Just don’t call it a paywall

In a mildly anticlimactic announcement, the New York Times let it be known today that in, oh, a year or so it will get around to figuring out exactly how it will charge some people for its stories.

If discretion is the better part of valor, the Gray Lady is Rambo.

This much we know: The Times will refer to its as-yet-undefined online subscription service not as a “paywall” (which it is) but as a “metered model” (which it isn’t). “Paywall,” apparently, carries the wrong sort of connotations; it sounds like the type of thing Ronald Reagan would have demanded to be torn down. “Metered model” is less likely to raise hackles; it’s the way we get electricity and water and parking spaces.

But the essence of a metering system is that what you pay goes up along with your consumption. That’s not what the Times has in mind. Its system will be a delayed-paywall scheme similar to that already in place at the Financial Times. You’ll be able to read some number of stories, or look at some number of pages, during the course of a month, and once you hit the limit a big old paywall will come clattering down, and you’ll be asked to fork up a few bucks for a monthly all-you-can-eat subscription. There are just two prices, in other words: zero and nonzero.

It’s not the most aggressive move imaginable, but it’s a smart move, particularly when viewed in the context of the Times’s previously disclosed last-man-standing strategy. (Saying it’s a smart move doesn’t necessarily mean it will work; it means that the risk of not trying it at all is higher than the risk of trying it and finding that it doesn’t work.) The structure of the written news business is in flux right now because the Net has erased the traditional local and regional boundaries that once defined newspaper markets. Because, as I described in an earlier post, the highly dispersed and fragmented newspaper supply model was built on the assumption of local market boundaries, the industry is now weighed down with much too much supply. That imbalance is in the process of being remedied as newspapers fold, consolidate, and lay off journalists. The supply side of the industry is shrinking, and every time a newspaper disappears the surviving papers get a little bit stronger. Once the shakeout runs its course, the “last men standing” will face less competition, for readers and advertisers, which in business is always a good thing.

The reduction of supply won’t solve all the problems faced by written news organizations. They will still have to grapple with changing modes of news consumption (and production), the resistance of large numbers of news consumers to paying for the news, and the fact that the web provides a less-than-ideal platform for the kinds of traditional advertising that have been the bread and butter of newspapers. One way to deal with these challenges is to start some rational experiments in market segmentation, and that’s what the Times’s paywall plan – oops, I mean “metered model” – is fundamentally all about.

The Times recognizes that, even in our digital age, the news-consuming public is not an undifferentiated mass. Some people are blind to differences in the quality of reporting and writing; other people pay attention to those differences and place a high value on quality. Some people are happy to skip around the net sampling all sorts of stories by all manner of producer; other people have better things to do and would prefer to stick with a few trusted sources. Some people still prefer printed newspapers; other people prefer to get their news from web sites or Kindles or iPhone apps; other people want all of the above. Some people find the idea of paying for news anathema; other people don’t.

The Times’s plan involves dividing the market into three categories and tailoring a different offering and business model to each. Here are the segments, as I see them:

Traditionalists: Largely though not exclusively an older and fairly well-heeled crowd, they continue to value the unique attributes of a printed newspaper while also wanting the option of digital delivery. They’ll pay a pricey subscription fee for a print edition, and they’ll (likely) get the full panoply of digital options thrown in for free. Because they’re an attractive audience to many advertisers, they’ll also generate significant advertising revenues, across print and digital media.

Loyalists: They don’t care about print editions. They want their news digitally, but they value quality and hence tend to be fairly loyal readers of what they see as quality news outlets. The Times hopes to convince a good chunk of these folks to subscribe to the all-you-can-eat digital version of the paper. This will be a tough sell, but it’s not an impossible sell. And if more digital news starts to be delivered through software applications and computing devices better geared toward the display of text and the navigation of an online newspaper (like the soon-to-be-nonmythical Apple tablet), the idea of paying for access to a quality online news outlet will likely become more palatable to this segment. Here, again, the subscription fees will be supplemented by ad revenues.

