Newspapers, Paywalls, and Core Users

This may be the year where newspapers finally drop the idea of treating all news as a product, and all readers as customers.

One early sign of this shift was the 2010 launch of paywalls for the London Times and Sunday Times. These involved no new strategy; however, the newspaper world was finally willing to regard them as real test of whether general-interest papers could induce a critical mass of readers to pay. (Nope.) Then, in March, the New York Times introduced a charge for readers who crossed a certain threshold of article views (a pattern copied from the financial press, and especially the Financial Times) which is generating substantial revenue. Finally, and most recently, were a pair of announcements last month: The Chicago Sun-Times was adopting a new threshold charge, and the Minneapolis Star-Tribune said that their existing one was also working well. Taken together, these events are a blow to the idea that online news can be treated as a simple product for sale, as the physical newspaper was.

For some time now, newspaper people have been insisting, sometimes angrily, that we readers will soon have to pay for content (an assertion that had already appeared, in just that form, by 1996.) During that same period, freely available content grew ten-thousand-fold, while buyers didn’t. In fact, as Paul Graham has pointed out, “Consumers never really were paying for content, and publishers weren’t really selling it either…Almost every form of publishing has been organized as if the medium was what they were selling, and the content was irrelevant.”

Commercial radio is ad-supported because no one could figure out a way to restrict access to radio waves; cable TV collects revenues because someone figured out a way to restrict access to co-axial cables. The logic of the internet is that everyone pays for the infrastructure, then everyone gets to use it. This is obviously incompatible with print economics, but oddly, the industry’s faith in ‘every reader a customer’ has been largely unshaken by newspapers’ own lived experience of the move to the web.

A printed paper was a bundle. A reader who wanted only sports and stock tables bought the same paper as a reader who wanted local and national politics, or recipes and horoscopes. Online, though, that bundle is torn apart, every day, by users who forward each other individual URLs, without regard to front pages or named sections or intended navigation. This unbundling leads to the odd math of web readership — if you rank readers by pages viewed in a month, the largest group by far, between a third and half of them, will visit only a single page. A smaller group will read two pages in a month, a still smaller group will read three, and so on, up to the most active reader, in a group by herself, who will read dozens of pages a day, hundreds in a month.

Against this hugely variable audience behavior, a paywall was all-or-nothing: “If you won’t give us any money, we won’t show you any ads!” Offered this all-or-nothing choice, most readers opted for ‘nothing’; the day they launched their paywall, the Times of London shrank its digital audience from a large multiple of its print circulation to a small fraction of it. This isn’t a problem with general-interest paywalls — it is the problem, widely understood before the turn of the century, and one to which there has never been a convincing answer. The easy part of treating digital news as a product is getting money from 2% of your audience. The hard part is losing 98% of your advertising base.

* * *

To understand newspapers’ 15-year attachment to paywalls, you have to understand “Everyone must pay!” not just as an economic assertion, but as a cultural one. Though the journalists all knew readership would plummet if their paper dropped imported content like Dear Abby or the funny pages, they never really had to know just how few people were reading about the City Council or the water main break. Part of the appeal of paywalls, even in the face of their economic ineffectiveness, was preserving this sense that a coupon-clipper and a news junkie were both just customers, people whose motivations the paper could serve in general, without having to understand in particular.

The article threshold has often been discussed as if it was simply a new method of getting readers to pay, to which the reply has to be “Yes, except for most of them.” Calling article thresholds a “leaky” or “porous” paywall understates the enormity of the change; the metaphor of a leak suggests a mostly intact container that lets out a minority of its contents, but a paper that shares even two pages a month frees a majority of users from any fee at all. By the time the threshold is at 20 pages (a number fast becoming customary) a paper has given up on even trying to charge between 85% and 95% of its readers, and it will only convince a minority of that minority to pay.

