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Thursday, November 19, 2009

Who Will Join Rupert's Pay Wall?

There has been a lot of print and buzz lately about attempts to monetize on-line newspaper. This past week it really accelerated when Rupert Murdoch announced he will be putting pay walls on his newspaper sites.

Murdoch in an Australian interview was a bit coy about details. It could be a situation like The Wall Street Journal (owned by Murdoch’s News Corp.) where visitors may see the lead paragraph of a story gratis but then have to pay to see the entire piece. Ironically, when Murdoch first purchased the Journal a few years ago he suggested that WSJ.com be distributed for free. When he saw the revenue the subscriptions generated, he thought better of it. Now, he appears to want to expand some version of the Journal model across his entire newspaper empire.

I cannot say that I blame him. Despite rampant cost cutting, most major metropolitan newspapers are losing lots of money. They cannot cut much more staff and be viable. Early this year we talked about how investigative journalism in many small and mid-sized markets will soon disappear as publishers cannot afford to have reporters spending weeks hunting down a story. And, forget about the next Woodward and Bernstein to come along. There will be no one who can afford to subsidize such exhaustive digging into a story like Watergate. So corrupt mayors and city councils in many markets can soon rest easy and do terrible damage. It will be much harder to catch them going forward. Some say a loss of newspapers will be a serious threat to democracy. Others say that cable news will pick up the slack. Maybe nationally cable and network news can serve as a cop on the beat, but locally the sleazebags will have a lot more room to maneuver.

Setting aside that serious issue, what about the economics? In a beautifully written cover story in Time Magazine earlier this year, Walter Isaccson argued that on-line pay walls were vital to keep newspapers solvent. He argued that historically newspapers made revenue from newsstand, subscriptions, and advertising. However, on-line advertising is not enough to keep the papers solvent as hard copy sales shrink. Some form of “micro-payment” system could be put in place that could help newspapers survive as more people moved on-line. An example was 5 cents for an article, 10 cents for a specific day’s paper, and several dollars a month for an on line subscription. He also said that most people would not have a problem paying.

The execution of micro-payments is probably tricky. How do you handle thousands and thousands of 5 cent transactions? But the broader issue is the tough one for me. Everything that I have seen indicates that most people would have a hard time paying. They have received something for free for nine or ten years and now they are asked to pay. Most seem to just go somewhere else for their news.

Some publishers have tried some unique approaches. In my home state of Rhode Island, The Newport Daily News with a tiny circulation of 12,000 had a novel offering. If you subscribed to their paper in standard format (Monday-Friday afternoon editions plus Saturday morning) you paid $145 a year. Print plus on-line was $245 and on-line alone was $345. While daring, this to me is completely counter-intuitive. You are driving people to the format, print, that is dying! I wish my fellow Rhode Islanders well and applaud their bold experiment but I am profoundly skeptical of its success. They have guts but do they have the vision?

A friend and weekly reader of Media Realism tells me that pay walls can work only if some major players do it all at once. He gave me the example of how ESPN.com had a pay wall for certain content. Immediately, he went to Sport Illustrated (SI.com), loved what he saw for free, and does not feel a need to go back to ESPN.

His point is well taken. The Wall Street Journal put up the pay wall first and it was a stiff fee ($200+) that people did not have a problem paying. A lot of their subscriptions are corporate so people were not paying a few hundred dollars personally. And, let’s face it. The Journal is unique. Most truly serious U.S. businessmen feel that they must read the Wall Street Journal to keep up to date on the financial happenings in this country and the status of major corporations. When it comes to politics and world affairs The New York Times and The Washington Post have similar aficionados. But most papers, magazines, and websites are not imperative reads.

A personal example makes the point well, I believe. In recent months, people have written or called me and suggested that I charge a subscription for Media Realism. With a straight face I told my wife who immediately broke into uncontrollable laughter. We sat down and figured that excluding relatives and a few very close friends I might have 25 paid subscribers. This for a blog that delivers 1200 readers in a slow week and as much as 3300 when the topic appeals to a lot of people and they pass it on aggressively. I am not putting myself down and certainly not you, dear readers. The blog is great fun to write and I really enjoy the hundreds of comments that I receive from you. But, I am keenly aware that you have other places to go for media/advertising news and commentary in today’s world. And, unlike many newspaper publishers I am still quite solvent, thank you, and can publish indefinitely from my basement or sun porch.

If publishers erect pay walls all it will do is reinforce bloggers such as I and even encourage more Twitter which is really micro-blogging. Yet, the American Press Institute states that 75% of publishers believe that they can successfully charge for content. Many say by late summer of 2010, they will have pulled the trigger.

To me, sadly, it may be too little too late. Newspapers over the last decade never really acknowledged on-line as part of their product line. On-line ad sales were not good and they did not package it well with their traditional newspaper offerings.

Now the rush is to provide various monetization models. I wish the industry success but a lot more papers will have to go down before the pendulum swings back, if ever. One possible scenario would be a total industry wash out where hundreds of newspapers go down in the next few years and exist only as weak on-line vehicles. The blogosphere which can no longer lift free articles from newspapers will get so bad and opinion rather than fact based that people will throw up their hands in disgust and pay for content. But, I am still not sure. Local news may fade and cable network news will dominate. It seems a shame but the tidal wave of change is impossible to hold back.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

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