Paywall pandemonium

Used to be that the newspaper industry was a cash cow. Set up your little publication on Main Street, start pulling in legal notices and classified ads and show up at the city council meeting and high school football game once a week and you were set.

The biggest challenge was the pesky cost of buying and operating a printing press. As it turns out, that barrier to membership might have been what kept the whole thing so profitable in the first place. Once the Internet came along, any Tom, Dick and Huffington with a computer and a modem could create or aggregate news and suddenly the competition for those ad dollars was much stiffer.

So what's a suddenly destitute publisher to do? Increasingly, they seem to be banking (quite literally) on online paywalls.

At least one publisher turned his back at the "everything-on-the-Internet-should-be-free" model with the express purpose of trying to return to the glory days of print. Last year the American Journalism Review reported on Albert K. "Buck" Sherman, who installed a $345 annual paywall on his Newport (R.I.) Daily News site (http://www.ajr.org/article.asp?id=4813).

Why charge 138 percent more for an online subscription than a print one? In the hopes of driving more people back to the ink-and-paper Daily News (circulation 12,000), which was far more profitable. Newsweek reported that sales of newsstand copies of the Daily News went up by 200 a day and cancellations of print subscriptions virtually ceased in the wake of Sherman's uber-paywall (http://www.newsweek.com/2009/08/31/this-news-doesn-t-want-to-be-free.html). A year later, Sherman has retired as publisher but his wall is still standing (exceedingly) tall — a monument to a man who scoffed at the "everything-is-going-digital" conventional wisdom.

That seems to be a rare case, even as paywalls go, though. Other news organizations are looking for a hybrid model which will allow both their print and online products to make money. That's been the Wall Street Journal's modus operandi for more than a decade, offering some free online content and putting some behind a paywall.

That's also the direction NewBay Media went in Oct. 4, ending its practice of offering everything that was in its Broadcasting & Cable and Multichannel News magazines online for free (http://www.poynter.org/column.asp?id=132&aid=192098).

"We charged for a subscription and then we were taking all the content of the magazine that came out every week and putting it up on the Web for free, which wasn't really fair to our subscribers," Tony Savona, NewBay's marketing director, said in a phone interview. "Also, at the same time we were paying [to produce] some quality content that we were just handing over there as well, so we really did it just to put a value on both our content and our subscribers."

NewBay is still offering breaking news online, updated daily, for free. Savona said the deeper analysis of those events will be in the print product or behind the online paywall. Through the paywall's first week, Savona said complaints have been minimal.

"We haven't really seen too much negative stuff," Savona said. "It seems that people are using [the paid online content]. They're registering, so... so far, so good."

It seems that paywalls can work for trade mags or the WSJ, but those are publications with specialized audiences. How would a mass audience newspaper fare, especially in a market bigger than Newport, R.I. (pop. 26,475), where it's competing with more than just Grandma Rudy's newsletter for audience share? Well, The New York Times is about to find out.

Yes, the Old Grey Lady, who herself has not been immune from the ravages of revenue-killing digital media, will be going paywall starting January 2011 (http://www.nytimes.com/2010/01/21/business/media/21times.html).

Like the WSJ, some NYTimes.com content will remain free, and print subscribers (even those who only take the 150-pound Sunday monstrosity) will have full access. The Times is doing this is an attempt to solve the "10 percent problem," (http://publishing2.com/2007/07/17/newspaper-online-vs-print-ad-revenue-the-10-problem/), which basically broke down thusly in 2007:

NYTimes.com online unique users (12-month average): 13,372,000
Print circulation (daily): 1,120,420
Print circulation (Sunday): 1,627,062
(Significance: The New York Times has roughly 10 percent of print readership vs. online)

Total advertising revenue: $483,594,000
Online advertising revenue: $51,000,000
(Significance: The New York Times gets roughly 10 percent of its ad revenue online)

In a nutshell, print circulation was about 10% of total audience reach, while online advertising revenue was about 10% of total ad revenue. Or, as the Publishing 2.0 technology and media blog put it: "The economics are nearly the perfect inverse of what they should be."

Obviously not a sustainable model. So, The Times (in a surreal and odd bit of shameless self-coverage), quoted its own executives saying they decided on a hybrid free/paywall website because "they wanted to create a system that would have little effect on the millions of occasional visitors to the site, while trying to cash in on the loyalty of more devoted readers."

A beautiful thought, but is it possible in a city where residents can turn to two other daily newspaper websites for free local news and CNN.com for free national and world news?

It hasn't happened at The Times of London, which went paywall along with many of Rupert Murdoch's other News Corp. holdings in July. The Guardian reported (perhaps gleefully, as one of The Times' top competitors) that online readership at thetimes.co.uk dropped 90 percent in the first month of the paywall — from 150,000 registered users to 15,000 paying registered users (http://www.guardian.co.uk/media/2010/jul/20/times-paywall-readership).

Yet Murdoch persists with his paywall. Is he just a stupid businessman who can't see the writing on the wall? Forbes says he's worth $6.7 billion, which seems to suggest he knows a bit about making money. Given the paltry ad revenues that come from online users, it might just be that Murdoch would prefer to have 15,000 pairs of paying eyeballs than 150,000 pairs of freeloaders.

And if some people decide they'd rather pick up a printed copy than pay online, then so much the better, financially — with a nod and a wink to Mr. Albert "Buck" Sherman.