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The newsonomics of Why Paywalls Now?

Paywalls are generating real money for American newspapers in 2013. But would they have in 2007, or 2002, or 1997?

Though it’s spring training season, forget Moneyball — think Paywall. The money now flowing into newspaper companies due to paywalls is getting to be seriously countable.

hg-wells-the-time-machineFor the New York Times Company, the circulation revenue increase amounted to $63 million in 2012. For Gannett, which installed its metered systems throughout the year, overall circulation revenue was up almost $40 million in the fourth quarter. That should lead to more than $100 million in added revenue in 2013. Add in the multiple millions pulled in by paywall leaders like the Star Tribune, the Columbus Dispatch and the Charleston Post and Courier, and you’ve got serious money. Figure that U.S. paywall programs will generate more than $300 million this year. When the 2012 final numbers come in, the industry’s circulation revenue should punch back through the $10 billion level — on their way to beating the $11.2 billion zenith, set in 2003, by 2016.

It’s money that’s stabilizing the business, really for the first time since 2006. Newspaper revenue trends among those top performers are getting back to that under-appreciated “zero” number (“The newsonomics of zero, and the New York Times”), making up for continuing losses in ad revenue. It also means we’ll see more top-line growth this year — and that’s milestone territory. That’s the reason why the U.S. system of metered paywalls is now being applied around the world.

As I’ve covered this phenomenon, a couple of questions has been bedeviling me: Why paywalls now? Why weren’t paywalls put into place in 2007, or 2002, or 1997?


Might such paywalls have prevented the massive loss of reporting that local papers — and local readers — have suffered? Would they have saved a good number of the more than 15,000 newsroom jobs (a 28 percent decline since 2001) that have evaporated? Might the global bureaus of the big metros been spared? Would regional business news coverage be as robust as it was in the 1990s? Would investigative units be off the endangered species list?

Why, oh, why, after the newsroom carnage of the last decade, are we only now seeing paywalls being erected and reader revenues being harvested? We can sum it up in two words: thinking and technology. It’s the intertwining of the two, in a hard-to-distinguish chicken-and-egg digital dance that appears to have led us to today.

Let’s start with early thinking, or some would like to say, “What were they thinking?”

Ask veterans of the trade, and they’ll remember the history this way: Reuters, in an earlier foray to establish a greatest U.S. presence, began licensing its national and global coverage to the portals — Yahoo, AOL, Excite, MSN, Lycos — of the day. The Associated Press followed suit. National and global coverage — a key ingredient of the daily newspaper mix — had gone free overnight. Digital evangelists seemed born anew on every street corner of the web; “free” became the new article of faith. The “death of distance” realization confirmed that local news consumers could no longer be held “captive.” There were paid forays by individual companies, and the outline of a bigger “national press pass” idea considered by then-industry chieftains through the New Century Network.

The tests and ideas fizzled. “Circulation” was a term only associated with Big Iron. Further, circulation was viewed only a means to advertising profits. The basic, unquestioned model of the U.S. industry: Keep reader prices really low, maximizing your “rate base” for mass advertising, and charge top dollar for those huge audiences. Reader revenue had never been thought of as a profit center in and of itself — the readers were only a means to an advertising end.

All of that led newspaper publishers to embrace digital advertising as the only way forward. They decried the poor man’s alchemy of turning shiny dollars into tinny dimes, and privately said they couldn’t quite see how the arithmetic was going to work. Again, though, as an article of faith, they told investors and analysts that advertising sales were the key to the digital transition. They believed that advertising, which had got them to where they were, was the key to the future.

A newly laid brick wall

That mistake is the vital one in the chain of events for managing director Rob Grimshaw:

I think the key factor is a growing realisation that online ads are not going to pay the bills. Online ad revenue growth at most publishers has slowed to a trickle. What many interpreted as a blip is now an established pattern over several years. As a result, many publishers are revisiting strategic plans and concluding that they have no hope of building exclusively ad-funded online businesses. Paywalls and content revenues are the obvious alternative.