Newspapers have two principal sources of revenue, readers and advertisers, and they can operate at mass or niche scale for each of those groups. A metro-area daily paper is a mass product for customers (many readers buy the paper) and for advertisers (many readers see their ads.) Newsletters and small-circulation magazines, by contrast, serve niche readers, and therefore niche advertisers — Fire Chief, Mother Earth News. (Some newsletters get by with no advertising at all, as with Cooks’ Illustrated, where part of what the user pays for is freedom from ads, or rather freedom from a publisher beholden to advertisers.)

Paywalls were an attempt to preserve the old mass+mass model after a transition to digital distribution. With so few readers willing to pay, and therefore so few readers to advertise to, paywalls instead turned newspapers into a niche+niche business. What the article threshold creates is an odd hybrid — a mass market for advertising, but a niche market for users. As David Cohn has pointed out, this is the commercial equivalent of the National Public Radio model, where sponsors reach all listeners, but direct suport only comes from donors. (Lest NPR seem like small ball, it’s worth noting that the Times ‘ has convinced something like one out of every hundred of its online readers to pay, while NPR affiliates’ success rate is something like one in twelve. Newspapers with thresholds now aspire to NPR’s persuasiveness.) Paywalls encourage a paper to focus on the value of their content. Thresholds encourage them to focus on the value of their users.

* * *

Threshold charges subject the logic of the print bundle — a bit of everything for everybody, slathered with ads — to two new questions: What do our most committed users want? And what will turn our most frequent readers into committed users? Here are some things that won’t: More ads. More gossip. More syndicated copy. This is new territory for mainstream papers, who have always had head count rather than engagement as their principal business metric.

Celebrities behaving badly always drive page-views through the roof, but those readers will be anything but committed. Meanwhile, the people who hit the threshold and then hand over money are, almost by definition, people who regard the paper not just as an occasional source of interesting articles, but as an essential institution, one whose continued existence is vital no matter what today’s offerings are.

In discussing why the most loyal subset of readers would pay for access to the Times, Felix Salmon described some of the motivations reported by users: “I like the product, understand the incentives involved, and want its production to continue” and “I feel that maintaining a quality NYT is immensely important to the country as a whole.” Now, and presumably from now on, the readers that matter most are disproportionately likely to score high on the God Forbid index (as in “God forbid the Sun-Times not be around to keep an eye on the politicians!”)

The people who feel this way have always been a minority of the readership, a fact obscured by print bundles, but made painfully visible by paywalls. When a paper abandons the standard paywall strategy, it gives up on selling news as a simple transaction. Instead, it must also appeal to its readers’ non-financial and non-transactional motivations: loyalty, gratitude, dedication to the mission, a sense of identification with the paper, an urge to preserve it as an institution rather than a business.

* * *

Thresholds are now mostly being tried at big-city papers — New York, Chicago, Minneapolis. Most papers, however, are not the Minneapolis Star-Tribune. Most papers are the Springfield Reporter, papers with a circulation 20,000 or less, and mostly made up of content bought from the Associated Press and United Media. These papers may not do well on the God Forbid index, because they produce so little original content, and they may not find thresholds financially viable, because the most engaged hundredth of their audience will number in the dozens, not the thousands.

On the other hand, local reporting is almost the only form of content for which the local paper is the sole source, so it’s also possible to imagine a virtuous circle for at least some small papers, where a civically-minded core of citizens step in to fund the paper in return for an increase in local coverage, both of politics and community matters. (It’s hard to overstate how vital community coverage is for small-town papers, which have typically been as much village well as town crier.)

It’s too early to know what behaviors the newly core users will reward or demand from their papers. They may start asking to see fewer or less intrusive ads than non-paying readers do. They may reward papers that make their comments section more conversational (as the Times has just done.) The most dramatic change, though, is that the paying users are almost certain to be more political engaged than the median reader.

