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. Newspapers and Paywalls « Tape Noise Diary Says:

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

  2. Marcus Barnes Says:

    Newspapers were forged based on a print-economics model. Just because the Internet exists, why do they need to abandon this model completely? A newspaper website that offered value-added features for both readers (e.g., community feedback/comments/contest) and advertisers beyond the print edition without actually duplicating content might provide the best of both worlds for newspapers. Have any newspapers successfully followed such an approach?

    My feeling is that many traditional publishers are still behaving as if it was the early 1990s. Everyone was rushing to “get on the web” whether it actually made business sense or not. We now have plenty of data about user behavior on the web. Yet, many publishers are trying to adapt their customers to how they (the business) wants to do things rather than catering to their customers wants and needs. Each medium has its strengths and weaknesses. Is it possible to utilize the strength of each medium to create something even better for both the business and the reader/customer?

  3. Joel and Clay don’t write often enough | Home Wealth Project Says:

    [...] Clay Shirky’s latest is about the future of newspapers. Again and again, he’s [...]

  4. AndyR Says:

    Arrived here courtesy of Seth. Thanks for articulating the facts in a debate that is sure to go on for quite a while yet.

  5. nevo Says:

    great article. mass newspapers have never had a policy where everybody pays, they have had a policy where some people pay but lots of people read the newspaper for free – thus readership versus circulation. Paywalls would not work even in a print newspaper!

  6. sean power Says:

    I am 44 and still pay for Newspapers like the Wall Street Journal and have paid for the NY Times because I find value in them and I can read them in the bathroom. Try doing that with your smartphone or ipad!! There will be less newspapers but more companies charging for them as we go forward because even a small % of readers and advertisers who pay are better than hundreds of thousands who get it for free and hope that ads support it which they don’t.

  7. Greg C. Says:

    I’ve been working at a financial paper for about 15 years on the Internet side. We’ve survived by creating tools that people want to use on a daily basis, and as such we have a high session rate, and ad view rate.

    Most papers have failed to innovate and create content/tools that is “web-specific” and engaging. Most have been followers in innovation and have bolted on Web 2.0/social media plugins that “me too” features.

    The differentiator of the web is that it is a real-time multimedia immersive experiencewith unlimited design and content potential. Most newspapers have failed to grasp that concept and used the browser as a paper replacement.

    Hard news will always need to be subsidized, and can be, if papers are willing to innovate and leverage the “real-time” and design potential of the web.

    Just my opinion. Love the blog. Thanks.

  8. Daniel McNeet Says:

    It is necessary above all to determine accurate information, not just information. Samuel Clemens said, “If you do not read a newspaper you are uninformed, if you do you are misinformed.”

    Determining accurate information even with the use of the Internet and not having access to the original source of the information, leaves readers in the position of relying on the integrity of a free press. Having said this, we all know the story of Judith Miller who was duped, or was she. by Karl Rove and Irving Libby.

    Retrieving accurate information is difficult at best but almost impossible from governments. It is disheartening I agree for the media to relay misinformation, because they are always racing to get there first, because they know they can produce a disclaimer later. The media loses credibility when they do this.

    So, I am going to stay with newspapers which I pay for gladly and trust them until I find out differently that I cannot. I will use my Internet access to different newspapers and try to the best of my limited ability to retrieve accurate information which is different than the truth. For you can tell the truth and still provide inaccurate information. Right? Right.

  9. Dan Ellender Says:

    Interesting observations. I would here add one: In my small town, a local (free tabloid) is thriving, mainly because it focuses on the local and has also strongly branded itself as such. It’s target market is those who visit grocery stores, etc, and these folks (self included) don’t mind picking up this bi-weekly, colorful tabloid to learn about happenings. Evidently the advertising income is strong, because the paper has been doing well for several years.

    Meanwhile the local traditional newspaper, beholden to AP and others, is struggling to “transition” to the web. Clearly the two publications have different economics involved, but the community they are serving is the same community. Eventually I see the two types merging into a quasi web daily web update with a biweekly event edition.