The fact that major general news players like NYT have jumped into the water also encourages others to take the plunge. The industry could have got to this place a lot earlier because the warning signs around online ads have been evident for a while to anyone that was looking. Unfortunately publishers were watching each other when they should have been paying attention to developments with ad networks, search and social media.

Watching each other. Or, as Orwell called it: groupthink. Publishers early on rejected reader payment in the digital age. The Wall Street Journal and Financial Times paywalls? Well, that’s not the news, it’s business news, publishers told each other, and besides the FT’s both British and, for God’s sake, printed in on salmon-pink paper. What stands out most is how little testing of a general news pay model we saw.

Only a handful, most prominently Arkansas Democrat-Gazette publisher Walter Hussman (just lauded by Warren Buffett) offered this heresy: Why would I give away a product on the web that I am asking people in the community to pay a couple of hundred dollars a year for? In retrospect, Hussman only had part of the answer. His contrariness did stem his papers’ circulation losses, because the paper only put a part of its daily print report online. His papers may not have been able to greatly grow circulation revenues, and they experienced a tougher time getting the digital ad business going — but that simple-minded thought for which he was ridiculed is now the root of the reader-revenue revolution.

Faith. Religion. Heresy. They seem like appropriate words. It’s only natural for the inhabitants of any industry to think inside their boxes. And those newspaper boxes were wonders, producing 20 percent-plus annual profits; contrary thinkers weren’t really welcome. It’s the structure of the U.S. newspaper industry that reinforced the problem. Daily newspaper publishers, by and large, don’t compete with each other. In our spread-out geographies, the age of competitive dailies largely disappeared 60 years ago.

Though mindset was clearly an issue, it wasn’t just that mindset that delayed reaping of new reader money. Enter the metered model, and the evolving technology that is still being built out to support it.

It’s at the nexus of mindset and technology that we find our answer. Now, “content wants to be free” seems silly to an increasing number of us. Yes, some content — lots of content! — is free and will always be. What the metered idea — allowing some number of free articles to each unique visitor — dispels is the either/or thinking of the early Internet news age. News doesn’t have to be either free or paid. It can a combination of the two.

The Wall Street Journal pioneered its “freemium” approach, offering a myriad of free gateways into paid subscription content. And then the meter came along. Built on the simple proposition of sampling, the Financial Times ‘ 2007 innovation blew open the either/or door. Now the meter — further innovated by the FT itself, The New York Times, Press+, and others — has reversed the industry’s groupthink. We’ve gone from “it’ll never work” to “Why were we free so long?” almost overnight.

Providing choices beyond either/or, in the form of a metered ecology, takes a lot of work. The New York Times famously spent a year, and about $25 million, getting its system built before it a launched its paywall in January 2011. Press+ has been building its system for more than four years.

What’s needed under the hood? Press+ cofounder (and former WSJ publisher) Gordon Crovitz ticks off the parts: “geotargeting, trial offers, coupons, enterprise licenses, multivariate testing” — in addition, of course, to the basic authentication and e-commerce functions. Add in skilled staff: developers and engineers with e-commerce backgrounds, data scientists, data analysts. Of the 30 staffers at Press+, 20 are on the technology side, both making the system flexible enough to match up with print audiences (enabling those high-priced all-access subscriptions) and building a strong base of best practice data. Press+ makes possible the kind of flexibility that we only dreamed about as New Century Network concluded its last supper in noisy disarray in Denver in March 1998. The technology, developed by Press+ and now separately by a number of chains and individual papers, is a gating factor in the beginning success of flexible, metered, connected-to-print-databases subscription paywalls.

Add in another technology to our that-was-then, this-is-now thinking: easy and secure digital payment, says Maribel Perez-Wadsworth, VP for audience development & engagement for Gannett. “Consumers are much more used to and comfortable with paying for things digitally. (Thank you, Amazon.) Buying content, games, and services online is now easy and safe. And of course, the iTunes experience has helped to further cement the no-brainer aspect of such purchase decisions.”

