Rethinking the Newspaper Paywall

Guess what's back in vogue: that lovely old chestnut, the paywall. In September, The Boston Globe announced it was putting up a paywall for its new website, leaving the very popular intact but apparently with less free content.

It's part of a trend we are seeing in the newspaper world. Desperate to find new sources of revenue, traditional media is trying the tried-and-true paywall. The New York Times--which owns The Boston Globe by the way--made the transition last spring, but this was a paywall with a twist. It wasn't so much a wall as maybe a hedge.

You can still link to stories, and that means that nonsubscribers can view content too, if they click the link. The Wall Street Journal has been using a free/paywall model for some time and apparently with some success. With its method, you can email links to locked stories to friends; the links are good for 7 days.

But can paywalls work this way, and is it ever desirable on the web to cordon off content in this fashion? That's the big question facing newspapers that are desperate to find revenue sources as the traditional ad revenue continues to dry up.

I read a special issue of The Economist on the state of journalism from last summer, and it drove home the idea that there are two ways to make money in the traditional journalism economic model: advertising and circulation. The U.S. newspaper industry in particular has been mostly dependent on ads, which got disrupted, in a big way, by the internet.

On the web, there is clearly not enough ad revenue to support a large news organization, which means you go lean and mean and the news suffers or you consider the other source, circulation. This means revisiting the idea of a paywall.

For years there was a symbiotic relationship between newspapers, advertisers, and consumers. Newspapers wrote the news. Advertisers subsidized the newspapers, and consumers got the news for a relatively modest price thanks to those advertisers. As newspapers lost their monopolistic hold on ad revenue, however, the picture changed dramatically. Suddenly Google was making big money on online ads, and newspapers found that without that monopoly, advertisers often went for cheaper online alternatives.

Which brings us back to the paywall. According to that Economist article, the U.S. newspaper industry is more dependent on ad revenue over circulation revenue than any other newspaper market in the world. That's why America's news industry has been hit so hard by the shift to the internet, while others in the world who rely on circulation have not taken as big a hit, at least not yet.

I've never been a fan of paywalls, but I can see the point now. When squeezed between two shrinking revenue sources, a newspaper needs to find some way to bridge the gap and make consumers pay when advertisers won't; this seems to make sense--at least on the face of it.

The question is, will newspapers provide a significant enough value proposition to justify the cost of the paywall? The Boston Globe's shiny new pay site costs $3.99 per week. That's $207.48 per year for news, which--let's face it--has become a commodity that in many ways we can get for free. The Globe is going to have to offer something more than just news for that money.

As a subscriber to The Boston Globe myself, it's something I might go for and stop getting the print Sunday paper, but if my buying choices are any indication of how people will choose to use this, then The Globe would essentially be robbing Peter to pay Paul and not generating new revenue this way.
What's more, I have to wonder if it will take traffic away from the very popular

It seems that The Globe and U.S. newspapers in general are caught between a rock and a hard place when it comes to generating revenue, and nothing is going to take away the biggest costs associated with running a brick-and-mortar newspaper business.

While I sympathize with the reasoning behind the erection of these paywalls, I'm not convinced this will be the answer to the U.S. newspaper industry's revenue problem in the long run. However, there is no easy answer--made all the more clear by even The Times' hesitation to completely block the massive amount of traffic that comes from social media sites.