  10. Dara Bell Says:

    I think that both newspapers waited too long. It’s not really Murdochs style to dither but he did with Paywalls. This is an entrepeunial situation. Fail, correct and ship again.

    I think no one in the newspaper industray has the stomach for that but it will pay off eventually for someone. If the writing is worth paying for then it will sell. Largely it comes down to something Londoners’ hate which is selling, packaging. It’s a marketing problem.

    Ironically the left wing Guardian has it all right and The Independent have launched a paper called The I, aimed at a younger demo. It’s all up in the air! To recap I say largely an entrepeneurial stab in the dark/process.

    Thanks

    Dara

  11. Scott Atkinson Says:

    This essay scratched an itch for me – I’ve been fumbling for the last few years with trying to explain why paywalls don’t work, and what does make sense to me (which is a lot like the NYT model) and how some of these issues roll over into my business, tv.

    Am not (seriously) looking for readers, but I keep a small blog for my own thoughts and wrote a response to ‘Newspapers, Paywalls and core Users.’ If anyone’s interested, find it here: http://myownprivateradio.wordpress.com/2012/01/05/paying-for-it/

    Scott Atkinson
    Watertown NY

  12. David Bonnier Says:

    The amount of debate around “paywalls” is amazing to me. I think there’s a wide belief that consumers won’t pay for news, and that’s simply not true. See FT, WSJ, and now NYT. Since its launch in late March last year, the number of paid and unsponsored digital-only subscribers to NYTimes.com surged to 281,000 as of Jun.30.11, then rising further to 324,000 as of Sep.30.11. For context, per ABC, New York Times’ average weekday paid PRINT subscribers at the end of 2010 was just ~720,000. In other words, in just two short quarters, NYT managed to rack up nearly half that many subscribers to its digital-only service. REMARKABLE!

    What’s the beef?

  13. clay Says:

    @Thomas/Jan 5: “When I read an an interesting article, what I like to do is share it with others. … I can’t do that with a paywall in effect.”

    That’s not true with threshold models. You *can* share it now. That’s precisely the design of the system.

    @Steve Yaeger/Jan 5 — “None of [the Star-Tribune's] original reporting is available elsewhere, and that is what a sizable segment of the readership is willing to pay for.”

    This is simply false. It is the theory behind all paywalls, and it has never worked for a general interest paper. Pew recently published a poll that asked, among other things, “If your local newspaper no longer existed, would that have a major impact, a minor impact, or no impact on your ability to keep up with information and news about your local community?”. Nearly 1 in 7 Americans said it would have no impact, or only a minor one. (I think those people are wrong, but it is their beliefs, not mine, that determine willingness to pay.)

    It is the persistent belief, in the face of a decade and a half of real-world evidence to the contrary, that _any_ sizable group will pay for local reporting, much less a majority, that has led newspapers down the garden path for so long.

    @Chris/Jan 4: Yes, a regression to patronage is in the cards for a number of publications, especially small-town ones. One side-effect of discriminating by users is the additional possibility of discriminating by price — Gold Memberships and all that. In a small town, the local burghers may end up pooling some donations to keep the paper afloat, at a price well above user fees. This brings in the same pernicious possibility of undue influence, as with all patronage models, but if the alternative is to stay pure and vanish, I think many papers will prefer the former risk to the latter certainty.

    @Jack/Jan 4: There is only hope for ad-based models under two conditions — very high CPMs (advertising rates per thousand users reaches, as with publications targeted at, say, CEOs or CIOs) or very large flow (and, ideally, low cost of content), with HuffPo being the gold standard in that regard.

    @Craig/Jan 4: Yes, newspapers were economically inefficient — as my friend Chris Anderson has pointed out*, industries with strong cultural norms are often defending themselves against market forces — and there were (and are) sharks that cut back on coverage. The entire history of Gannett is the history of the realization that newspapers could pay their executives more if they cut back on news.

    * http://www.niemanlab.org/2011/11/the-jekyll-and-hyde-problem-what-are-journalists-and-their-institutions-for/

    @Anonymous/Jan 4: “Do you have info to support these claims [about political users]?”

