Best not to bet on paywall success

Posted on April 1, 2010


It’s been one of the worst-kept secrets in journalism for months, but the Times newspaper has finally revealed the details of its paywall, which will come into effect from June. Anybody wishing to access the Times or the Sunday Times online will be required to pay £1 a day or £2 a week. The Sun and the News of the World, also owned by News International, will announce paywalls of their own in due course. This is a response to the dramatic fall in online advertising that has led the Economist to dub 2010 ‘the year of the paywall’[i].

Paywalls are considered a viable alternative to advertising income because, in some cases, they have worked. Millions of people pay for multi-channel television even though they have access to a free commercial service. News Corporation has already introduced a paywall at the Wall Street Journal, which saw a rise in circulation last year[ii]. There has been success, too, at the Financial Times, where circulation revenues rose last year and there was a 30% increase in digital subscribers[iii]. These figures are attractive, and it is clear to see why newspaper owners might consider paywalls to be the best way forward in a world where more and more people are obtaining their news on the internet.

These figures can be misleading, however. Both the FT and the Wall Street Journal cater for a very specific crowd; people who are willing to pay in order to gain financial information that could benefit them. They pay to get information more quickly than those that have not subscribed do. It is unlikely such a scenario would develop with less specialist publications while other newspapers continued to offer free content on their websites. Johnston Press introduced paywalls on six of its sites back in November of last year[iv], appearing to put faith in Kevin Ward’s argument that regional news was enough of a “niche” product to successfully charge for content[v]. Yet, at almost exactly the moment that Rupert Murdoch announces plans to erect paywalls at the Times, it seems the company are preparing to scrap the trial[vi]. With Johnston Press as yet refusing to make any public comment on the matter, we can only assume that the experiment has been a failure[vii].

Various opinion polls seem to suggest that people just do not want to pay for their news online. Forrester research found that 80% of 4,711 customers would not pay for online news[viii]. Harris Interactive, on behalf of paidContent:UK, found that 75% of Britons would find a new free news source if their favourite site began charging[ix]. The Pew Research Centre found that only 7% of Americans who access news online would return to their favourite site if it put up a paywall[x]. Can news organisations that do not have the “niche” appeal of the FT or the WSJ really afford to disregard these statistics, particularly in the wake of the Johnston Press debacle? Paywalling looks unlikely to be a blanket phenomenon across the industry, and the BBC in particular does not seem at all likely to discontinue its free online news service. It’s a brave proprietor, and to be fair to Murdoch brave he most certainly is, who takes a potentially costly risk such as this. He has been warned, most notably by Twitter co-founder Biz Stone[xi], that it is simply too late for paywalls to have any positive impact.

Organisations like paidContent:UK[xii] have formed in order to try and find a way forward for news organisations in an era of reduced advertising and falling circulations for print newspapers. Yet there is no suggestion as yet that paywalls can meet that need. Jeff Jarvis has suggested that by erecting a paywall, Murdoch has admitted defeat: “The future defeated him”[xiii]. It seems that Murdoch has run out of ideas to increase advertising, and has fallen back on a paywall. Yet the evidence seems clear that paywalls only work for “niche” products that are distinctly better than what is available for free. Murdoch is also foolish to ignore the numerous polls that say people will not pay for news while it is still available for free elsewhere. Unless paywalls are erected at the same time by all good news organisations, or perhaps an annual payment system resembling the television licence is established, then people will continue to access free news for as long as they possibly can.

Posted in: Issues, Media