Paywalls: On Their Way Out?

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They work for a few very large papers but not for many others

By Toni Fitzgerald, MediaLifeMagazine.com

August 3, 2015

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In 2014, amidst much fanfare, the Toronto Star launched a paywall that forced readers to pay for its online content, including articles and videos on its website and digital apps.

One year later, it took that paywall down.

The paywall didn’t work, the paper admitted. Readers complained constantly about it, and revenue gains didn’t live up to expectations.

The Star won’t be the last to pull the plug on the paywall.

From 2011 to 2014, hundreds of newspapers instituted paywalls forcing readers to pay for content they’d previously accessed for free. They argued they needed the money to offset sharp declines in print advertising and circulation that had already forced deep cuts in newspaper newsrooms.

But it’s becoming clear that paywalls won’t be the cure for what ails the newspaper industry.

“The industry has been struggling with this issue since 2000, when the dotcom bubble burst and circulation managers started trying to prevent newsrooms from giving away all their content,” says Gordon Borrell, chief executive officer at Borrell Associates, an ad tracking firm in Williamsburg, Va.

“There have been several ebbs and flows of that effort since then, and I suspect we’re in another ebb.”

Seventy-three percent of newspapers worldwide now have paywalls, according to the International News Media Association.

There are signs, however, that paywalls are losing their appeal.

“As free content continues to proliferate on the web, many publishers are finding it harder and harder to charge for their publications,” notes a recent study on digital ad trends by Hubspot.

The study found 20 percent of publishers believe fewer publications will charge for content in the coming six months.

And the Star is not the only one to take down or modify its wall. The Sun in the UK relaxed its restrictions earlier this summer, and Borrell expects others will follow.

“Local news and information is greatly commoditized and not perceived as particularly valuable, so people aren’t willing to pay much,” he says.

“And the print business model, where you get 25 percent of your revenue from subscriptions and 75 percent from advertising, doesn’t work online. You need huge audiences to generate sufficient ad revenue, and paywalls work against that.”

That may ultimately be the problem with paywalls: The economics don’t make sense. Newspapers’ desire to offset print declines isn’t realistic.

That means you can expect many sites to eliminate or loosen their paywall restrictions in the coming years, with only giants such as The Wall Street Journal or New York Times, which have the premium content to keep people happy, sticking with the paywall.

“In five years we’ll have vague memories of what a paywall was,” Borrell says.

“The local news industry will migrate pretty quickly to delivering content on apps with a freemium model that have very little resemblance to a newspaper front page.”

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