    Funnily enough, this has turned out to be one of the most contentious assertions in this piece, though it was one I thought I could leave as common wisdom. I’ve changed the wording from ‘political, and partisan’ to ‘politically engaged’, because of the current sense of partisan as ‘at a political extreme’ rather than ‘strongly and actively committed to.’

    The best work on the subject is Markus Prior’s, who studied segregation of people by degree of political interest when the media landscape opened up. Subject to violent compression, his key finding, from the point of view of this argument, is “People who like news take advantage of abundant political information to become more knowledgeable and more likely to turn out. In contrast, people who prefer entertainment abandon the news
    and become less likely to learn about politics and go to the polls.”

    http://www.princeton.edu/~mprior/Prior2005.News%20v%20Entertainment.AJPS.pdf

    So yes, I’m taking it as read that when entertainment content is widely available, the people who are heavy users of sources of political news are themselves more interested in politics.

  14. Blogposting 01/06/2012 « Nur mein Standpunkt Says:

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

  15. John A Says:

    On the one habd, I can go with paying for full access to a newspaper,

    Note: A, as in one, newspaper. Perhaps two.

    But in the course of a day I typically follow links into perhaps fifty newspapers, ranging from New York to London to Tokyo to Sydney to New Delhi to Paris to Moscow… Each deserves some form of compensation, but in no way can I afford say $4/week for each one.

    My father worked for a paper, and I vaguely tecall that as of the Sisties over eighty per cent of income was from advertising: how much has this changed?

    Heck, EBay is basically a massive collection of adverts, and seems to be doing well. Google has fewer ads, but also turns a profit. Can such models be adapted?

    Or a central agency. “soft porn” is often set up so the customer pays a central site, ahich then allows access to numerous sub-sites. If the income is divided equally (regardless of subsite-specific traffic) it is only a couple of pennies each – but with as few as a million paying into the central site, it adds up nicely for each subsite, almost certainly more than most would make without that central site.

  16. JanW - Aussie Says:

    Fascinating analysis. From reading the post and the comments, this thought struck me: if online newspapers can’t rely on advertising, as they have in the past for their print bundles, why can other online services, such as Google search and Facebook do it? Isn’t that what makes them so valuable? Search is a service that we don’t pay for directly, but indirectly through the ads. Facebook is a communication exchange service and ego building platform (‘look at me! look at me!’), and is valued at millions? billions? of dollars because of this.

    Why doesn’t the online information provision services (news, essays, etc.) work under the same model that has spawned these? Granted, we can go to free services and get the retread syndicated reports, but if I want the local stuff, even state level, I go to my preferred online paper. I have brand loyalty to one of the two major publishers in Melbourne.

    Is it a difference in the number of eyeballs, news orgs versus search/social media services? Is it the cost of supporting two delivery systems at the same time in the transition phase? any ideas?

    Maybe a hybrid approach is required during the transition: adverts plus patron contributions. I would suggest a govt subsidy for local/state, but I doubt that would go over too well in the US. But if publishing was looked at as a public good — a well informed citizenry (which is debatable in some circumstances) — then the idea of transitioning the industry instead of letting it flub its way through, may be worth considering as well. That is also part of the CPB model, btw. I haven’t kept up with the amount of tax money going to CPB broadcasters. I know it has reduced, but is it gone entirely for NPR? PBS?

    I believe it is also valuable to avoid more concentration in order to get the sort of economies of scale that Google/Facebook have in their worlds. So supporting local news outlets may also fit that double criteria: avoiding mega pubs (e.g. Murdoch press), but helping out the little guy.

    BTW, in Australia, we have a dual level: paid for metro press and multiple FREE local (town/village info) papers delivered to our homes. They also have online versions of both, all free except for two national papers, one Murdoch, one not.

  17. Kerry Webb Blog » Blog Archive » Another great feat of Clay Says:

    [...] Shirky has done it again.  In a new post on his blog he’s done some further analysis on the economics of newspapers and paywalls, and still [...]

