Is 2014 the year when the leading New Zealand newspaper websites (i.e. Stuff.co.nz and NZHerald.co.nz) put up paywalls and begin charging Kiwis for access to content?
Those in the know seem to think so:
- In a May 2013 NZ Herald column, APN New Zealand chief marketing officer Kursten Shalfoon predicted 2014 would be “the year of the paywall”
- Science Media Centre’s managing founder Peter Griffin told StopPress in August 2013 that “by early 2014 [APN and Fairfax] need to have paywalls or risk falling further behind … maybe irrecoverably”
- “I think inevitable somewhere in the future there’ll be a paid model for online,” APN CEO Martin Simons said on TVNZ’s Breakfast [in September 2012], echoing recent comments by Herald editor Shayne Currie (reported by NBR)
- Fairfax Media says it is only “a matter of time” before its online publications in New Zealand go behind a paywall. Acting managing director Andrew Boyle told Fairfax today [June 2013] that when or how it will happen to websites such as stuff.co.nz is still up for investigation. (per TVNZ)
Why the need for a paywall at all? Take a look at what’s been happening with advertising expenditure over the last decade (to which we’ve appended our projections for the next three years, based on trends over the previous ten years):
If we base our projections on trends from just the last three years, the decline in print revenues is even more severe:
Yes, Stuff.co.nz and NZHerald.co.nz are leading recipients of interactive advertising revenues — but (according to a Pew Research Center study released in 2012) US newspapers are losing US$16 in print revenue for every US$1 of digital they gain. The perceived wisdom, that print dollars are being converted into digital dimes, turns out to be understating the problem.
As noted in a June 2013 Stuff article on the topic, newspaper paywalls around the world have generally been introduced under three models:
- The “freemium” model, as used by Rupert Murdoch’s The Australian paper [and NBR here], allows users to get selected content for free and pay for the rest.
- A “hard” paywall, employed by the likes of The Wall Street Journal, makes content available only to paid subscribers.
- Many others [such as the New York Times] use a “metered” paywall, which grants access to a certain number of articles for free each month.
The metered option seems to be the most favoured by APN and Fairfax for their respective NZ websites, especially given the negative reaction to the freemium model when the NZ Herald tried it for a short time in 2005:
The Herald’s method put premium content such as opinion pieces behind a pay mechanism, with the goal of leveraging the brands of writers such as Peter Griffin, Kerre Woodham and Brian Gaynor and turn it into paid subscriptions from their audience. The reality was completely different.
“It was a disaster. Those of us sitting behind the paywall resented it … worst of all our engagement with the community dried up overnight. We were in the dark and felt a lot like mushrooms,” says Griffin.
The metered content strategy, on the other hand, has been more successful, at least for the poster child for the strategy, the New York Times:
… the Times recently reported that 56 percent of its revenues now come from readers [i.e. subscriptions for both print and digital content]. Given that reader revenue is now growing as paywalls have gone up, and that print ads remain in sharp decline, majority reader revenue seems to be the preferable market position.
Thus far, NZ media paywalls are few and far between (and their achievements seem relatively modest). Apart from specialist trade journals such as the NZ Doctor, the primary consumer-facing publications implementing paywalls thus far include NBR, the NZ Listener and two independent local newspapers:
- Privately owned regional paper the Whakatane Beacon launched a paywall in February 2013. After about two months, more than 200 people had signed up. The Beacon‘s model is largely designed to retain newspaper subscribers by giving them free online access. Those living outside the distribution area can pay $91 a year to read its website – the same price as a paper subscription.
- Ashburton Guardian editor Coen Lammers told TV3 News that the decision to put the Guardian behind a pay wall in November 2012 was a matter of when and how to implement it, rather than if they should. “Because we had a very basic website which had no advertising and very little audience, we had nothing to lose. If you compare it to stuff.co.nz or with the New Zealand Herald website, which have millions of hits every week, they’ve got a lot to lose. They have a problem that they have to convince their readers that they’ve been getting it for free for years and, ‘Sorry, now you’ve got to pay for it.’ That’s obviously a massive quandary for people in charge there.”
And what about NZ’s most famous paywall adopter, the National Business Review? NBR indicated in 2012 that it has “just under 3000 individual paid subscribers, plus some of New Zealand’s largest companies” [which purchase corporate subscriptions shared across their organisations].
AUT researcher Merja Myllylahti, in a study set to be published in Digital Journalism, commented in June 2013 that “the National Business Review is making around $500,000 per annum from its paywall, with almost half of subscribers reading content online.”
On the other hand, NBR publisher told TV3 News at the end of 2013 that “the NBR website was losing $10,000 a week. Now, it’s making money.” Clearly, paywalls were a very smart idea for NBR.