Another set of technologies, brought to market by Apple, clearly have played a huge part in the all-access revolution. Newspapers could have offered combined print/web subscriptions at any point in the last 15 years. Yet it’s been the growth of mobile that has spurred both publisher confidence in selling bundled subscriptions and consumer willingness to accept the deal. It’s basic psychology: As consumers, we have the sense we’re getting more when our favorite newspaper or magazine promises (and delivers!) to get us its product via web, smartphone, tablet, or print. For publishers, it’s easier to offer that full package — at a higher price — even if most who take the deal only use a couple of the products.

Further, our on-the-go reading lifestyle is bolstered by broadband speeds: Selling digital subs in the dialup era made less intuitive sense. Of course, as Perez-Wadsworth points out, tablet and smartphone value is only enhanced as publishers have gone digital-first with their news reports and added rich(er) media. John Murray, the Newspaper Association of America’s VP for audience development, agrees: “Newspapers are fortunate that they did move slowly and deliberately because they now have better product(s) to offer.”

New York Times CIO Marc Frons adds in another factor worth considering: scale. “I don’t think paywalls would have ‘worked’ in 1998 or 2003. And they didn’t work in 2007 either, with the Times trying and failing with Times Select. I don’t think a meter would have worked back then either, because the Times and other publishers lacked sufficient scale to reach and then convert the plurality of the audience who would pay. But by 2011, when The Times launched its metered paywall, our traffic was close to an all-time high, so we had the scale.”

The new metered tech capability also allowed publishers to do what they had rarely done before, but which had become standard in so many businesses: segment their audiences. It allowed new testing of pricing.

Matt Lindsay’s Mather Economics is now the go-to circulation advisory firm for more than 300 U.S. dailies. He explains how that segmentation developed: “I think it was the innovation of the metering model for customer price discrimination, much as other industries have found other pricing models that worked well for them. The cell phone industry stopped charging by the minutes of use in favor of fixed prices for numbers of minutes. Airlines used the “Saturday night stay” to separate business from leisure travelers. Prior to the metered model, there was an open or closed choice for newspapers. The meter is successful in segmenting the customers based on engagement and likelihood of subscribing.”

Further, it allows newspaper companies to remain, in a phrase we haven’t heard as much since the beginning of the paywall debate, “creatures of the open web.” Stories, themselves, can be part of the public debate, findable by search and sharable through social.

Could our scenario — and the life and near-death of the U.S. metro daily — have played out differently? Sure, it could have, even with the technological limitations.

“I don’t see why paywalls wouldn’t have worked even better in 2003 or 1998 before people had gotten as accustomed to the prevalence of “free” news online,” says Star Tribune publisher Mike Klingensmith, whose company now takes in 44 percent of its revenue from readers. “In addition, there was less digital ad revenue in those days; a minimal loss of ad revenue seems like it would have been even more minimal.”

So, maybe, newspaper companies would be in better shape today, with a lot less bleeding along the way. Maybe, sort of, in part, some way.

Clearly, though, we’ve seen a harmonic convergence in 2013. The coming ubiquity of mobile news reading. Sophisticated metered systems. The stunning death spiral of the ad subsidy. Audience scale. Pricing segmentation. The reassertion of community news value by publishers. Consequently, pay models are becoming a part of the new business model — but clearly only a part. So what other conventional wisdoms, business and editorial, need to be challenged in the remaking of the news business?

What to read next
Ken Doctor    Aug. 25, 2014
“Things” editor, distribution editor, correspondent for progress — as newsrooms change, so do the ways they organize their human resources.
  • Sean Upton

    There will always be disruptors to incumbents. And incumbents perceive themselves as somehow of greater value. There will never be incumbent advantage. The idea that I would pay more for daily news than I would for, say, doing my taxes (how much I pay for, say, TurboTax) — this is a farce. The ad-only model may be low-margin, but it is a reasonable quid-pro-quo arrangement that has a chance to compete with disruptors and be a distruptor without the sloth of becoming a lazy incumbent. Provide a low-barrier to entry of someone else will. /me removes metering cookies, (maybe the foolish dailies using them can come after me using the DMCA).