  18. Jonathan Mendez Says:

    In my experience the skillsets needed to sell content online are most similar to e-commerce, not advertising. I’ve worked on paywall strategy and have blogged about it. It’s a technology & product problem more than anything:
    http://www.optimizeandprophesize.com/jonathan_mendezs_blog/2010/07/another-brick-in-the-paywall.html

  19. Stephen Strauss Says:

    The most curious and weird thing about the post above is that when I attempted to respond to it I was told my response was a spam by WP-SpamFree. What I learned from that is that spam walls are more effective than Paywalls, as they have the power to prevent you from even talking about PW’s.

  20. Reader: Jan 5, 2011 | updownacross Says:

    [...] Newspapers and their paywall subscription system. Thoughtful [...]

  21. Thomas Says:

    Is the NYT paywall being enforced these days? I definitely read more than 20 articles there monthly but nothing happens. I don’t get blocked or see any warnings.

    I will never pay for a news article. There are only a finite number of subjects and news to write about. So there is almost always someone else writing about the same subject somewhere else. Maybe the news organizations should first try to kill search engines before they implement a paywall? [lol]

    Also, if I pay for an article, then what do I do with the article after I have consumed it? Save it? Why? Forward it to a few select friends? Maybe.

    When I read an an interesting article, what I like to do is share it with others. So I will general extract a paragraph or two, tack the URL on and then post it to forums I frequent to share it. I can’t do that with a paywall in effect. And so the newspaper with the paywall loses potential eyeballs that might be reading the story that drew them to the site and then whatever other content they might stick around for. Their loss…

  22. Terry Heaton Says:

    Clay, I’m not sure readers ever were the customers. Maybe long ago. To paraphrase Dave Winer, “The readers are the product, and the customers are the advertisers.”

  23. Will Knott Says:

    Paywalls do work for hyper-local news (e.g. some very local small Irish newspapers have their emigrant populations paying for local gossip), or highly specialized timely news (e.g. Wall Street Journal).

    Once a title is national (regardless of nation), that news leaks out in some way, either because of people talking about it on Social Media or rival titles.

    Should online newspapers do a “Jimmy Wales” please pay to keep us running for those accessing outside of the country? Would it make more sense than serving “local” adverts? And might it actually get a few pennies in.

  24. Commentopia Says:

    http://www.commentopia.com/Commentopia-TheBigStoryTheBestComments-Business-January2012.htm#shirky

  25. Ack Says:

    One paywall I really don’t get is the FT. I really like their coverage, bit it is nowhere near irreplaceable. Meanwhile, their blogs (e.g. Alphaville) are excellent, with a lot of the commentary unavailable anywhere else, and are outside the paywall. It seems like this should be reversed. The “mass” content should be free and ad supported and the “niche” content should be subscriber supported.

  26. Making digital pay « donbrownsblog Says:

    [...] tweeted a link to this article about paywalls yesterday, but it’s significant enough to link to again. Although it’s about newspapers, there [...]

  27. Bill Densmore Says:

    This post elegantly advances the discussion away from paying for content and toward the realization that news organizations have always been part of a larger service. As you note, that service, historically, was delivering a physical, bundled product. To expect to be directly paid in the future, news organizations are going to have to deliver a very different service, one which addresses information overload by saving time and adding knowledge and insight on a customized, personalized basis.

    As Jack C comments, above: “All of a sudden, you know exactly what your customer reads and also what they don’t.” The use of that knowledge by news organizations can range from creepy to inspired. There will be a balance to be struck, and striking it will have economic consequences and opportunities with the the one-to-one audience members.

    Spot.Us founder (and former Reynolds Journalism Institute colleague) David Cohn observers, also in a comment above: “Whether or not they know it, and without identifying it as such, the New York Times has taken a big step towards the NPR model . . . This ‘paywall’ is not about access – but affiliation. In his linked blog post, David talks about the opportunity interact with a Times community as of potential value to users.