Merja Myllylahti observed in her report that “generally speaking financial newspapers tend to make more revenue out of their paywalls, because their subscription fees are higher and they have corporates paying for the access.”
We agree — but believe that’s only part of the story. NBR is able to charge what it does because it provides access to content that is not available elsewhere (that’s why, as we see it, some NBR stories start out behind the paywall and then become free, when the news is no longer exclusive).
The Wall Street Journal‘s original paywall strategy was considered successful for the same reason: unique content (recent changes since the paper was acquired by Rupert Murdoch have seen that strategy evolve substantially).
So the challenges for Fairfax and APN as they consider whether 2014 will indeed be the year of the paywall are substantial:
- Is their website content unique enough to warrant a fee (in an online news environment where they’re not merely competing with each other but also with TVNZ, TV3, Prime News, all the radio networks, the BBC, CNN, Facebook, Twitter, LinkedIn, Google News, YouTube, MSN, blogs, yadda yadda yadda)?
- Will they generate enough subscription revenues to offset the advertising dollars they will lose as reader eyeballs bounce off the paywall and head to other sources for their regular newsfix?
- Will they cease to be “the preferred news source” and “the newspaper of record” when their content is not freely available, to be searched for, linked to and shared in a crowd-distributed world?
- Can they introduce enough new content, not available in printed form nor previously featured on their website, so that past readers believe it’s worth subscribing?
- With the tastiest tidbits hidden behind paywalls (because, frankly, that’s where they’ll need to be to attract subscribers), will the content that stays free be too dull to lure in prospective readers?
The problems aren’t (quite) insoluble. For example, the New York Times and the Wall Street Journal have both come up with new paid content options that are generating solid buzz.
Here (from November 2013) are three new niche products from the New York Times:
- Food & dining: Sam Sifton, a former Times restaurant reviewer and national editor, is heading up this project. Expect lots of video and how-tos. This product will grow out of the Times’ well-read Dining section. The big question won’t be interest; it will be what kind of product might the Times create that consumers will value enough to pay for separately. Food and dining is a big, free world, with television content hugely popular. Recipes won’t be enough — nor will thoughtful and entertaining commentary. What might help would be third-party content, a partnership with a food outlet that has affinity with the Times, or functionality that extends the experience. How about some kind of special deal with OpenTable that gives subscribers some kind of preference or deal, for instance?Michael Zimbalist‘s R&D staff demoed “Julia” for me last week. Julia (check out the demo here) is a magical Internet tablet, using gestural and voice interfaces to use tablet-like content and then see ingredients displayed on the countertop.
The R&D Lab describes Julia as “an experiment to think about how usage data and sensor data could be tied into a feedback loop between a publisher and its users to improve future offerings.” Julia may not be ready for prime time — or kitchens may not be ready for it — by mid-2014, but it’s the kind of wow that could get people to buy, much as the new Mayday feature on the Kindle Fire HDX is doing. Sometimes you sell the steak, and sometimes you sell the sizzle. What will be the Times’ sizzle here and in the other products?
- Need to Know: Cliff Levy, a much decorated Times editor, is at work on this smartphone-first (tablet-second, web-third) product. It’s intended as a first briefing on the world: Put down that Facebook and smell the globe. Thompson talks about it setting a news agenda, with an “American voice” and a witty, engaging tone that Levy has surfaced in the Times’ NYC Metro coverage.
And here’s a sample new-look initiative from the Wall Street Journal:
WSJ Live, launched [in September 2011], is a milestone product. It’s not Fox News. It’s not CNN. It’s not New York Times news video. WSJ Live is its own thing, and a model for the news industry. Newspaper companies can talk the talk of becoming multimedia companies, but most are still text-bound. WSJ Live is a news video product that does a great job of leveraging the new technologies of the day and converging them to create an easy-on-the-eyes, easy-to-use new consumer product.
Notice, first, that WSJ Live is a tablet product — or more precisely a “lean-back” product, available not only on your iPad or your Galaxy Tab but aiming to get in early on “connected TV” platforms. If you want WSJ news video, you can access it on WSJ.com and on your smartphone. WSJ Live, though, understands that the tablet is today’s go-to platform for this kind of news experience.
It leverages the tablet-sized screen well. It mixes on-the-hour scheduled programming with on-demand access. It balances the talking heads of its global reporting workforce, via Skype, with anchor-hosted programs (News Hub), photo stills, and graphics.
So yes, newspaper paywalls can work — but they do take investment in new kinds of content. Like we said, a big challenge for our leading newspaper publishers.