Are paywalls the way to make online news profitable?
By Joy Blenman
“I’ve never bought a physical newspaper,” says a journalism student at the University of King’s College.
“Is that something you’re proud of?” replies John Honderich. He’s the chairman of Torstar Corporation, which owns the Toronto Star, among other publications.
The student’s question is a sign of the times: the future of journalism is digital, and the transition has already begun.
Yet, in 2012 the newspaper industry doesn’t have evidence of an effective digital business model.
Still, there is a twinkle of optimism in Honderich’s eyes as he discusses Thestar.com’s readership numbers. When Ontario Premier Dalton McGuinty resigned in October, Canadians logged onto Thestar.com more than any other site, Honderich says.
As the talk proceeds his voice wavers between enthusiasm and grave concern. Digital-only subscriptions at the Hamilton Spectator have been “very limited,” he says.
Honderich is uncertain what the future journalism business model will be. He shifts in his paisley wingback chair and jokes that students should tell him if they know a solution.
No one dares to speak up. He tells them one thing with certainty: “It’s a tough time, but quality content will survive and we are going to figure out the model.”
In 2000, the U.S newspaper industry was worth $59.2 billion. It has since plummeted to less than $34 billion, according to a 2012 report on the state of the media by the U.S. Pew Research Center.
The media plays the role of the watchdog, interpreter and fact-checker, but it is expensive to produce. To survive, it must redesign its business model.
Canadian news outlets are asking readers to pay for content. Many have already chosen that route, like the National Post and the Globe and Mail.
“In a democracy we need good, quality, independent journalism, but how do we do that?” asks David Climenhaga, a former journalist at the Calgary Herald and the Globe.
Paywalls are a hot topic for good reason.According to a 2012 Newspaper Audience Databank Inc. report, digital subscribers may soon surpass print subscribers. The urgency for a profitable online model has never been greater.
“I feel that this was the original sin. We just didn’t know what the stuff was worth, so we gave it away,” says Kevin Cox of online media. He is a journalist who witnessed the debut of the Globe’s free distribution of online news content at the dawn of the millennium.
Newspapers can no longer depend on advertising or classifieds for revenue, says Raymond Brassard, executive editor of the Montreal Gazette: “Companies don’t need the newspaper. They can create their own website and service their customers without having a middleman.”
Postmedia Network Inc., the owner of the Gazette, implemented a metered paywall in 2011. Brassard says the newspaper has around 1,500 digital-only subscribers who pay to read more than 15 stories a month online. The Gazette found out early on that few people were surpassing the original limit of 20 stories.
Lisa Lynch, an assistant professor of journalism at Concordia University, says paywalls are a desperate move to retain online readership.
“Paywalls are a crisis move. It is never going to replace previous legacy revenues,” she says. “Why pay a premium on a container that doesn’t really contain exactly the things that you’re looking for, especially when Radio-Canada or CBC are doing much more original reporting?”
Newspapers have seen few gains from digital advertising. Ramesh Venkat, a marketing professor at Saint Mary’s University, says some people claim social media is more effective than traditional advertising.
As its main advertising campaign in 2009, Ford gave away 100 Fiesta cars and had people promote the model through blogging and social media. Car ads used to represent a large portion of newspaper revenue.
Now for every $10 newspapers lose in print advertising they gain $1 online, according to the Pew Research Center report.
But paywalls are boosting revenue for publications such as the Wall Street Journal and the New York Times.
“Digital subscriptions have helped circulation revenue at the Times and Herald Tribune surpass advertising revenue,” reported the Times in July.
This year the Times cut its metered story limit in half to 10 from 20. In July 2012, New York Times Co. reported 509,000 digital subscribers. That’s nearly double the number of subscribers the Times had with its first major paywall — TimesSelect — which ran from 2005 to 2007. TimesSelect charged readers for archives and op-ed articles.
Lynch says readers will pay for niche news — not opinions — citing the Times’s failed attempt with TimesSelect.
“A lot of the columnists left because they didn’t want their audience to decrease,” she says.
Canadian subscribers were the guinea pigs for the Times paywall. Now publications north of the border are introducing online pay models.
In 2004, Postmedia’s then-parent company CanWest charged readers for content at Canada.com. In August 2012 Postmedia CEO Paul Godfrey reattempted the pay model experiment: a new, metered model was launched at the Ottawa Citizen, the Province, Vancouver Sun and National Post.
Readers at the Province pay $7.96, plus tax, if they wish to access more than 15 stories per month, while the Ottawa Citizen charges readers $9.95.
Postmedia isn’t alone. On Oct. 22, the Globe and Mail implemented a metered model. Weekday print subscribers have unlimited access to web articles, and for $20 per month digital subscribers gain unlimited access to the Globe on any electronic device. Non-subscribers can read up to 10 stories and access content through social media for free.
But in an era when free news is abundant, readers are reluctant to pay.