There has never been a mass market for good journalism in this country. What there used to be was a mass market for print ads, coupled with a mass market for a physical bundle of entertainment, opinion, and information; these were tied to an institutional agreement to subsidize a modicum of real journalism. In that mass market, the opinions of the politically engaged readers didn’t matter much, outnumbered as they were by people checking their horoscopes. This suited advertisers fine; they have always preferred a centrist and distanced political outlook, the better not to alienate potential customers. When the politically engaged readers are also the only paying readers, however, their opinion will come to matter more, and in ways that will sometimes contradict the advertisers’ desires for anodyne coverage.

It will take time for the economic weight of those users to affect the organizational form of the paper, but slowly slowly, form follows funding. For the moment at least, the most promising experiment in user support means forgoing mass in favor of passion; this may be the year where we see how papers figure out how to reward the people most committed to their long-term survival.

84 Responses to “Newspapers, Paywalls, and Core Users”

  1. Modern Society/ Culture | Pearltrees Says:

    [...] His courses address the interrelated effects of the topology of social networks and technological networks, how our networks shape culture and vice-versa. Newspapers, Paywalls, and Core Users « Clay Shirky [...]

  2. Why content isn’t quite king « donbrownsblog Says:

    [...] akin to hope – there may be a future beyond print that actually makes money. The extension of porous paywalls allows ad revenue to be generated from browsers and subscription revenue from readers, apps let us [...]

  3. Peter Varhol Says:

    There is another problem with paywalls. I don’t want to shell out relatively small amounts of money to a dozen different sites individually. That’s why I got rid of paper subscriptions; they were too hard to keep track of. I would like to deposit a couple hundred bucks in a central repository, then check off the digital content payments I would like to make, irrespective of the URL or publisher. If someone creates something like that, I would pay in a heartbeat. But each publisher/content provider believes that it should be the sole payment interface to the (um, here we go again) customer, so I’m not holding my breath.

  4. Peter Varhol Says:

    It doesn’t matter who wins any debate with logic and style points. Nothing is going to save mass print publishing in the long run, so hanging on to it emotionally is an exercise in futility.

  5. David Leason Says:

    Just look at the Hamilton Spectator for an example. They’re charging you for imported material for the most part. If they produced actual journalism, then yes, I would pay. But not for the joke the paper is now.

  6. sirfrancisdrake Says:

    Webcomics like penny arcade, and free to play videogames like League of Legends manage to give away content for free and still stay in the black.

    Seems like the newspapers need to take an approach like that, because anytime i see a paywall, i leave that site and find a free one.

  7. Possible financial model for on-line newspapers? « Outrun Change Says:

    [...] Clay Shirky has an intriguing idea on how newspapers might adapt to the net – threshold paywall. You pay for over a certain number of page views – Newspapers, Paywalls, and Core Users [...]

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  9. Spare charities from #copyrightfees | Rob Dyson Says:

    [...] means of sharing online content for example (actively promoted by publishers) encourages readers to “forward each other individual URLs without regard to front pages or named sections or intende… It is really likely (nay enforcable) that someone who shares a link on Twitter to a news story will [...]

  10. Kim Says:

    This superbly written article eloquently articulates the impact of digital media and the rise of online newspapers. Practices of this nature are shaping our future and rapidly changing the way we all do business as this ripple effect has ramifications upon all industries. This was good to read, thank you!

  11. Will Thurston’s civic elite pay for quality journalism? « Olympia Views Says:

    [...] a recent post Tom Hyde presents a quote by new media guru Clay Shirky, who argues, “There has never been a mass market for good journalism in this country.” Let’s [...]

  12. Mary Stapp Says:

    Great read. Insightful story. My problem with paywalls and online in general is that newspapers help incite civic engagement by virtue of the format. On the same page as the horoscopes you may find a story that piques your interest. Thus newspapers helped to develop a more civic-minded society.
    My new theory that our polarization is not coming so much from Congress and the extremes represented in the blogosphere as much as it is coming from a change in the average American’s reading habits. If you only read the one article you already knew a little something about, and don’t engage on new subjects perhaps your thinking only grows more and more entrenched. Yes?

