To compensate for plunging ad revenues, a growing number of media outlets are imposing paywalls.
As many know, both legacy and digital natives are struggling to survive. Last week, money-losing Condé Nast announced it would establish paywalls for all its publications. Previously, it had paywalls only for Vanity Fair, The New Yorker and Wired. Meanwhile, digitals such as Verizon’s Media Group and BuzzFeed have been conducting major layoffs.
The paywall strategy could turn out to be the business model media properties need. Or it could constitute a Trojan Horse. Within it could be the forces of destruction for some media outlets. The latter could occur because paywalls aren’t universal. Those without them can have the edge over those with them. The playing field isn’t level.
Paywalls are, essentially, tolls for access to content. They establish a direct financial relationship between the publications and readers. That isn’t unique to media. Digital sites with academic research or content related to litigation, for example, frequently have tolls. In addition, paywalls aren’t new. Why they’ve been getting increased attention is because they are becoming more common. Security analysts could question if paywalls provide a sustainable business model. Experts on media wonder if this is a trend or another desperate measure.
Back in 1996, The Wall Street Journal had been a paywall early adopter. It used the “hard” model. No access was permitted without paying the toll. That remains intact. The subscription cost is relatively high. Even with the current special, access for six months runs $117.
The other two paywall models are “soft” and “metered.” Soft, used by BusinessInsider, mixes what’s available for free and what’s behind a paywall. “Metered,” used by The New York Times, allows free access to a specific number of articles, then the reader is directed to subscription options.
Currently, paywalls may seem to be the right move at the right time. The classic example is the increased revenues of the New York Times Co. in light of its success with digital subscriptions.
But, many question if the “Trump Bump” is generating those subscription surges at the Times and other media. After the Trump phenomenon, media with paywalls could be back in the same pickle of struggling to find a sustainable business model, with time not on their side. Competitors without paywalls could have been poaching readers and advertisers, along with boosting their influence. In an economic downturn, readership could tilt toward free.
From the get-go, media paywalls have been controversial. Players that refused to establish them, such as The Guardian, hammer that the Internet should be open. All information should be available without charge to the digital community.
But the business arguments against the paywall have been loudest in the room. The five top arguments are that a paywall:
Threatens ad revenue. Much or all of the content, including the ads, is behind a paywall. In addition, the toll could turn off readers who change their habits and migrate to what’s free. Statistics about those lost eyeballs, in turn, can drive away advertisers.
Can reduce traffic, resulting in poor search engine optimization. No fools, savvy Internet surfers can review headlines in media with paywalls and click coverage on free sites. An example would be surfing The Wall Street Journal and then reading the reporting on the no-paywall MarketWatch, Fortune or Forbes.
Undermines influence. If more and more readers are picking up their information and insight from no-paywall sites, journalists behind a paywall might no longer be thought leaders. Also, there will be fewer outbound links to their content. Another negative for SEO.
Loses Generation Z (iGen) as readers. They grew up consuming free online content. Unlike other generations they didn’t pony up money to purchase print media. So, the expectations of payment aren’t in the generational DNA.
Establishes “subscription hell.” To gain perspective on a critical issue, such as if there will be a recession in 2019, it’s useful to follow coverage in both The Wall Street Journal and Bloomberg. Both have set up pricey tolls. Add to that the monthly digital payment for access to other media such as The Atlantic and Vanity Fair and there could be an inequality tipping point. The rich can afford being well-informed, others cannot.
What might media discover from the current experience with paywalls?
The Atlantic had been modifying its business model for more than a decade. In 2008, it dropped its paywall. In 2018, it set up a metered one. So, what could The Atlantic et al. learn now?
Here are six possibilities.
Simultaneously develop other kinds of profit centers. One is introducing sponsored content or enhancing its format so advertisers get results. Ideally, media employees partner with the advertiser’s public relations and marketing firms. Of course, the published content is identified as sponsored. Other types of profit centers could be established through sponsoring special events and creating new products and services.
Fundraise. That is what The Guardian does every time a reader clicks on an article.
Seek friendly outside ownership by non-profits. Lauren Powell Jobs, Steve Jobs’ widow, bought a majority stake in The Atlantic through the non-profit Emerson Collective.
Differentiate. The New York Times has made political investigative reporting its signature. In itself, that could help that media property scale, even post-Trump Bump.
Become more user-friendly. Yes, ditch the pop-up ads. As with software, in media the user experience is critical.
Bundle or be part of a bundle. That’s how subscription hell could end. Instead of stand-alone subscriptions to one media outlet there would be packages for access to multi-media at an affordable price. For example, a bundle could include a combination subscription to Vanity Fair, The New York Times, Netflix and Spotify. Some anticipate that the Apples and Googles will come up with such packages. Meanwhile, media properties must make themselves attractive enough to be selected for bundles.
Just like almost every other institution on planet earth, media players are encountering ongoing disruption. No one’s prediction about the future can be trusted. At best, paywalls as they presently operate represent a survival mechanism. In time, they could be refined and configured into a solid new business model. At worst, they can destroy brand name media properties.