It’s no secret that news providers are struggling to make money online. The mass media's monopolistic control over the public flow of information has given way to conditions euphemistically known as "digital disruption". Disruption refers to a market saturated with free content from an unprecedentedly diverse range of sources. In this market, distribution and advertising are dominated by global platforms like Google and Facebook. Previously stable audiences are now fragmented and transient and, most significantly, disruption refers to the collapse of the mass advertising model that fuelled the business side of news. As advertising is now dispersed across digital sectors, returns for major publishers are declining. In the first quarter of 2016, 85 cents of every new dollar spent in online advertising went to Google or Facebook.
The crisis in news publishing continues to be about the decline of print advertising, which generates far more revenue than digital advertising. This is also true of traditional broadcasting; a point emphasized by Noel Curran in his recent FuJo lecture when he noted that RTÉ's "commercial income from digital remains a fraction of overall commercial income”.
As traditional media companies watch their old business models flounder online, there is little solace to be found in the performance of popular digital-born publishers. The latter’s inability to turn digital eyeballs into digital revenue was abundantly clear at the end of the financial year in April. BuzzFeed - one of the top 1000 most visited sites in the world according to Alexa rankings - fell $80 million short of its projected revenue. Mashable, also in Alexa's top 1000, announced drastic layoffs including the entire political desk "as well as most of its global news desk and about half of its editorial video team".
Meanwhile, among the traditional outlets, The Guardian was forced to roll back its extensive digital expansion and The Financial Times, previously a poster child of stability, warned of necessary cutbacks and expected declines. In their Mother Jones op-ed, Monika Bauerlein and Clara Jeffery declared “the digital media bubble" burst. Buzzfeed called April’s financial news "a digital media bloodbath".
Erecting Paywalls
In their desperation to reverse the revenue slide, publishers have intermittently returned to the idea of getting readers to pay for online news through paywall systems. By closing the door on free access, publishers hope paying customers will come flooding in.
For niche and established publications, like the Wall Street Journal or the Irish Farmer’s Journal, this strategy does make some sense because readers have a good reason to pay for content they cannot get elsewhere. In 1997 the Wall Street Journal was the first major publisher to launch a hard paywall. It gained 200,000 digital-only subscribers in the first year and exceeded 900,000 by 2013. At the Financial Times, an early pioneer of the ‘soft’ or metered paywall, 70% of all paying customers were from digital subscriptions by 2015.
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Hard Paywall: No online content is accessible without payment. A hard paywall can lead to a loss in web traffic - and an associated loss in advertising - because web pages are not indexed on Google search.
Soft or Metered Paywall: Allows access to some content without payment. The assumption is that core readers and newly cultivated readers will then pay for full access. In reality, most soft paywalls are easily circumvented.
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The benefits of a paywall are not so clear for general news publishers. After all, if one publication restricts access to the latest news, the same content is freely available elsewhere. And if they restrict access altogether, web traffic decreases, fewer people share articles, and the hoped for monetization of that traffic via advertising views disappears. Avoiding this scenario is the reason so many publishers opt for leaky paywalls.
For those behind a hard paywall, Google’s created First Click Free which creates some leeway for serendipitously discovering paywall articles through search and social media. If a publisher subscribes to "first-click free", users can access an article from search or a social media link but subsequent navigations through the site are restricted.
In this context and in the absence of a good alternative, publishers are trapped in a cycle of implementing and dropping various kinds of paywall. In 2003 the LA Times put a paywall around its popular entertainment section but scrapped the initiative after a 61% drop in visits to the site. The New York Times had a similar experience with a subscription-based service for daily columns. In the UK, Johnston Press trialled paywalls for six of its regional newspapers but abandoned the experiment after a year. After two years, News Corp dropped The Sun's paywall to allow the UK’s biggest-selling tabloid compete for advertising against rivals like Mail Online. News Corp's UK broadsheets, The Times and Sunday Times, have been behind a hard paywall since 2010.
Deceptive Success Stories
Despite these setbacks, many business strategists persist in the belief that publishers must monetise their content and supplementary services through paywalls. For Steve Brill, paywalls simply indicate that a publisher's content has value that deserves to be paid for. This is the thinking behind the restructured publication routines at The Times. By abandoning the breaking news cycle, the paper will concentrate on delivering in-depth and high-quality analysis of events. In essence,The Times no longer competes with the free breaking news provided by the BBC and Twitter.
In 2011 The New York Times invested $40 million in its metered paywall and recently reached the milestone of one million digital-only subscribers. However, as Mathew Ingram observes, the success of a paywall at a big publisher like The New York Times means little for the industry at large.
"There is little that the newspaper publisher’s paywall success can teach other smaller papers simply because it is so unique. Just as every magazine wants to be The Economist or Vanity Fair, every newspaper likes to think of itself as being similar to the New York Times. But there is only one NYT, and it is everywhere."
Moreover, Ingram points out that revenue from digital subscriptions and digital advertising is dwarfed by the revenue The New York Times gets from print circulation and print advertising.
"It’s not that getting a million people to pay for the newspaper isn’t remarkable, it’s that even one of the most successful paywalls in the history of print media is still barely making up for the decline in print advertising revenue."
The New York Times' paywall was initially very easy to work around leading Peter Tucci to describe it as a “pretend paywall” that preys “on the guilt and ignorance of loyal readers”. More tech savvy demographics are unlikely to be lured into paying for something they can easily access for free.
“The [New York] Times’s paywall targets two groups: readers who feel guilty about consuming free journalism and readers who don’t realise how easy it is to bypass the pay wall. This is a clever strategy. If just 1 million of the site’s 30 million monthly unique visitors sign up for the $15-a-month, computer-only subscription fee, the paper will rake in $180 million a year from the pay wall — enough to keep the paper in the black. And if some of those readers subscribe to the $35-a-month premium plan, The New York Times will be in really good shape — at least until word gets out that the pay wall isn’t real.”
Elsewhere, newspapers that have adopted paywalls continue to abandon them once the slide in traffic and advertising becomes unsustainable. The Toronto Star, Canada's largest-circulation newspaper and the fourth largest market in North America, announced the dissolution of its soft paywall last year.
“We had a nice run when we first launched it. Had early adoption rates which we were quite thrilled with and then we hit a wall pretty quickly. Within about 90 days we seem to have plateaued – we spent about probably six months trying pretty aggressively trying to move the number and found that was expensive and a relatively high churn rate." Sandy Macleod, chief operating officer Toronto Star
Back to square one, the Toronto Star targeted a new edition for tablets; a market that has fallen into sharp decline as people opt for smartphones over tablets. Herein lies another problem for publishers: they are left to pin their hopes on devices and platforms that change rapidly. The crux of "digital disruption" remains: publishers are totally at sea in a market they used to control. They do not control distribution or readers' access to content and they cannot control advertising. The Internet runs on free and open content and publishers are fighting against this by trying to figure out ways to make people pay.
Blendle's pay-as-you-go model - the so-called "iTunes of journalism" - is a fantasy because music isn't like news. People don't buy news in the way they buy music. We buy music because we want to re-listen to it over and over. It is also notable that Blendle originated in Holland where the market isn't as competitive or as saturated with free content as in English language markets. The alternatives to paywalls are not much better than paywalls and, as Mathew Ingram concludes, "paywalls are more like a wall of sandbags than anything else, and the wall is still leaking".
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