Will Paywalls Save the Newspaper Business?

February 2, 2014 - 1:26pm

by Stephen Pate
From Rupert Murdoch to the 25 local newspapers in the Quebec based Transcontinental chain, newspapers are struggling to survive the double whammy of the digital world and young readers who don't give a flying fig about reading a paper.

Paywalls, charging for online access, is a temporary fix for the huge decline in newspaper subscription and advertising revenue.

The long-term survival of newspapers is in doubt.

Young readers get the news free from the Internet and have little brand loyalty to the old names in newspapers.

Why anyone pays to read a dull old newspaper is beyond me and millions of others. Will you pay to read the paper online? Leave a comment.

The only solution is to fire people, get out of the bricks and mortar news business and adapt to the digital era. The challenges faced by the media are not unlike the revolution in the music business where suppliers have to radically adapt and find new value added models of business.

The other thing that slams newspapers is they are old and stodgy and do not translate well on smartphones. The Charlottetown Guardian and Globe and Mail just don't make the cut as digital news sources against Huffington Post or TMZ for format and digital media content.

Local newspaper paywalls

The Charlottetown Guardian, a Transcontinental paper, started giving me the newspaper free (summer of 2013). We haven't subscribed for years since everyone in the house has a smartphone, tablet or computer and gets their news online. People like to save the trees and their bucks, and who wants to haul out blue bags full of newspapers on trash day.

I was shocked by how small the Guardian has become and how little advertising filled its few pages. There are almost no classifieds, thanks to free want ads in Kijiji, and most end pages were full of - gasp - news not advertising. The paper must be bleeding money unless they have laid off more staff.

Then I read the Guardian story that they will be putting up a paywall like the Washington Post, Globe and Mail and Telegraph. After May 15th, 2013, tablet and online readers will have to pay for the pleasure of reading all that's fit to print about PEI. This is a trend across Transcontinental's stable of small town papers.

Actually PE Islanders won't have to pay. Like everywhere else, the news on PEI is available free from many no-charge sites like the CBC which is actually a better site. Since digital subscriptions are free to paper subscribers, who will pay?

The Guardian, like every newspaper that has tried a paywall, will gain a small amount of revenue from the loyal readers, most of them older. The Guardian will have a porous paywall that allows people to read 8 stories for free, enough to build a new habit of sourcing the news elsewhere and checking the Guardian once in a while.

Print versus digital

Newspapers still have trouble competing in the digital world. Where are the pictures, video clips and wowie-zowie content that keeps people glued to their smartphones?

In the Halifax market, the upstart paper "The Coast" is all digital with features like today's best movies, restaurants, bars, and entertainment. Their site is optimized for smartphones and tablets. The mainstream Chronicle Herald is not formatted for a small screen and has little content that appeals to younger people.

How newspapers make money
Newspapers make some money from subscriptions but the profit is in advertising. When the 2008 recession hit, it was the tipping point and print advertising has dropped ever since. Google advertising and digital flyers are the big winners. Even the car companies and national brands have shifted to the internet where costs are lower.

Worse still is the cash-cow in classifieds dried up. Do you really know anyone who buys and sells from the newspapers?

Free online ads in Kijiji own that business. You can buy and sell anything for free on Kijiji and it works. Two weeks ago we got last-minute, 4th row center floor tickets for Leonard Cohen in Halifax. Everything is available on Kijiji and the newspapers have lost a big part of their revenue.

Subscriptions are a valuable revenue stream for the papers and digital subscriptions actually do help, but not enough. This tipping-point for paywalls does not fix newspapers' larger crisis writes Michael Wolff in The Guardian UK. "Not even the smartest metered model can make up for paltry digital ad revenues and a failure to recruit younger readers."

"The New York Times deserves credit for the breakthrough: it created a model that is "porous" enough that if you don't want to pay, you don't have to, and if you read the Times regularly enough and don't care about not paying, you will. This has added a significant new revenue stream, while yet preserving the Times' online advertising income (anemic though that is)."

"The (New York) Times' success turns on its ear the old notion of news economics: that there is enormous price sensitivity among news consumers and that small rises in price mean big circulation drops. The Times model leads the way to demonstrating, as the news analyst Ken Doctor has observed, a much different conclusion: loyal newspaper readers have minimal price sensitivity, if any at all. This is true for both online and offline subscription costs. Or, put another way, old people will pay anything to maintain their newspaper habit."

Newspapers will adapt, or they will disappear.

Editor’s Note: Transcontinental is the Quebec-based parent company of the Prince Albert Daily Herald.
http://njnnetwork.com/2013/04/will-paywalls-save-the-newspaper-business/

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