For many newspapers, the decision to erect a paywall has been a decision of last resort.
And for a seemingly good reason: despite the obvious need to generate the type of revenue that advertising often can’t provide alone, asking the consumers of your content to pay for the privilege can be a difficult undertaking.
Case in point: when John L. Robinson, a professor at Elon University, asked the students in his class if they would pay a fee to use Facebook, all agreed they’d pay $1/month for the world’s largest and most popular social network. A smaller number indicated they’d be willing to pay $5, none said they’d pay $10.
Robinson’s story may be anecdotal, but chances are most of us would expect the results he reported from his informal, statistically insignificant poll to be fairly representative of the population at large.
After all, today’s consumer has been conditioned to love — and expect — free.
Which creates a worrisome question for newspaper execs: if university students wouldn’t pay more than $5/month to access the most popular social network in the world, a service that many consider to be an indispensible part of their social lives, can a newspaper realistically expect to charge much more than $5/month for its content?
“Perhaps not” might be the logical answer, which is why Robinson says that the creation of a newspaper paywall is like “using a Band-Aid on a bullet wound.”
But is he right?
Outside of the United States, some newspapers are doing better than one might have expected with the paywall model. Piano Media, for instance, has achieved promising results in Slovakia and Slovenia, and is reportedly set to take its model into a larger market in the very near future.
According to Piano Media’s Tomas Bella, who I interviewed last year, one of the keys to getting consumers to pay for newspaper content in Slovakia and Slovenia was to “break a ‘will never pay’ barrier.” The jury, of course, is still out on whether the revenue from inexpensive subscriptions can be enough to support the type of news organizations that were built when the newspaper commanded far more dollars from advertisers.
In the United States, however, at least one big investor is apparently confident enough that they can play a meaningful role to put his money where his mouth is.
Last week, Warren Buffett’s Berkshire Hathaway purchased the bulk of Media General’s newspapers for a nine-figure sum. Most of the newspapers in Media General’s stable are moving to a paywall model, which Buffett seems to believe is big part of the future of the newspaper business.
As Poynter’s Andrew Beaujon notes, the Oracle of Omaha stated earlier this year:
[Newspapers] have been giving away their product at the same time they’re selling it…and that is not a great business model. When they put papers up on the Internet and you get free, you’re competing with yourself. And throughout the industry you’re seeing a reaction to that problem and an answer to it. … You shouldn’t be giving away a product you’re trying to sell.
Buffett may be right that newspapers made a big mistake in embracing free, but that doesn’t answer the billion-dollar question: now that the genie is out of the bottle, can the paywall help contain it?
The good news for newspapers is that new media upstarts intent on disrupting the business of news gathering, particularly at the local level served by the kind of newspapers Buffett is most interested in, have thus far proven to be expensive, less-than-fruitful ventures. This doesn’t mean, however, that newspapers can count on the money being there.
So what are newspapers to do while this plays out? It would seem that newspapers wanting to survive are still going to have to reorganize themselves to fit the economics of the present while they wait to see if their new paywalls deliver a slightly better future.