    Our notion of the “information valet” — a somewhat hokey term unless you think of valet as a curator, agent, adviser — suggests where news organizations need to move and is explained further in the RJI white paper: http://www.papertopersona.org

  28. Kataweb.it - Blog - SNODI di Federico Badaloni » Blog Archive » I giornali, la vendita dei contenuti, il ruolo degli utenti Says:

    [...] Shirky analizza le caratteristiche e le opportunità dei due modelli in un recente articolo. Di seguito traduco i passaggi che mi sembrano [...]

  29. Steve Yaeger Says:

    Arb writes that it is “easy to get the same news from many, many, many different sources.” That may be true for Dear Abby and celebrity gossip, but Star Tribune, for example, has 265 full-time journalists, the largest newsroom in the Midwest by far. None of their original reporting is available elsewhere, and that is what a sizable segment of the readership is willing to pay for.

  30. Farai Chideya Says:

    Important article. The affiliation/God Forbid model is underway, and in many senses undermines the civic space cheap newspapers once held. The NYT raised to $2.50 for a regular weekday edition. That’s lunch or dinner money.

    When papers were cheaper, by a factor of tenfold given inflation, you really could talk about mass market news. What happens when people look at a paper and say “that, or the cost of me making a sandwich and packing an apple”?

  31. Mike Says:

    The other problem with paywalls comes from the inside- the newspaper staff itself. How many in-demand journalists or columnists want to write for a newspaper where their words are almost *guaranteed* to be seen only by a select few (the paying customers)? Damn few, that’s how many.

    Most writes want their work to be seen (that’s the whole point, right?), not locked behind a paywall where few people will ever see it. I suspect many of them will migrate to more open newspapers that *welcome* a wider audience and that doesn’t make them pay for the privilege.

    I expect to see a slow backlash from the writers as they come to realize that this fabulous new paywall (mandated by upper management) is killing their readership- it’s actually *preventing* people from seeing their work. What writer is going to get happy feet over that?

    By the same token, how many advertisers like the idea of paying for ads behind a paywall that most people will never see?

    The fact is that paywalls suck, and I have a hard time seeing general content distributors like newspapers making it work. Oh sure, there will always be *some* people willing to pay, but it won’t be enough to make a profit and survive.

    That’s my take on it.

  32. Clay Graham Says:

    Damn fine essay Mr. Shirky. Giant fan. Basically it is our position that Hyper Local Journalism especially of the Indie variety is a new frontier. It will be the place where people go in the future for journalism; Readers will go there to build and understand their communities. The issue right now is monetization. We need to find business models that work for indie local journalists.

  33. Eric S Says:

    The article, and in fact many of the comments, emphasize a major flaw of paywall strategy that I’ve not seen connected: As already explained in detail, the Internet is intrinsically a many-source medium. However, the paywalls are all modeled on single-source subscription. In order to read one interesting thing, you need to sign on to read the whole edition and — worse — to indefinite future editions until cancellation. The porous paywall tries to keep those occasional readers but sacrifices revenue. Music already showed us the answer: Micropayments. Music labels tried to sell the traditional album online and failed horribly, and monthly subscription streaming struggled because the money was too large to be spent casually. iTunes succeeded because you could buy a single song at nearly trivial cost with no further obligation. Smartphone app stores work the same way: I’m willing to risk $0.99 or maybe even $2.99 on something that looks good but might not be. An article doesn’t get reused like a song or an app, so maybe $0.35 or $0.49 is a good price?

    Which brings us back to unique content. I will in fact pay for a fair number of local articles and other bits of interest, but not if I can easily find the similar content for free elsewhere. The few papers who have so far dared to raise paywalls do have much unique content, but they cling to an outdated pay model. They are no longer a single news source of a person’s news by any definition of news, and any successful pay model will need to accommodate sharing readers with those other sources.

  34. jp Says:

    Excellent article, clear and engaging as always.

