Presumably, a few hundred years ago, there was a debate in Ye Olde InPublishinge focussed on whether this new-fangled method of printing news onto pieces of parchment and allowing people to buy them for a groat would ever catch on, and if it would replace the established and understood town crier system.
We’re now in the middle of something similar, as the internet gradually powers up people’s communication capability. We still have many forms of news and information delivery, although the town crier concept is now purely ceremonial. Debate now rages over the best business model for publishers.
One of the problems with discussing internet media business models is their intrinsic flexibility. If you’re just talking about print media, there’s basically two choices – free and paid. Overlay that with newstrade and post, and you’re done. But with internet delivery, there’s almost as many business models as there are publications, and indeed there may well be more.
Here comes the paywall
Last year’s media news was dominated by the paywall – the impermeable barrier that stops those who don’t pay seeing the jealously guarded and unique content produced by the publisher’s highly paid ace reporters. Rupert Murdoch’s paywall at the Times / Sunday Times has become an ideological standard bearer for those who feel Joe Public should pay for his news.
There are two main camps – those who believe in the wall, and those who believe in free. Loosely, it’s Murdoch v Rusbridger, Times vs Grauniad, good vs evil. Or is it evil vs good? How can you tell?
It’s not that simple, as Jon Slattery pointed out in InPubWeekly in July. Within the two camps, there are distinct differences of opinion. If people are going to pay you, is it a monthly subscription, pay-as-you-go, or a fixed number of articles that they are buying? Are they going to pay for everything, or will some content be free? Do you let people have their ‘first click free’ from a search engine (as the FT does), or close that door and spoil some of your SEO work (as do the Times)? As I said, the flexibility of the medium makes discussion of models complicated.
Who pays?
At the heart of the debate is whether it’s better to get readers to pay for news, or advertisers to fund them reading for free. If you get each subscriber to pay you more than you lose in advertising for the ones you drop by introducing your wall then you’re in the money. So are they?
Let’s look at some facts. When the Times paywall came in, there was a frenzy of reporting on how much traffic they had lost – the consensus was between 60% and 90%. This is borne out by data from Hitwise, Nielsen and Alexa.com, which shows a fall from about half the traffic of the Guardian, to about a tenth. We heard nothing from News Corp until the October announcement that a curiously precisely counted 105,000 people had paid for access. If they’re paying £2 a week, which is the rack rate, then that’s, er, £10m a year.
They’re probably not paying the rack rate of course. One commentator suggests they’re all paying the promotional £1 a month. That would produce more like £1.25m a year. So, subs revenues should be between those two figures then.
How much advertising have they lost? Certainly more than the lower end, and possibly more than the upper end. Revenues were said to be between £20 and £30m pre-paywall. If 90% traffic loss equals 90% revenue loss, well, you can do the maths yourself. Of course, it might not be that bad, and Times ad director Katie Vanneck suggested the demographic data they have on subscribers will make them more valuable than their pre-paywall users, about whom little was known.
Not just numbers
She may well be right. The Times newspaper was and is reasonably successful at attracting advertising, but delivers an audience far smaller than does the final of the X-Factor. Numbers are not the be all and end all for many brand owners. Still, there will probably be more than a teensy drop off in ad revenues.
So staying free must be the answer then? Look at the Evening Standard’s success in pushing its readership up by 130% and advertising up 160% by ceasing to charge readers. Of course, ES controls distribution points in a way which would be impossible online, and commands a captive audience of high-value advertising targets forced to stand on a train ambling through commuterland’s patchy mobile phone reception who can do nothing but read a paper.
Wait a minute
But hang on. The FT’s ability to take money off 140,000 online subscribers – twice its print circulation – would suggest that actually it’s perfectly possible to make money the other way round. At full whack, their online subs would generate just shy of £25m a year. If the Times is heading for that in a sustainable, going-concern sort of way, then that’s perfectly acceptable isn’t it? However, the FT produces a fairly differentiated blend of editorial, not easily available elsewhere, so of course people will pay.
The FT also has a mixed model, where up to a certain number of articles a month are available for free. It’s only those who consume more than that who pay £3-5 a week.
Search disabled
This model also helps search marketing, as you can typically access an FT article from Google search results. The Times’ paywall is so tough that Times articles just don’t appear in the natural search results. A scan of the issues of the day as I write this – the Luton / Swedish suicide bomber, Carlos Tevez submitting a transfer request, and Liz Hurley getting it together with Shane Warne – produced natural search results which didn’t feature a single result from the Times. And yes, the stories were on the Times homepage.
If a website gets 20% of its traffic from Google, then the Times is missing out, and probably on the potential overseas people who would call it ‘The London Times’, and might be more likely to pay than those from the UK are. That the proportion of Times users based in the UK is double what it was pre-paywall bears this out.
Profit from the Generation ‘i’
The ‘i’ effect is strong too – the FT, the Spectator, and others are making money putting out iPad editions, and apps for the iPhone generation. Around half the TimesOnline subscriptions are reported to be on iPad. This is of course genius, as you’re selling something to people with little enough sense to be addicted to such gadgets, and who will therefore cheerfully stump up a couple of quid for something they could access on a cheaper device for less. However, it’s a pointer for the future. Optimising content for the most profitable or popular delivery method will be a key to riches. When the next generation own the money, will they choose to spend it on newspapers? Top ‘futurist’ Ross Dawson says newspapers will cease to exist in the USA in seven years, so that looks like a ‘no’.
Rupert will fail
In a perfect market, those knocking out commoditised news for free should win over those who try to charge. It’s not about quality, it’s about reach. If it’s just the basic facts, then free will do. As Jim Chisholm told the Society of Editors Conference, “If the Times are going to charge and the Guardian and Telegraph aren’t, readers are just going to move somewhere else because they are reading on average four newspapers a day online.” If the Beeb continues churning out acres of factual coverage for nothing, there’s even less reason to pay. Is the Times a step change in quality better than the Beeb? No. So Rupert’s plan will fail.
Er… well…
But if that’s true, then why are the Telegraph looking at copying the News Corp shift to paid-for? They certainly are. Quite possibly during 2011, even if not necessarily in exactly the same way as the Times – they are said to be looking at a ‘metered’ model, more like the FT’s.
And if the Telegraph – once the leading exponent of free content - shifts, what price a wholesale leap by the ‘free’ camp to the paid side of the tracks? Perhaps one day soon, Guardian Media Group will think, ‘might as well join them, they’re all making money’ and flip over too. The power of the herd mentality is strong – no-one wants to be “backing Betamax”.
What really matters in this great debate is not whether the Times and Sunday Times lose 90% of online readers, or whether, on principle, people should pay for quality journalism. It is, simply, whether the Times’ plan works or not. VHS beat Betamax in the big battle of VCR formats not because it was better – it wasn’t. VHS won because people bought it.
The biggest influence on whether Rupert Murdoch succeeds or not is whether others follow his example. And it looks like they might. So Rupert’s plan will, probably, succeed.
References
Times site traffic falls by two-thirds following paywalls – Media Week
FT Paywall Works – Press Gazette
The Times’ Paywall: Not a simple story so far – InPubWeekly
Nielsen: Times getting 362,000 UK visitors behind the paywall
Times paywall - what constitutes success then? – Organ Grinder (The Guardian)
Greenslade on Ross Dawson – The Guardian
Times attracts 75% of users from UK – Media Week
Jim Chisholm: Times paywall will fail - Press Gazette
Do advertisers want to be in Times paywall club? - Brand Republic