A 2011 study by the Canadian Media Research Consortium reports 92 per cent of Canadians would go elsewhere if their favourite website started charging for content. It found Canadians across the demographic spectrum opposed to paying for online news; however, more educated and wealthier Canadians were slightly more likely to pay.
Former journalist Climenhaga says most readers refuse to pay for online news because they feel “ripped off.”
“I think there might be people who will pay for the New York Times,” he says, “but will not pay for run-of-the-mill newspapers like the Calgary Herald or even the Globe and Mail because they don’t see the content that those papers provide as being exclusive.”
Dan Shaw, a marketing expert from Dalhousie University, says when newspapers gave away content for free, readers perceived the news as being of little value or something they shouldn’t have to pay for.
Readers’ unwillingness to pay is exhibited by the number of online articles on how to hack the Times paywall. Climenhaga says he discovered early on he was able to gain unlimited access to the website by deleting its URL from his Internet browser’s cookies list.
“I’m not some young kid who is really savvy about the Internet,” says 60-year-old Climenhaga. “It took me less than 15 minutes to figure out how to defeat that paywall.”
Despite readers’ resistance to paying for digital journalism, more and more publications are creating paywalls.
Northern News Services, which holds a virtual newspaper monopoly in the Northwest Territories and Nunavut, was the first company in Canada to implement a paywall, in 1995.
Similarly, in New Brunswick readers can only access digital news from the local paper with a subscription. Brunswick News Inc. owns the province’s 19 English and French newspapers. There, readers pay $19.95 per month for online access at the Telegraphjournal.com. Both the CBC and CTV operate in New Brunswick; however, New Brunswick resident Sherry Aske argues that Telegraphjournal.com is the only source of in-depth, local coverage.
“If you don’t have access to that paper you are going to be less informed on some of the smaller things, which are not necessarily the less important things,” she says.
James Irving, the vice-president of Brunswick News Inc., declined to comment on readership numbers for the Telegraphjournal.com, which launched last year.
The Chronicle Herald, another leading paper in the Atlantic region, has not decided to put up a paywall but is “certainly watching this closely,” wrote digital director Sheryl Grant by email.
Consumers are most likely to pay for content that is not readily available — specific and local content — and not easily found elsewhere.
Allnovascotia.com is an online, business-only publication. It has charged readers since it launched in 2001. It has a niche clientele and its circulation numbers have surged over the years.
When current managing editor, Judy Myrden, started at Allnovascotia.com in March 2011 the website had around 5,000 subscribers. That number has since jumped to 7,000.
“There are people out there who are willing to pay to be informed,” says Myrden, “and I think that’s why you see so many of these other newspapers trying to get their product under a paywall.”
Myrden says Allnovascotia.com is successful because it offers provincial business news not found anywhere else.
“You can’t give the product away for free,” says Myrden. “If people want excellent journalistic standards they are just going to have to pay for it.”
Kelly Toughill, director of the University of King’s College School of Journalism, agrees it is easier to charge for niche media than mass media.
“General interest news is dividing into news organizations for the power elite and for the opposite end of the spectrum,” says Toughill. “So, it may be that the Times and Gawker survives; it’s what survives in between those two that people like me worry about most.”
Toughill says how effective paywalls will be as a business model — even at the Times — is still unclear.
Digital Advertising Outlook Hopeful
Digital advertising analyst Gordon Borrel predicts online advertising will rise by 30 per cent in 2013.
He says ads targeting readers based on recent Internet searches will boost revenue for newspapers.
Dan Shaw, a marketing lecturer at Dalhousie University, says paywalls give companies detailed information about their readers. The more advertisers know about their audience, the more targeted and ultimately profitable advertisements will be.
The Gazette’s paywall has been up for just over a year with only modest readership numbers, but executive editor Brassard says he is confident that as the trend of charging for online content grows, readership and revenue will also increase.
“In five to 10 years from now, I am confident that news organizations will be getting the same kind of revenues from their online content as they are from their print content.”
Technology has enhanced journalism by creating rich multimedia elements that give news stories deeper context and clarity while fostering social-political engagement through social media.
Yet, technology has also destroyed: it has decimated advertising revenue, caused job cuts and led to publication closures.
In September 2012, free news website OpenFile.com suspended its operations, putting yet another team of Canadian journalists out of work. In an interview a week before the announcement, OpenFile Montreal’s then-editor-in-chief Dominique Jarry-Shore alluded to the Canadian news revenue crisis.
“We can’t figure out how to pay for content and everyone is just laying off journalists,” says Jarry-Shore. “A lot of great minds are trying to figure this out as we speak.”
This fall, the Times journalist David Carr proclaimed that this is the golden era of journalism. The golden era of the 1920s was a time of great splendor and uncertainty. Today’s journalism is just as precarious and paywalls straddle that same line. They are part of the revolution of news organizations urgently trying to fund journalism in the digital age. Whether paywalls revolutionize it for the better is yet to be decided.