  13. Glanzlichter 80: Possen, Drohnen, Ostinato « … Kaffee bei mir? Says:

    [...] Shirky Newspapers, Paywalls, and Core Users „This may be the year where newspapers finally drop the idea of treating all news as a [...]

  14. Newspapers, Paywalls, and Core Users | Andrew Spittle Says:

    [...] Newspapers, Paywalls, and Core Users. 45.513804 -122.644971 Like this:LikeBe the first to like this post. This entry was posted in Links and tagged advertising, business, Clay Shirky, journalism, New York Times, paywall by Andrew Spittle. Bookmark the permalink. [...]

  15. Newspapers, Paywalls, and Core Users « Clay Shirky « turnings :: daniel berlinger Says:

    [...] Newspapers, Paywalls, and Core Users « Clay Shirky: To understand newspapers’ 15-year attachment to paywalls, you have to understand “Everyone must pay!” not just as an economic assertion, but as a cultural one. Though the journalists all knew readership would plummet if their paper dropped imported content like Dear Abby or the funny pages, they never really had to know just how few people were reading about the City Council or the water main break. Part of the appeal of paywalls, even in the face of their economic ineffectiveness, was preserving this sense that a coupon-clipper and a news junkie were both just customers, people whose motivations the paper could serve in general, without having to understand in particular. [...]

  16. Mark Collard Says:

    Brilliant analysis Clay. I’ve just dropped in courtesy of Seth Godin’s referral, a good one in this case. I live in Australia, and I’m starting to see some of the initiatives you describe by the bigger US dailies.

    I think the most successful will be those newspaper that create user-defined platforms, where only the content prefered by the user is delivered digitally. Time will tell if this works…

  17. Jim Somers Says:

    A comment for Kevin B. Parsons:

    Perhaps you are right that the number of readers and the number of papers sold are not the same. But the numbers work in the reverse fashion than you describe. I invite you to conduct the following experiment: Stop at your neighborhood Starbucks with a copy of your local paper in hand. Read it, then put it in the newspaper recycle basket (all Starbucks have them), and count how many people read the same paper after you have finished it. You’ll be thoroughly caffeinated before you’ll ever finish counting.

  18. Jim Somers Says:

    A comment for Peter McKay:

    Perhaps you are right that the number of readers and the number of papers sold are not the same. But the numbers work in the reverse fashion than you describe. I invite you to conduct the following experiment: Stop at your neighborhood Starbucks with a copy of your local paper in hand. Read it, then put it in the newspaper recycle basked (all Starbucks have them), and count how many people read the same paper after you have finished it. You’ll be thoroughly caffeinated before you’ll ever finish counting.

  19. Sunday Reading « zunguzungu Says:

    [...] Newspapers, Paywalls, and Core Users [...]

  20. John Finkelde Says:

    I am a huge fan of (Murdoch owned) The Australian newspaper. it has excellent journalism, balanced reporting & credibility.

    I get the The Weekend edition home delivered & buy it sporadically during the week.

    They have just introduced a paywall & I signed up for the free month but to be candid I won’t be paying for access after the free month.

    The reason – I much prefer reading a paper newspaper than a digital one. Actually I only occasionally browse news web sites.

    I am an enigma cos I totally prefer Kindle for all my book reading & love reading blogs!!

    However when it comes to my newspaper I prefer a tactile experience – go figure! I reckon this does make it hard for the newspaper industry because committed readers like me have different tastes – that’s capitalism I guess!

  21. Peter McKay Says:

    This is simultaneously the best defense of paywalls and the best description of their limitations that I’ve ever read.

  22. kevin B Parsons Says:

    The Emperor’s New Clothes! Newspapers, for decades, have used bogus numbers to entice their advertisers: “2 million readers!” when actually, Iit was 2 million papers sold. With the Internet, they now track who reads what, and the possibilities of buying customers has shrunk considerably. In actuality, the buyers are the same, but the numbers look much worse for the traditional print media.