  • Ole Nørskov

    While you pinpoint a lot of interesting developments, your enthusiasm might turn out as misplaced as the enthusiasm of the free content evangelists of yesteryear. The main reason paywalls are being raised now and not in 2003, 2007 or 1998 is desperation. There’s no alternative left. For some, that are lucky enough to have a huge market or content of very high value in a well defined niche, paywalls might work – for many others they surely will not.

  • Ken Doctor

    Ole: Less enthusiasm than what I see happening in the marketplace. You’re right: old-fashioned desperation is at play as well. Biggest question on uniqueness of content, niche as you point out, is whether substantial local reporting — so far unduplicated elsewhere — in indeed a well-defined niche that people will pay for. I’d suggest that the early evidence is that it is.


    Everyone should test a paywall on their site using MediaPass. They guarantee that you’ll make 10x more money than advertising alone, and it requires just one line of code. Everyone is using it. Test it for free at

  • Ole Nørskov

    I agree that it will be very interesting to follow the local media’s forays into payed content territory. I think it’s a little early to draw conclusions, but I’ll keep my fingers crossed.
    Of course what you call local in the US is sizewise what we call regional or even national in Denmark and most other countries.

    On the whole what I expect is that the news media market will be polarized even more than what we see today. At one end of the spectrum some (very few) tabloid brands will survive by aggressively pursuing clicks and ad revenue. At the other end niche media that produce high quality content for ‘the elite’ will probably live too.
    Most of the rest will need to think fast. Some have died already – others will follow. It’s not the end of media or the end of news – but probably news media will play a different role in the future.

  • John L Brown

    Desperation is as good a reason for innovation as any. And to extend your point: my assumption is that only media channels that provider real, tangible value will survive anyway, regardless of their evolving business model.

    Advertisers have never paid for news coverage, in print or elsewhere, a point that Klingensmith has made repeatedly. So if consumers value it, they have to contribute. The bigger point I’d suggest, not made here, is that the current model is broken for advertisers, too. Opportunity is to cut through noise and create value for both audience and advertisers.

  • André Kenji De Sousa

    1-) Most people that are working with paywalls are working with the assumption “Our content is so good that people should be forced to pay to read it”. That´s a dangerous assumption. And that´s not entirely the case: efforts to build paywalls should also be coupled with efforts to improve content.

    The NYT, the FT and the WSJ built paywalls, but they are creating new and interesting video and multimedia content, for instance.

    2-) Paywalls are not the universal solution. In Brazil, many print newspapers stuck with the paywalls since the beginning. They simply lost space and reputation for megaportals like Terra and

    3-) Most newspapers do a poor job of using technology. Many apps are simply print newspapers transported to the Ipad, and it´s no wonder that ads do not make enough money – you see the same ads, regardless of who or where you are.

    Even the Washington Post, a newspaper that has a HUGE foreign readership, until some MONTHS ago, did show the same ads that they show to people that are in the DC and to people that are outside the US. The Post can easily monetize their foreign audience, but not by selling rentals in the DC area for them.

    4-) The most important thing: most paywalls are being built with a mindset that predates the internet. Before the internet, a regional paper like the Kansas City Star or the Minneapolis Star-Tribune were basically read only by people living in Kansas City and Minneapolis. Today, even a regional a newspaper can be read by people all around the world.

    A paywall should be built aiming a global, not a local audience. Paywalls that only gives access for a single regional newspaper or paywalls that are as expensive as print papers makes no sense at all.

  • jondaly

    paywalls will generate $300 million dollars out of $10 billion in circulation revenue. that’s sounds like a pittance. has the growth in payroll revenue really offset the decline in (traditional) subscription revenue? the decline of advertising dollars?

    when you are in a sinking ship, the arrival of life jacket is good news. of course, if there are 1,000 people on board who need the jacket, you are still in a world of hurt.

  • Sammy Asterin

    I find it interesting you mention the Columbus Dispatch. When the Dispatch first went online, they were free. In 2002, they implemented a paywall that gave subscribers free access while everyone else had to pay $5 a month. That lasted til 2007 when they made it free once again, but added “Dispatch Extra” which gave subscribers exclusive stories. Then, last year we got the metered paywall.

