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Four + one truths about paywalls

The first newspapers that implemented a paywall in Finland now have a couple of years’ experience of its effects, so it’s time to take a look at where we stand. Merja Myllylahti, media researcher, and Johanna Suhonen, director for content sales at Kauppalehti, discuss the effects of paywalls.

1) A metered paywall has established its position among newspapers as the most common method of charging a fee for online content. It usually allows visitors to a newspaper’s website to read a certain (usually a small) number of news articles in a month without any fee. As soon as they surpass the limit, they have to then pay a subscription to gain access to further news on the website.

Merja Myllylahti:
“According to recent research, between 75 and 80 percent of the 45 biggest newspaper publishers in the world use a metered paywall. It seems to be a very appropriate model for general interest newspapers as well; for example, The New York Times uses it.”

“In contrast, many financial newspapers use a paywall model where most of the general news articles are free but premium content, such as market news, is only accessible through payment.”

Johanna Suhonen:
“The metered model seems to have become the most popular strategy globally among newspapers. It ensures that the number of visitors to the websites remains high, as even the more occasional visitors have access to content. This is vital for advertising sales. If we take Kauppalehti as an example, those who pay for the premium content are a small minority of all our users.”

“Another advantage of the metered model is the fact that the paywall restrictions are easy to control. This is why it is so easy to generate advertising revenue by loosening the paywall restrictions for content that is more in demand among advertisers.”

“Every newspaper that used to receive income from subscriptions will soon need a strategy for also collecting subscription fees from their digital services”, says Johanna Suhonen.

2)Implementation of a paywall does not automatically translate into success, but may actually set higher standards for a newspaper’s online content.

Johanna Suhonen:
“I believe that any content behind a paywall must be somehow unique, but its uniqueness may be based on different features. For example, The New York Times succeeds in the digital market because of the particular values it represents, which are specific among certain Americans. Those Americans who subscribe to the newspaper’s values would find it very difficult to obtain similar content in any other American media.”

“The paywall is a guarantee for high-quality journalism and good content. Here at Kauppalehti we see the content of our website as an online shop. All products must be such that, figuratively speaking, visitors to the website want to add them to their shopping basket. Every article must have a value that makes people want to buy it again and again, news item after news item. It is good for journalism that the editorial staff need to assess every story in terms of whether their readers would pay for it and not whether they would click the link for free.”

Merja Myllylahti:
“At the end of the day, paywalls exist in order to enable publishers to continue increasing their revenue and keeping the shareholders happy. I think that they should be evaluated from the perspective of how well they support the journalistic efforts of the news rooms, as well. It all comes down to journalistic content and its quality; this is what subscribers pay for, really. Any content behind a paywall must be good enough that people are willing to pay for it.”

3) Despite the implementation of paywalls, a large proportion of newspapers’ revenue from digital operations is still generated by advertising in most of the papers.

Johanna Suhonen:
“I would say that this still holds true as a rule; in other words, online news and other content is financed mainly by the revenue from advertising. In Kauppalehti the situation is now more or less fifty-fifty, but our online services still generate slightly more revenue from advertising than from paid-for content. This is, however, also a question of statistics. We have many subscribers who subscribe to both the printed and the digital paper. In cases like these, we need to decide on how much of the subscription revenue is recorded as profit from digital operations and how much from printed operations.”

Merja Myllylahti:
“In global terms, The Financial Times is currently the only newspaper that receives more revenue from its paywall than it loses because of the decrease in circulation and advertising revenue. The number of subscribers for the online paper has increased dramatically, and I think it’s higher than the number of subscribers of the printed paper.”

“Western newspaper publishers are facing a situation where the revenue from their printed media is declining while the revenue from their online operations has not increased enough to cover that. My research, published in Digital Journalism, explored the use of paywalls in eight countries, including Finland. It showed that an average of 8 to 10 percent of newspapers’ revenue comes from paywalls. In my doctoral dissertation I studied the proportion of revenue at Fairfax, which is one of the largest newspaper publishers in Australia. Only two percent of the company’s total revenue comes from paywalls.”

4) Paid-for online content is here to stay but the paywall is not the final point of development.

Johanna Suhonen:
“I believe that newspapers will launch new paid-for content packages, for example, whose logic is similar to that of magazines. These are packaged products that offer readers a clearly defined service. They can be subscribed to in the same way as a paper but it is a subscription to a particular application.”

Merja Myllylahti:
“Many papers have started to find more online revenue from native advertising. The New York Times, for example, reported considerably better results because of paid-for native ads.”

“Newspaper publishers have also started to purchase online classified services, such as those focusing on cars or property. In many countries, this type of advertising completely disappeared from printed newspapers, and at the same time newspapers lost their foothold in the online classified market to the dedicated online services. Now the papers are trying to win back market shares by acquiring these companies. The old model familiar from printed media, which relied on two sources of income – subscription fees and advertising – does not work in the digital world, at least not yet. This is why the newspapers’ online operations must generate income from a variety of sources.” 

+ One truth

Johanna Suhonen:
“Every newspaper that used to receive income from subscriptions will need a strategy for also collecting subscription fees from their digital services. People are not willing to pay for the subscription to many papers, not when they pay for other services such as television packages and telecommunications. I’m sure we’ll have a situation where newspapers are assessed by how they have succeeded in their content business. For this reason newspapers are well-advised to adhere to two strategies simultaneously: advertising and content sales. A metered paywall is ideal for this as it allows both.”

Merja Myllylahti:
“People seem to be getting used to the idea that they need to pay for newspapers’ digital content. I think that the problem with the metered models is the fact that not everyone want a monthly subscription. For this reason there are new services such as the Dutch Blendle, which allows its users to only pay for particular articles. Here in New Zealand a service is being developed that lets people subscribe to a package that contains a few international and one regional online newspapers.”

“I would ask the publishers to take the initiative. They must develop various payment models that support different kinds of access and are more suited for the new ways that people read online content.”