    @Rufus Dogg and all other misguided moralists: You forgot to mention the air your hypothetical burglar was breathing after he walked into your home, which is unfortunate, as those “stolen” gases are the only substance that would make your flawed analogy applicable to the current newspaper paywall situation, or to any scenario where creative content is available digitally. The vital difference between your purloined pizza and beer and online articles is that after some unsavory individual eats your food and drinks your drink, the pizza and beer are gone. However, like air (which is so abundant and easily accessible that there is virtually no cost to any individual), digitized content can be “stolen” and still exist where it was “stolen” from, so nothing is lost, so nothing is truly stolen. Or maybe we should start arresting everyone who browses in a bookstore for theft, unless I’m missing some difference between reading something for free in real life vs. reading something for free online.

    Yes, effort went into the creation of digital content, and yes, it is unfortunate that the creators of that content are finding it more difficult to receive compensation for that effort. But the manner of how they are compensated, and even the presumption that they should be compensated, are based in previous technological and cultural changes that turned creative work into a viable commodity outside of the preceding patronage system. Those changes also led to the situation we have today. The result? In terms of accessibility and abundance, newspaper articles, books, music and movies are now more like air than pizza. It’s a big scary change, but the solution is not to hide behind hollow moral rules that don’t address the current reality or to demand laws that protect obsolete ways of doing business.

    As far as journalism goes, a return to local/regional emphasis and an involved readership would not only serve the public and the individual, but would also best exploit the technological advances in desktop publishing that could make a small-circulation paper not only financially viable but actually interesting to people who’ve given up on newspapers over the last few decades. Who knows, it might even help revitalize politics. None of that will happen, though, as long as flimsy moralizing still has traction as a legitimate defense for broken business models.

  35. arb Says:

    One huge problem I see with paywalls is that it is so easy to get the same news from many, many, many different sources, rendering paywalls all but useless for the majority of “news” in most newspapers. Paywalls can be effective if a newspaper offers a reasonable amount of custom content – opinion pieces, reviews, and genuine “local” news written by staff reporters. When newspapers rely so heavily on news agencies for the bulk of their content, they run the risk of becoming irrelevant as a news source. I can get much the same news from dozens (or hundreds) of news sites – the question newspapers need to ask themselves is “what does _our_ site offer that a reader cannot get anywhere else?”

    Newspapers need to reinvent themselves in order to survive in the online world. They need to start becoming more akin to magazines, providing unique content that is unavailable elsewhere before any significant numbers of readers will begin subscribing.

  36. Mark Lazen Says:

    Provocative and insightful as usual Clay.

    I’ve always been fascinated by the ways that the physical (or technological) constraints of a medium are what really limit the range of business models in the world of media. You cite great examples in the “bundle” of a newspaper or the ability to secure a signal on coaxial cable.

    Another particularly notable example: the combination of digitization of music and the internet destroys not just the ability of CD distributors to hold their price point in many cases, but also exposes how flawed is the notion that IP law in the abstract is somehow sacrosanct, when in fact it is only as useful as it is enforceable. Once upon a time, an individual couldn’t practically copy and distribute music. Now almost anyone can losslessly.

    Newspapers are in a similar boat and have to decide whether it is better to let readers “steal” their product than not see it at all.

  37. Chris Boardman Says:

    Great post! But, you seem to be pointing towards a regression (which may be a good thing) to a “patron” based model.

    It is a curious phenomena that as consumers become more empowered they will be forced to both be engaged (at a local level to be sure) and held accountable for their actions.

    Thus, the elimination of paywalls with the power of Core users increasing will be an interesting dynamic to follow. Thanks Clay….always love your insights.

  38. Benoit Wirz Says:

    FWIW, I agree that pay metering is really a way of monetizing audience, not content by identifying and culling core users.

    Interesting point about what pay metering means for local papers in particular. But in order for a civic-minded core of citizenry to drive local newspaper revenues, pay meters need to be driven by more than just usage. There need to be other hallmarks of engagement that drive payment requests (perhaps just asking those folks that actually read civic journalism to consider sponsoring the beats they favor).