  23. ROBIN HOOD Says:

    It’s easy to bypass thespec.com paywall. Simply wait until the page loads, then click the “X” icon (stop loading) in your browser two or three times. Each time you click a link, you can do the same thing, wait for it to load, then click stop a bunch of times. Pretty simple. I can’t believe that f#*%ing idiot Howard the Editor believes people are going to pay for the atrocious spelling errors made by his reporters. What a joke. The day that they make it so the stop button doesn’t allow you to bypass the paywall is the day I stop going to that site. The National Post and CTV are pretty good and you can use CH website for local news. Weird that the spec goes on so much about the poor and then restricts local news to them unless they pay $70+ a year. What a joke.

  24. Kate McClare Says:

    In their richest day, newspapers never directly made any money from the readers. Did your little 25 cents ever truly support a newspaper? Of course not — it was strictly the means with which the paper proved to advertisers that it had readers. Why are we continuing to obsess about whether readers should pay for content? Why not charge the aggregators?

  25. David Bonnier Says:

    @Clay/Jan 6 – There certainly is a lot of tweaking to be done to find the “right” paywall for each type of content (value-add general interest, niche, etc.). But to be frank, of the millions of uniques that visit NYTimes.com, very few are of real value to advertisers, at least in terms of demographics. It is those that subscribe that are of value (30-45 yr old affluent spenders with families). Per its recent quarterly results, when locking up its website, the NYTimes.com didn’t suffer any material decline in online ad revenue. However, it did finally manage to return its subscription revenue back onto a structural growth path. That’s pretty powerful—a first in many many years.

    @sean power/Jan 6 – I promise you, it is actually much more easier/practical to read news in the bathroom on your smartphone or iPad!

  26. Daphne Gray-Grant Says:

    Some interesting thoughts in this column. In a previous career, I worked as a senior editor at a large metropolitan daily. I can tell you that the money made from subscribers (in those days, more than 15 years ago) covered about 10% of the cost of producing the paper. Advertising paid the bills. I don’t know what the formula is now — perhaps different — but it’s surprised me that newspapers haven’t REDUCED the cost to consumers in order to maintain circulation. But there is also the environmental cost. I know that 15 years ago many readers objected to the “waste” of newsprint every day and I assume that feeling has only increased.

    I am just over 50 years old now and I have virtually lost my interest in reading newspapers. In terms of transferring to an electronic delivery system, I have been TEMPTED by the NY Times but, honestly, I don’t want to spend any more time in front of my computer than I already do. I have an ipad & a kindle, so I can read elsewhere if I like, but for now at least I prefer to read books to newspapers.

    If defence of newspapers, I can tell you that the COST of producing a good investigative news story or a well-written feature is enormous and I don’t blame the newspapers for trying to charge to survive. These types of reporting/writing efforts generally aren’t replicated anywhere on the web and it makes me sad that people genearlly don’t understand the value/cost of them.

    That said, I agree that the amount of writing people find worth paying for is only a tiny subset of the writing that newspapers produce.

  27. News and the Underpants Gnomes’ equation « Newsroom With A View Says:

    [...] morning I was reading Clay Shirky’s thoughts about the “leaky paywall” or threshold model for news sites, which lets visitors see a set number of free articles before requiring a payment for any [...]

  28. EBRohde Says:

    I for see a time…if not already here…when the group of willing payees simply begins to dialog directly and internally amongst the members and the NYT becomes nothing more than a credible facilitator of acres to reliable information feeding the dialog. As a well positioned agent of trust it can facilitate meaningful dialog among those who care…and who presumably are better or best situated to impact meaningful social and cultural change or support the stays quo. The real question is whether this elite segment will see and attempt to leverage their inferior numbers but superior acess to meaningful truth into a plan of action against the majority of disengaged consumers of junk information. the future is built upon credibility and open facilitation of critical dialogs impacting our world, our lives and the lives of those who matter most to us. the NYT can continue to solidify it’s credibility but will face an onslaught of competing sources big and small new and old….and it’s reach can no longer produce the same barrier to entry into the market of ideas…the power to print is now severely marginalized by the web. Every purveyor of information must be an evangelist of truth and an apostle of mass dialog lest instead the engaged and connected who understand it’s disadvantages because of it’s inferior numbers, sets about the task of dominating and arranging a future that feeds controlled subject matter and restricts the discussion to it’s own self serving topics.

