Posted by: structureofnews | June 8, 2012

The Neverending Story

Just when you thought it was safe to go out again… CJR hosts a rollicking debate on the merits of free vs. paid with back-to-back columns that attract the likes of The Wire creator David Simon, the Batavian’s Howard Owens, Press Plus’ Steven Brill and Gordon Crovitz, ProPublica’s Dick Tofel, Digital First’s Steve Buttry, and many more.   And here I was thinking that that discussion was over.

Clearly, it’s not – and judging by the tone and length of the comments, it still elicits a huge level of passion among those committed to some future of journalism.

I won’t try to summarize the discussion – you have to read it for yourself, and in any case, Poynter did a nice job doing that already.  But it seems like a good idea to take a step back, make explicit some of the assumptions in the debate, and – hopefully, more importantly – raise some of the questions that are less-discussed when passions run high over the merits of paywalls.  (Some of these issues were indeed raised in the debate; they just got drowned out by the rest of the to-ing and fro-ing.)

For the record, I like paywalls – or, to be more accurate, online subscription fees.  Or, at least,  I have nothing against paywalls.  After all, I spent much of my career at The Wall Street Journal, one of the early adopters of paywalls, and now work at Thomson Reuters, which in a sense has an expensive paywall.  I like being paid.

So it seems to me there are two basic assumptions behind the free vs. paid debate.

1.     Journalism costs money.

2.     Online ad revenue can’t cover those costs.

I doubt that many people dispute item 1, although it also appears that we don’t have enough discussion about what kind of journalism we want.  Some people talk about investigative/accountability journalism; others about metro paper-type coverage, yet others suggest we should have much more focused news organizations, and some are experimenting with new forms of organizing and presenting information.

It’s a critical question, but we don’t spend enough time on it.  How should journalism evolve in its most basic form?  How do people come to news these days?  What do they actually want or need – today, next year and in years to come?

Without debating that – as Ryan Chittum and Clay Shirky sort of did at CJR (and I riffed on here) – it’s hard to figure out how much journalism costs. Not to mention figure out what its real competitive advantages are vs. all the other ways people are getting information they want or need, often for free.

On point 2, I don’t have an issue with that as an assumption, although I know some people do. My belief is that long-term dynamics are against online advertising being a major revenue stream for most information organizations, at least relative to the costs of a major newsgathering operation.  But that also speaks to question 1, above – what are the costs of a major newsgathering operation?  So I agree it’s a debatable point.

Nonetheless, if you accept 1 and 2, then it leads to:

Conclusion 3: We need other forms of revenue.

For some, that means paywalls, and more power to those who can make it work for them, as, to some extent, the Journal. the New York Times and the FT have done.  Whether there should be lots of ink spilled over debating whether or not it should be tried is another issue; this should be a pretty simple empirical question to settle, and it’s not clear in any case that there’s a universal answer.  But obviously it’s something that arouses religious fervor in some people.

In any case, the bigger question is whether paywalls will ever come up with sufficient revenue on their own to offset the costs of a major newsroom (and see point 1, above).  I don’t believe so, but that doesn’t make me anti-paywall – just that I believe in multiple revenue streams, including online advertising, data, events and other ways of monetizing the organization’s assets (one example: WSJ Wine), as well as subscription dollars.

But there are broader issues.  Here’s one: As one commentator at CJR noted, copyright covers the expression of a story and not the facts in it.  How do we protect/ensure a return on richly-reported accountability stories (for that matter, any story) if the facts in them can be summarized and disseminated soon after release?

Real-time financial news organizations can charge large sums of money by offering information seconds – or milliseconds – ahead of the competition, because for some people, that’s worth millions.  But for the vast majority of ordinary readers/users who aren’t news junkies, a millisecond edge (even several hours’ edge) is simply not a valuable-enough commodity to shell out subscription money for.

If we believe all paywalls leak to some extent – and as far as I can see, they do, whether intentionally or not (or legally or not) – then how do we ensure the monetization of long-form/long-term work, which comes out sporadically but can’t be protected for any length of time by a paywall?  If you do a great investigative story once a month – which would be a great pace at a decent paper – in the hopes that people would continue to subscribe to your publication, will that be enough to keep them on the hook?  How many would keep paying if they knew they could read the gist of the piece the next day, somewhere else, for free?  Perhaps the writing is great, and people want the original story and not just the information in it.

Or perhaps a sense of loyalty – or morality – would keep them paying.  Or a sense of community and engagement. But that’s different, in some ways, from people valuing the content per se.

I suspect the answer lies in some combination of tying the day’s story to other coverage on the same topic, personalization, data and user experience (and, of course, structured journalism) – and I’ll write more about that soon – but the broader point is that, if we’re going to be mired in the culture wars of free vs. paid, we’re not going to explore in depth other issues that we really need to dive into.