    One option that I’ve often wondered about is whether advanced access to local, exclusive pieces would also prove a way to get folks to pay for content. Say you gave paying folks 24 hour advanced access to legislative coverage (which most people could wait a lifetime for, but some need immediate coverage of). Would this drive revenues?

    Also interesting comparing NPR conversion to current newspaper conversion rates online. I think the analogy is a bit unfair as radio is clearly qualitatively different medium (and one which allows you to hold all content hostage to a pledge drive). Better analogy is probably Wikipedia where 1/450 users contribute $22.00 on average.

  39. Carlos Cortes Says:

    According to some articles I came across, the iPhone, iPad and Android apps –with its walled gardens and cozy environments– were the key to the paywalls scheme. And indeed some numbers made the case for increasing online subscriptions (see the NYT: http://www.cjr.org/the_audit/the_nyt_paywall_is_working.php?page=all).
    You state otherwise, but still I feel the business logic seems to be driving the we way we are and will be consuming content.

    Thanks for the great post.

  40. Rufus Dogg Says:

    @CL It is wrong to read 20+ NYT articles without paying. Just because I leave the door to my house unlocked, that doesn’t give you the right to come in, watch my cable, eat my pizza and drink my beer, then blame your immoral behavior on me. It troubles me greatly that you have no moral compass. Even more most of your friends.

  41. Jack C Says:

    Interesting piece.

    Is there no hope of an ad-based model for web papers? It strikes me that while something is lost the unraveling of content, much that was previously impossible is now relatively trivial. Specifically, I’m thinking of our ability to monitor exactly which parts of “the paper” appeals to specific readers, where the reader consumes information, and by what means. This knowledge comes with vast opportunities. It not only gives us significant insight into a reader’s demonstrated preferences, but we can also make good guesses at other content that will be appealing. This same line of insight also applies, perhaps more compellingly (in terms of financial viability), to advertising. The new world is rife with microtargeting opportunities, one where more data (i.e., greater openness) is preferable. Interestingly, IBM and others seem to be betting heavily on these new opportunities.

    This same insight into who is reading what has obvious implications for real journalism too. All of a sudden, you know exactly what your customer reads and also what they don’t. It may lead to painful decisions in the short-term, but informed decisions are typically more sustainable. As physical newsrooms transition to logical ones, competition for individual journalists balloons, but niche opportunities open up too. Outside of huge markets, a journalist with a passion for Chinese documentary film making would be well advised to cultivate more mainstream passions, but could be entirely possible (albeit still, presumably, limited) in the not-too-distant future. As content becomes more individualized, local journalists become essential. Clearly, many other new opportunities have opened and are already being explored (e.g., how news is collected, etc.).

    Even for editors and management, there seems to be plausible future opportunities. As the amount of content explodes, quality assurance, individualized content, sensible aggregation, signal, marketing and so on become increasingly important.

    The more I consider the future of content, the less prone I am to worrying about the long term. It strike me that the radical changes we’re currently seeing are less of a collapse and more of a reboot.

  42. David Cohn Says:

    Awesome post Clay. I have to agree re: The NYT stepping towards NPR. Here’s something I wrote the week it came out.

    http://blog.digidave.org/2011/04/why-the-new-york-times-pay-model-is-similar-to-npr-and-spot-us
    “Whether or not they know it, and without identifying it as such, the New York Times has taken a big step towards the NPR model. ”

    This “paywall” is not about access – but affiliation. Or as you call it the “God Forbid” folks. Those folks WANT to affiliate themselves with saving the newspaper. Others prefer to save the whales. It takes all kinds. But they are there. If anyone should be worried – it might actually be NPR. With The Texas Tribune, The Bay Citizen and the Chicago Coop – the NYT is starting to create little outlets where people who affiliate with their NPR station might jump ship to NYT. Of course – that would only happen once NYT admits its a membership based organization. But if they made that leap – it would be a deceleration of war to NPR in a very strange way.

  43. Craig Will Says:

    You seem to suggest that newspapers in their heyday were economically inefficient. Why then, were there not sharks who would buy a newspaper and then drop coverage of city council meetings and water main breaks?