  29. The conundrum facing insurance [courtesy of Clay Shirky] « Get "fit for randomness" [with Ontonix UK] Says:

    [...] via Newspapers, Paywalls, and Core Users « Clay Shirky. [...]

  30. Mimi Says:

    Advertisers have always attempted to follow the “eyeballs”, some mass, some niche. OK in some cases they create products/opportunities, but mostly the effort has been to tap into an existing audience, if there’s a fit.
    The model has indeed changed.
    The internet has created very exciting possibilities for identifying and following those “eyeballs”. Google has in part figured this out. I have never heard of you Clay and did not seek out your blog yet i am here because i received notice of it from a “referral” WITH A LINK and the topic interested me, as a former media buyer/planner. Given this, if i personally had to pay to read your blog, at least the first time, i would not.
    In accepting the God Forbid and quality arguments – education becomes a more important factor, and i’m afraid, greater schisms are possible.
    Am i able to discern and appreciate objective journalism and applaud it (and support it) or am i simply willing to pay for someone i agree with?
    I could care less about how newspapers will be paid. My question becomes: Who, if anyone, now bears the responsibility of making sound, objective information available en masse?

  31. Hans Suter Says:

    The donor model is based on committed readers. Committed readers have developed there commitment thru time and at a certain point in time they have sent money. After having developed a commitment.
    Newspapers like the NYT have committed readers, too. These can be transformed in donors via paywall. But once this reservoir is exhausted how can the NYT generate newly committed readers if it doesn’t give full access to the paper ?

  32. Susan Rubinsky Says:

    Eric S. is wrong, so wrong. Yet so right. Hell, yes, you can buy a tune for $0.99 on iTunes. Go for it. Hell yes, you can get 10 free articles on nyt.com a day. Go for it. (10 free articles is an album, man [Channeling Dennis Hopper in Apocalypse Now])…

    - A song for $0.99 bought through iTunes benefits the artist how?
    - An in-depth article about the relationship between Turkey and Syria is worth what?

  33. clay Says:

    @Marcus/Jan 6: “Newspapers were forged based on a print-economics model. Just because the Internet exists, why do they need to abandon this model completely?”

    They need to abandon the model because the readers and advertisers are abandoning them. The fantasy that old media could continue under the old economics, when the web altered the competitive landscape so dramatically, is another of the classic errors the traditional media made in the last 15 years.

    @David/Jan 6: The beef, as you say, is that the NYT has hundreds of thousands of subscribers, but tens of millions of readers. That is the big change — an understanding that, for the general interest papers (i.e. not the financial press) that you can’t get most readers to pay.

    That may seem like a ‘Duh’ realization (in fact, it is a ‘duh’ realization, given that we understood those economics in the 1990s), but the move of the papers I mentioned is the first real sign that papers are ready to drop the idea of a paywall that only allows access to paying users, and gets most of its readers to pay. And the end of that fantasy is a big deal, culturally.

    @Dara/Jan 7: “If the writing is worth paying for then it will sell.”

    This is only vacuously true, being a tautology and all. The problem with this tautology is that it turns out that the amount of writing people find worth paying for is a tiny subset of the writing newspapers produced.

  34. Lessons from Murdoch on Twitter, and paywalls’ role in 2011-12 By Mark Coddington « World Media Trend Says:

    [...] arguing that paywalls are only working in specific situations, and media prof Clay Shirky reflected on the ways paywalls are leading news orgs to focus on their most dedicated users, which may not [...]

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