Responses

  1. Reg,

    Agreed it was an interesting discussion over at CJR. Here’s what I saw as a few of the seemingly newer issues:

    Paywalls as a band-aid — One of the things that popped up was mention of a recent post by John Robinson at Elon University who used a rough poll of students to prove that paywalls don’t work. What none of the anti-paywall proponents seem to question is the fact that Robinson’s post doesn’t necessarily prove that paywalls don’t work; it instead seems to show that they don’t work at certain price points. Here’s the link:

    http://johnlrobinson.com/2012/05/newspaper-paywalls-using-band-aids-on-a-bullet-wound/

    Press+ pricing — As far as I’m aware, the discussion was the first time Press+ has made a broad disclosure of how its pricing model works, which is $4500 up front and 20 percent of revenue. This is interesting if you take it in the context of prior estimates on the relatively huge outlay The New York Times made to implement its own metered paywall.

    Staffing costs, current business models — One of the things that seemed surprising, and I say this with all due respect for a group of smart commenters, is the extent to which news side folk still tend to not have a very good grasp of overall newspaper business models. For example, the NAA has indicated for a very long time that a rule of thumb for editorial staffing of a large metro daily is usually in the neighborhood of one per 1000 of circulation. If you lean the engine out any more than that, so the conventional wisdom goes, it can start to run ragged and you risk losing readership.

    Yet another example, although this didn’t come up in the discussion, is in the area of advertising sales compensation, which typically runs on a base plus commission model. How, specifically, such a model is implemented is a very tricky area.

    Although I have a high regard for Howard Owens and what he’s been doing in local, I tend to think he’s probably right about the idea of no paywall at The Batavian, but wrong about using that as a criteria for everybody else. The reason for my opinion is because of a seeming dichotomy that’s difficult to define.

    For a long time, it’s been evident there’s a split dynamic going on in the news business. At one end of the scale you have large dailies trying to spiral down into workable models, and on the other a group of small local efforts trying to spool up. Although they both share some characteristics, they’re not the same thing. Same genus maybe, but different species.

    Still another issue is that of what seems to be an emerging consensus that advertising and paywalls should be supplemented with additional revenue streams similar to WSJ Wine. We know, for example, that such streams might work, but there’s been very little risk assessment on costs of implementation versus potential reward. Without putting too fine a point on it, we simply don’t know yet how to pick the low-hanging fruit in that realm.

    • Perry,

      Thanks again for the thoughtful comments.

      I agree that too many people seem to be making too many broad pronouncements about whether paywalls will or won’t work, based either on small samples of data – or purely on ideology. If this was a debate about whether to charge more for the Sunday paper or not, it’ll be just odd if that level of passion was elicited; here, it seems par for the course.

      Not to mention that there whole host of ways to implement paywalls/subscription fees, and what types of content to wall off/make more difficult to access; it seems self-evident that there isn’t a universal answer to the paywall/no-paywall question. As Mao (I think) said, we should “seek truth from facts.”

      And, as you note, there are all kinds of operational issues/challenges that go beyond the broad question – what does it cost to set up and maintain a paywall? What does the local ad market look like? How should the ad sales model be organized?

      For too long, journalists have been shielded from the hard work of product design/business operations and management – all for theoretically good reasons, but leaving a big gap that’s hard to fill when it’s most needed.

      That NAA rule of thumb, for example, is a helpful way to look at staff costs; but it’s also probably outdated in an age where entirely new types of news products are being developed.

      And I do take your point about the very different types of news organizations in the ecosystem these days – in fact, that’s the topic of a post I want to write soon, about what I’ve come to think of as artisanal journalism and industrial journalism.

      Reg

  2. Hi Reg, absolutely online ad revenue cannot cover the cost of quality journalism — and most certainly not at current rates. It should be contributing more, however, as part of a multi-stream solution.

    Is it too simplistic to suggest media organisations need to do more to manipulate these rates??

    We know certain advertisers value certain groups of readers. Right now they pay a premium to reach, say, Guardian or New York Times readers in print form. The number of online readers is a large multiple of print readers — but advertising rates are the inverse.

    What happens when a ‘digital-first’ media organisation, or newspaper, takes the plunge and goes ‘digital-only’?? At that point, if we accept that the newspaper/website/brand “owns” the readers’ loyalty, then advertisers will have to pay to reach these potential buyers.

    The likes of Facebook may have taken a machete to online advertising rates with the gigantism of their scale. But when a reader has shown intent by committing to a news provider’s paywall (however nominal) his or her level of engagement must be far more valuable to advertisers.

    Ossian

    • Ossian,

      Thanks for the comment. It’s true that some news organizations – and the Times, Guardian and Journal are probably highest on that list of mainstream news media – do have a strong hold on their readership. And that anyone who pays for a subscription generally, nearly by definition, has a stronger engagement with that publication that someone who doesn’t.

      Which is why publications with paywalls/subscription models tend to ask for somewhat higher ad rates on the ground that they have more engaged users. They also have more information about their users, so that helps get them more targeted ads (ie, higher ad rates).

      The broader problem is that most news organizations can’t count on that level of reader loyalty, and that even if they could, there are so many other ways to reach more or less the same demographic that they don’t have the kind of pricing power they used to have. Hence rates continue to slide….

      Perhaps at some point someone will figure out a metric/model that does pull rates up, and there certainly are cases where organizations have done well with things like sponsorships. But the broad trends aren’t moving the right way.

      Best,

      Reg

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  4. […]  For all the discussion of paywalls – and thank god the worst of the ideological wars about them are over now – there is a less-discussed but just as fundamental issue about the value of stories in […]


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