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A number of prominent newspapers, including the New York Times, have publicly committed to setting up pay walls as they struggle to find new sources of revenue.

But according to the Pew Research Center's Project for Excellence in Journalism "State of the News Media 2010" report, newspapers planning to erect pay walls could be in for a rude awakening.

Pew found that only 35% of online consumers in the United States have a favorite news website. Of this group, a whopping 82% said that they'd turn elsewhere if their favorite news website put up a pay wall. In short, of the consumers who actually have a preference amongst news websites, less than one in five would consider shelling out money for it.

The Pew report highlights several disturbing facts for newspapers:

  • News has been commoditized. Clearly, few newspapers are doing enough to differentiate themselves from their competitors online. So it's no surprise that the majority of consumers don't see much reason in picking one news website over another. And even amongst those who do, there's no compelling 'lock-in'.
  • Newspapers' relationships with consumers have decayed. The fact that a minority of consumers even have a favorite news website is not just a result of commoditization. It's a result of the fact that newspapers have lost touch with consumers. In all industries, successful companies are able to forge strong bonds with consumers. This is the basis for loyalty, and the fact that there's very little loyalty in the online news space indicates that newspapers have not done enough to maintain these bonds.
  • There's a value disconnect. 81% of the online news consumers Pew surveyed indicated that they were happy to accept advertising in exchange for access to online news content. Yet 77% of these consumers also admitted that they "never" or "hardly ever" click on ads. This sends a very clear message: consumers think a lot of the online news content is worth a lot less than newspapers do. Unfortunately, newspapers that have been giving away content online in exchange for ad impressions in some cases worth fractions of a penny haven't done themselves any favors. They've essentially done their best to convince consumers that their news isn't very valuable.

The implications of Pew's findings are obvious: pay walls aren't likely to solve the newspaper industry's woes. As Pew notes:

For online news to become a profitable enterprise, either consumer attitudes need to change or the industry must do more. That more could be developing new better-targeted products that people are willing to pay for; new forms of advertising that work better, including local search; or new forms of revenue other than display advertising, including perhaps online retailing.

Unfortunately for newspapers, consumer attitudes won't change until the industry does more. The question now is whether or not the industry has the ability to do more.

Photo credit: dpstyles™ via Flickr.

Patricio Robles

Published 16 March, 2010 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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