in March it was getting closer to this model, as it will also propose a day and weekly pass powered by PayPal.

The first, closed paywall system, is very rare, more likely to be used by highly specialized periodicals like science magazines. The freemium model has been the most adopted so far, but metered access is gaining ground. Most newspapers which will embrace a paid content protocol are likely to adopt a mix of these systems.

In the past three years, consulting firm Accenture asked publishers and other content providers (from broadcasting to music) what is the business model they most believe in. Their responses showed a decline of the “a-la-carte”, iTunes-style schemes from 23% to 8%, and of advertising from 62% to 39%. This mainly because in the last survey, Accenture’s researchers introduced two new options, freemium and a subscription-advertising hybrid, with success (respectively 18% and 21% of the media and entertainment executives consulted).




[Note: to see a clearer chart, go to on page 10 of the following PDF document

The 2009 percentages displayed below have to be replaced by the “2009 responses” chart showed on page 9].

Media’s next top business model: survey suggests hybrids

Source: Accenture Media & Entertainment

Last January, The New York Times disclosed that it would adopt a metered system at the beginning of 2011. Its long awaited model will still offer free access to the whole website, but for a limited number of articles every month. We still do not know how many, and how much passing the wall will cost. This cautious and slow move of the “gray lady” is illustrative of the hesitations and fears of the profession. The daily is namely still working on how to prevent readers from using different free accounts (in order to avoid paying once their free quota is reached). It also needs to make sure that the new subscription scheme will be smooth and easy (unlike the often criticized FT paywall).

In 2005-2007, The New York Times already had gone freemium with its TimesSelect program, which consisted in charging for editorials and archives at a cost of about 50 dollars a year. It attracted over 225,000 subscribers (one third of the total) and generated about 10 million dollars in revenue, which was a performance but not enough. It was stopped because the website was losing traffic for advertising, and the e-segregated columnists were complaining they were losing their audience. Three years after, The New York Times can rely on technologies which have considerably improved.

Paid content may only work for major brands, specialized papers like the WSJ or the FT, which also happen to be read by businessmen at their company’s expense. A world wide study on 27000 consumers released by Nielsen in February 2010 shows that in addition to the 8% few who have already paid for newspaper websites, only one third consider doing it. The responses are slightly more positive for magazines:

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Source: The Nielsen Company


Many still consider that paywalls are unrealistic, because if one newspaper starts charging, another online source can easily be found that does not. An industry tone setter, The Guardian’s editor Alan Rusbridger, whose website is one of the most read in the world, is fiercely against them because widespread paid access can shrink the free exchange of ideas. He still counts on online advertising and on other revenue streams for the survival of print based newsrooms.

For instance, like a growing number of its peers, The Guardian launched a new iPhone application last December, which is said to be successful. People are willing to pay for mobility allowed by technical innovations. Newspapers also can sell non- journalism related goods and services provided by partners who value their strong brands. If the website paywalls do not match the expectations of their supporters, the industry will still be able to test other new sources of income.

Jean-Pierre Tailleur is a researcher for media laboratory Futuroom (Prague) and for the World Editors Forum (Paris). He expresses his own views in this article.


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