Many smart people will argue that the real mistake news outlets made was giving away news for free when the Internet was in its infancy, but they are wrong. Those people believe that they can correct their “mistake” by going back now and making people pay for something they have been getting for free for more than a decade. Wall Street Journal’s Richard Tofel, says in his book, “How, as a visitor from another planet might ask, did a large industry that had successfully charged customers for its product for more than a century come to decide to give that product away and thus threaten its very existence?” This is known in the media business as the “original sin” theory (which, ironically, isn’t original or a sin) – and it’s simply dumb.
While everyone from the American Journalism Review and Columbia Journalism Review to media mogul Rupert Murdoch are supporting paywalls as the solution to the original sin, they fail to recognize that it’s based on an outdated business model from a time when newspapers controlled the primary distribution platform and had a virtual monopoly on news content. Neither of those things is true today. The other – far more important – problem with the paywall strategy is that subscriptions (payment for content) have NEVER been the primary revenue source for newspapers. Subscriptions have always taken a back seat to advertising revenue. And this is where the paywall strategy falls flat on its face. Without fail, every single time, paywalls will decrease the number of people viewing your content … and, in turn, decrease the number of people seeing your ads.
Every time a publisher or editor tries to sell the public on the paywall concept, they inevitably point to the Wall Street Journal and the New York Times as examples of paywall triumphs. The New York Times has what is likely the most successful paywall service in the world – and it barely brings in enough money to offset the losses the New York Times is experiencing from declining advertising revenue. Let’s be honest, your little hometown newspaper isn’t the Wall Street Journal or the New York Times. I see people reading those publications everywhere I go – but I can’t recall seeing anyone reading the Knoxville News Sentinel or Maryville Daily Times at a Starbuck’s in New York City, Washington, D.C., Denver or Chicago … ever.
As you consider all of this, also recognize that the world is lining up against newspapers in many other ways while they are struggling to develop a viable business model. Here are some other struggles newspapers face:
· - Cutting down trees to create a paper product (that will be in the trashcan by 10 a.m.) using a process that pollutes the environment and requires massive amounts of power to run printing presses, then guzzling gasoline to distribute those newspapers to people’s homes is not only inefficient, costly and wasteful, it’s increasingly viewed as downright irresponsible.
· - The younger generation doesn’t get all misty-eyed over the feel of a newspaper or the smell of newsprint and coffee in the morning because that has NEVER been a part of their life.
· - Telling people that your online readership is “ten times” the number of people who read your print product while you charge ten times MORE for advertising in your actual newspaper is stupid.
· - Anyone who has five extra minutes in their day and can afford $9.99 for a domain name now has the ability to distribute news (and before you start rattling off the names of irrelevant blogs, think “HuffingtonPost”)
· - Decreasing your audience is an insane strategy.
· - Advertisers recognize that there are now more cost-effective alternatives to newspapers that reach a far larger audience and can be more easily targeted to their desired demographics. And those alternatives are completely trackable – providing real stats and data about who is seeing the advertising and what they’re doing after they see it.
I don’t claim to have the answers to the many problems facing the newspaper industry, but the problems with their new business model are obvious. The “original sin” of the newspaper industry was not giving away content for free – it was clinging to “business as usual” while the world was rapidly changing around them. As long as people can get local news online for free (in Knoxville, there are at least THREE legitimate free news services provided by the local television news affiliates), most of the general public will not pay for digital local news. This is not rocket science. Charging readers to see your news content will simply reduce your readership, and therefore reduce the value of your advertising space – which will ultimately cost you more money than you will ever generate from your paywall.
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