    The Dispatch has been all over the place. They went from free, to paywall, to semi-free to meter. They blow with the wind. I wouldn’t call their paywall strategies much of a success especially since they abandoned it once already.

  • Dennis Hetzel

    Ken, would be interested to get your take on the decision most TV stations have made to remain free online, which is consistent with their broadcast culture. Will that change? How does that play out in competitive markets with newspapers and broadcast fighting for digital audience?

  • Ken Doctor

    Dennis: Great point. We will soon hear the announcement of the first significant metered paywall by a strong regional TV station. Others may follow. Broadcast revenues are essentially flat, but increasingly endangered both by movement to digital ads and splintering of audience. In general, most produce too little unique local news to charge, and they know it. Newspapers that produce many times the content of TV stations, and have the digital experiences to match, should be able to compete well against “free” TV sites, and their evolving reader revenue gives them an edge TV stations don’t have, as ad revenue suffers for all.

  • Matt Robare

    If you ask me, the business is still too rooted in a non-digital world. Most newspapers that have gone online are basically attempting to recreate the newspaper online. I don’t think they’re really trying to adapt to the demands of a digital world and the adaptation is going to dictate the business model. For instance, a lot of papers, even online, continue to cover national sports, even if by the time the subscriber gets the paper they will have already seen all the highlights and commentary on TV and the internet (I’m thinking of my hometown paper, which had a press time of around 8:00 pm at night and so was always putting in the same notice about why they didn’t have a recap and boxscore of the Red Sox game). Similarly, I think the internet will afford us opportunities to reevaluate the news cycle with a focus on quality instead of merely being the first to report something (if it’s going to be aggregated by a robot it should reflect well on the people producing it). It’s not over yet.

  • Greg Golebiewski @znakit

    “Why paywalls now? Why weren’t paywalls put into place in 2007, or 2002, or 1997?”

    not because of lack of content monetization technology and innovative
    business models. These were available and widely disused back in the
    90s. Does anyone remember the IBM Micropayments or DEC Millicent? Maybe
    it was “too early” then; publishing was still very profitable. But even
    when it was obvious that the old model, based on paid advertising, was
    broken and ad revenue started to sink (2002), most publishers rejected
    any changes.

    Now it sounds unbelievable, but when my company
    developed a payment platform (Znak it!) that was to be used with
    then-still-new tablet technology (2007-09), to help publishers charge
    users for online access, the whole idea was dismissed by major content
    providers as “threatening” and “silly.” Tablets were perceived as
    competition, not a way to increase readership and add revenue.

    today’s infatuation with subscription-based paywalls resembles the
    earlier mistakes. By accepting metered paywalls, publishers reject
    other, better, models.

    In a couple of years, we will be asking again: Why only paywalls?
    Why not on-demand micropayments, or donations, or advertiser-sponsored
    access, where individual casual visitors to paid sites have an option to
    pay or “earn” free access in exchange for their attention or data.
    Those models convert up to 20% of the casual traffic into transactions;
    they do not require massive up-front investments in technology or
    marketing; and being both user- and advertiser-friendly, they increase
    readership not limit it to a handful of most loyal users. And yet, we still talk about paywalls only.

    Deja vu all over again.

  • Mike Coleman

    We need to have a more frank discussion about the fact that most of the success being talked about with paywalls is really just leveraging of the existing print subscriber base. In other words, charging those loyal and not-very-price-sensitive (although graying) customers more and then telling them it includes digital access. I’m all for every newspaper in the country getting more circulation revenue and more revenue overall, but the only way to gauge the effectiveness of getting people to pay for digital content at a regular metro newspaper (let’s stop talking about the NYT and WSJ) is to count the number of digital-only subscribers and then watch how that business grows, churns, whatever. The current conversation is too tied to the print business, back-office accounting, and allocation techniques.

  • André Kenji De Sousa


  • André Kenji De Sousa

    By the way, the new Chicago Tribune´s paywall is not only requesting American visitors to pay to visit the website, but it´s blocking everyone that´s outside the US from seeing most of the paper.

    That´s idiotic.

  • Gregory Pleshaw