  44. Nathan Adkisson Says:

    I like this, except you seem to suggest that papers will start rewarding paying customers by giving them more of the content they want (thoughtful, politically opinionated “real journalism,” rather than “celebrities behaving badly.”

    But the people who are interested in the second type of content remain an essential part of the business model. Neither the Times nor any of the other outlets introducing paywalls can afford to lose ad dollars made possible by non-paying readers who prefer generic, sensational headlines. So I’m not bullish on content changing much.

  45. CL Says:

    The New York Times paywall is so leaky that it’s easy to read as much as you want without paying. Most of my friends do this. I imagine the people who pay are 1) loyal readers who want to preserve the institution (as you’ve said here). These are the people who want to contribute and feel it would be wrong to read 20+ articles without paying. And, 2) old people who don’t understand technology. It’s hard to imagine that the number of people who are willing to pay will grow over time.

  46. Jonathan Stray Says:

    Those who are curious about the precise economics of “a paywall doesn’t actually cause most readers to pay,” can take a look at the visual paywall revenue calculator I put together for NiemanLab. That ran almost exactly two years ago, but the fundamental balance of audience breakdown, article threshold, conversion rate, and ad revenue remains the same.

    While the calculator can be used to gauge the result of any particular set of assumptions — and questions like “what fraction of users who hit the paywall will pay?” can only be answered with speculation — I think what we can learn from playing carefully with this model of news revenue is the sensitivity of the outcome on those assumptions. Unfortunately, even in the face of dismal and declining online display ad rates, it’s a real gamble whether or not switching to a paywall will result in a net increase in revenue.

    And yet, “freemium” seems to be the dominant web business model these days, because it’s so good at exploiting the virality of the internet for marketing and scale-out to sizes where network effects (in the sense of lock-in) become significant. So I don’t want to dismiss the fundamental idea that most people get the product for free but some people pay. The question is, what would people pay for? If I understand you correctly, you are saying that “news” as in “public interest journalism” is not something people will pay for. And from the evidence so far, it looks like you are right.

    That’s why this looks like a product design problem to me.

  47. Tess Says:

    Great post! I’d also like to add that hyper-local community blogs are thriving here in Richmond, VA, and that they are literally the *only* news I read. You can easily grasp the main happenings in a small-ish town like Richmond by visiting RVANews.com, and you can get more specific to your own neighborhood by following any one of the hyper-local blogs that feed it: http://rvanews.com/community-news-sites

    These sites are funded on a modest level by ads, and of course they’re a lot easier for regular citizens to run than a site for a major city would be.

    Thanks for all that you write and do! I’m a big fan.

  48. robin Says:

    May I take the liberty of suggesting the following trifecta the NYT must hit to nab a paying on-line customer: Feelings of guilt (as you mentioned), comfortable to well-to-do (disposable income) and technically illiterate (and aware of it). Miss just one and they’re hosed.

    A personal example: over-educated and well-read, little to no guilt, no disposable income and technical savvy (sufficient at least) means I can read as many pages of the NYT (my homepage since ~1998) as my heart desires.

  49. Anonymous Says:

    Do you have info to support these claims?

    “[T]he paying users are almost certain to be more political, and more partisan, than the median reader. There has never been a mass market for good journalism in this country.”

    The most partisan readers I know are the least likely to chip in for news. But that’s just based on personal anecdotes.

    People have done insightful work on the shift in local/regional publications — see “Leaving Readers Behind: The age of corporate newspapering.” And, since you like academic writing, “Journalism without journalists: on the power shift from journalists to employers.” I disagreed with most of it, but it makes a key point about morale and “critical mass.”

    Other telecom. industry players are part of the picture, too.

  50. Newspapers, Paywalls, and Core Users « Clay Shirky « Soreal it Must be True Says:

    [...] Newspapers, Paywalls, and Core Users « Clay Shirky. LD_AddCustomAttr("AdOpt", "1"); LD_AddCustomAttr("Origin", "other"); [...]

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