Freeloaders: The biggest and (from a business standpoint) least attractive segment of the market, they’re happy to hop around the web gathering news content from many different outlets, and there’s no way in hell they’re going to pay for it. The Times will give these folks free but limited access to its site (though probably not other kinds of digital delivery), and it will carefully establish the limits on free access to ensure that most of the members of this segment will go on getting what they’re used to getting from the Times (and if they don’t, they’ll come back for a few stories next month). Freeloaders will continue to provide the Times with some marginal ad revenues, and over time some small but not insignificant number of them might relocate themselves into the Loyalist category. Maintaining some level of free access is crucial for a news outlet like the Times because, as the company’s top execs put it in a staff memo, it needs to “remain a vibrant part of the search-driven Web.” It needs to stay in the link stream.

The newspaper business has been shrinking for decades, at least in terms of readership. It will never be what it was, and it will certainly never be what it was before the Web. But for the last men standing, things may not turn out as bad as the doomsayers think. The consolidation of supply in the industry, the reduction of competition, the emergence of new market segments, the willingness to experiment with targeted subscription programs and other types of pricing schemes, and the coming of new devices and software for news delivery: these may not be causes for optimism in a beleaguered industry, but they are causes for hope.

This is the third installment of “Dog Bites Newspaper,” Rough Type’s non-award-winning series on the future of written news. The earlier installments were The Writing Is on the Paywall and Google in the Middle.

6 thoughts on “Just don’t call it a paywall

  1. Barry Kelly

    As you know, newspapers are in the business of selling readers to advertisers, not content to users. Trying to invert the relationship and making the subscription charge a profit centre isn’t likely to work; the freeloaders, as you call them, outnumber the other groups combined by a substantial margin.

    And in any case, the FT model (and technically the current NYT “registration-wall”) is easy enough to circumvent: simply delete the site cookie, and it resets your view quota and lets you through.

  2. Ian Betteridge

    Barry, the “it’s easy to circumvent” model was also used with music. After all, why would I buy songs from iTunes if I can download them for free elsewhere? Yet strangely iTunes sells millions of songs.

    Also, I think you’re falling into a trap by claiming that “newspapers are in the business of selling readers to advertisers.” They *were* in that business – but times have changed. Now, they are no longer the main way that advertisers can reach readers. There are numerous other channels, some more effective in targetting specific niches.

    To use John Maynard Keynes’ dictum: “When the facts change, I change my mind. What do you do, sir?”

  3. gypsybandito

    Maybe publishers need to start thinking less about Walled Gardens and more about Public Parks.

    If the internet has done anything to the content business, it’s changed the consumer’s appetite — the nature of the market demand.

    So I think what publishers should be doing is making their content freely accessible, but only to registered users. The user account themselves would be free, but sufficiently integrated with social media sites that the publishers could mine user data and target them with better advertising.

    For example, give users an incentive to “connect” their profile to their Facebook account, and not only will the publisher’s content be promoted to that user’s personal network, but the publisher will gain access to that user’s profile data and can then use it to target them with highly specific ads.

    Similarly, publishers should look at mobile apps to geo-target ads so that, suddenly, mom and pops can buy advertising with not only the local newspaper, but the NYT as well. For instance, if I’m reading about middle-east politics on my phone, why not show me an ad for a nearby middle-eastern restaurant?

  4. Shyam Kumar

    A thought off the top of my head-

    Since the value of news is inversely proportional to the time it has been out there, how about enabling even freeloaders to access all the articles after 1 or 2 days of publishing?

    (The optimal timeframe can be derived based on user habits ofcourse)

    That way you’d still get enough users for advertisers, and be able to maintain your differential pricing strategies for the segment who wants their news NOW..

  5. Dennis Dunleavy

    In all of the guesswork going on with how to monetize content, I have not heard all that much about exactly who publishers think their readership is. Much of this pay wall or metered modeling is based on antecedent econometrics. My students at the university are not aligned to such a fee-based model because they do not follow news in same predictable way their parents did. The point I am trying to make is that the culture of news readership is changing and so must those who create, control and disseminate it. The news industry must begin to understand audience behaviors before trying to make money. I have not seen all that many studies dedicated to the social psychology of news readership. That’s where I would start.

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