Tuesday, February 26, 2013

Erecting the Paywall to Save the Product

The Seattle Times tried putting itself in the same class as the New York Times when announcing Sunday that, like the New York Times and 400 other daily newspapers, it would begin charging for viewing its online content next month. In putting its content behind a paywall, Fairview Fanny now puts itself in the same class as the McClatchy Papers (Bellingham Herald, The News Tribune of Tacoma and The Olympian), the Skagit Valley Herald, and the weekly Vashon-Maury Island Beachcomber. David Black’s Sound Publishing purchase of The Herald of Everett and the Peninsula Daily News may mean paywalls there may be coming soon, leaving only the daily Kitsap Sun as yet unaccounted for. (Up north, you will find paywalls at the Vancouver Sun, Victoria Times-Colonist and the Globe and Mail.)

Seattle Times executive editor David Boardman described the decision thus: “The reasons for this development are simple: The economics of the news business, and of the newspaper industry in particular, have changed dramatically over the past decade. More people than ever are reading our content in print and digital formats, but our primary source of revenue — advertising — is declining locally and nationally and no longer supports our costs to the degree it once did.”  ("Digital subscriptions needed to support quality journalism")

In December, the Bellingham Herald’s owner and publisher Mark Owings described his change this way: “Now, it's never fun to ask anyone to pay for something that has been free. But providing unlimited access across all platforms for a small amount makes sense. It also gives us the ability to protect our most valuable product -- our content. I know it really doesn't need to be said, but I'll say it anyway -- a business that gives away its most valuable product for free is doomed.” ("Pay-To-Read —What?")

Sadly, the online content of the local McClatchy papers and the Skagit Valley Herald are no different pre-paywall and post-paywall. How valuable was that product being ‘given away’ for free, and now is charged for? As I wrote in the December blog, “Let me rephrase Mark Owings’ dictum this way: “A news medium that doesn’t provide its most valuable product — its content— is doomed.”

Maybe the Seattle Times will become content rich in its online edition like the New York Times and it will be worth paying for access to online content, but I doubt they have the resources to do it, especially if they are relying on pay-to-read subscribers. Linda Thompson at MyNorthwest.com writes that the online-only subscriber rate will be $3.99/week, which comes to about $207/year. ("The state of Seattle journalism, as the Times puts up a paywall ")

Print subscribers will get access to online content included in their print subscription— which makes some marketing sense if the Seattle Times thinks they will build circulation by driving online-only readers to buy a print subscription in order to keep reading content online “for free.” Maybe they’ve done their market research and they’re carrying out a well-thought out strategy— including analysis that says the $3.99/week price-point will move their market.

I doubt they know and there is much desperation as advertising revenue shrinks in the digital age and the recourse is to start charging for content much like public radio with its marathon fund drives. David Boardman may want to say, “More people than ever are reading our content in print and digital formats,” but print circulation is down and print advertising revenue is down. If more people are reading content in digital format, digital advertising revenue has not  supplemented print advertising revenue. The business model of digital format being a digital version of print format hasn’t worked for advertising.

And, according to Derek Thompson in this month’s The Atlantic, the challenges for advertising in digital format will get worse. The market is moving beyond desktops and laptops to mobile devices: “For the next 10 years, as mobile penetration screams past 60 percent, 70 percent, 80 percent, this will be the trillion-dollar question: How do you build a thriving business selling ads on a four-inch screen—and what happens if you can’t?” ("The Incredible Shrinking Ad")

“One of the biggest problems with mobile advertising is that it’s not interactive, it’s just a passive ad,” Thompson quotes Scanbuy CEO Mike Wehrs. “We can make it a full interactive engagement: ‘Thank you for scanning. Do you want to watch a video? Are you interested in sellers nearby? Would you like to order it online?’ ”

Consider that kind of interactivity for mobile content across news, culture and entertainment platforms— and call that the new “newspaper.” That would not only be worth paying for, it would also be where advertisers might be looking to interact.

--Mike Sato

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