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article imageOp-Ed: News media- The market hits the paywall, and doesn’t like it

By Paul Wallis     Jul 24, 2010 in Internet
News Corp’s pay wall has apparently led to a 90% move to the free Guardian, and a battle of wits is now on to predict the outcomes as the new media hit the mainstream. My impression is that none of these people have studied business or advertising.
The story so far:
The New York Times is now in development mode, according to its editor.
The Times paywall is an instant response, requiring a one pound sub fee for non-subscribers. Hit any article, see what happens.
There are now even paywall defenders, prepared to slam anyone anti-paywall for their logic. Excuse me if I'm not overwhelmed by this sudden enthusiasm. The, and I do mean the, literally oldest trick in media is a sudden appearance of highly supportive zeal in an industry famous for its lack of exactly that.
The net effect, pun intentional, is that it looks as if there’s only one idea on Earth, and everyone’s running with it. The theory seems to be that a paywall will operate like selling a newspaper, and therefore all is fair and just, and those horrible consumers can just wear it.
There are risks in this game, and disingenuous positioning of nice little copouts on basic news media issues won’t cut it. “Paywalls fix everything” is very dangerous, and commercially unproven, and has every chance of news media cutting their own throats, if it backfires. If this doesn’t work the news media will take major losses, with no comeback. The next issue will be staying in business at all, and that could be very iffy.
What’s actually being provided at this point is a purely voluntary source of revenue. Going out into the street and busking might produce the same result. Many subscriptions will be business subscriptions. That is not the same thing as the mass consumer market.
Having a new un-quantified by definition source of revenue doesn’t guarantee anything. There are huge numbers of news sources out in the real world which aren’t looking at pay walls. Google acquired Reuters and AP feeds a while back, and it’s not even blinking at this point. Google, Yahoo and Microsoft all run news. With very little effort, they can pick up the entire online news market. Reuters, AFP, AAP, and the public broadcasters etc. aren't charities. They'll go where they're getting exposure. Even AP, which is owned by news media, and committed to the paywall concept, could be in trouble.
What I’m concerned about is that this revenue model, which is basically sink or swim with no other options, can rebound and trash good working news sources. That's not good for anyone, including consumers. Serious losses are a contingency for which there doesn’t seem to be even a mention of a contingency plan. This isn’t the sort of thing you can just set up and assume all will be well. Revenue isn't a theoretical quantity. It either exists or it doesn't. As a business plan, it'd fail a basic exam.
Try this equation for The Times:
10% readership = 10% of the hits on current ads. Add one source of revenue, lose another. Also lose exposure. Result, a much shorter giant, with far less market share and therefore less claim on market revenue.
Advertising 101 for news media
The advertising situation has been blamed for the drop in revenue and is cited as the main cause of the paywall apart from issues about property rights to materials. Murdoch and others say the online ads don’t pay.
There’s a reason for that. They’re also lousy advertising. The no-frills, all over the place, irrelevant type of ads are visual spam. The noisy, annoying ads are also spam, and are naturally filtered out.
The online ads need to be in some sort of relevant context, not just obstacles to reading the news. In any other format, like a good all round advertising scenario, where do most people go for hardcopy ads? A special section called the Classifieds.
For upmarket ads, where do they go? The lifestyle section. Wake up, fools, you’re doing it all wrong. The most basic principles of marketing include something called “Placement”. That’s what you’re getting wrong. The pitiful content of the ads is the other problem.
Online ads can be charged for like mass circulation ads online, too. Lose the “per milliard” approach and you’ll start seeing some money.
Consumer issues
The paywall issue also overlooks a major consumer issue. Consumers are already paying just to be online. Those costs mount up, and they’re a point of legitimate sales resistance.
For example:
$40 per month ISP $480
5 subs at $2 per month $120
$50 Phone bundles per month $600
See a point where your subs are going to be an issue, even if you’re producing the greatest stuff ever written? The media content affects the ISP rates, too, because these high kb things eat up the monthly allocations of GB.
People will have to be very picky about paying for something for which they don’t want to pay in the first place.
I see a new situation in which a whole generation of freelance journalists find that their only real option is sales. If you know what you’re doing, you can sell your news anywhere. That’s also the best way of avoiding neurotic, cost-obsessed, hot and cold employers.
That’s not necessarily good news for news media. While access to A Grade journalists is worth paying for, it’d be a sellers market. Add a sellers market to what can be charitably described as a shaky revenue base, and what happens?
We’re about to find out.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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