Paywalls: hype and reality December 4, 2012 Melbourne, Australia Merja Myllylahti PhD Researcher AUT

Free content = media will die David Brauchli, CCO of Piano Media: “Most people believe news on the internet ought to be free, but if this continues to be the case, most media will die and this will directly affect the democratic societies we live in. Therefore not only is it in the interest of the media to charge for their premium content, it is also in the interest of the consumer.” (D. Brauchli, personal communication, August 15, 2012).

Digital revenue painfully slow PEJ’s study The Search for a New Business Model in March 2012, found newspapers process of building digital revenue was painfully slow: “shift to replace losses in print ad revenue with new digital revenue is taking longer and proving more difficult than executives want.” Digital gains don’t make up for print losses: every one dollar gained in digital advertising income meant seven dollar loss in print revenue. Source: PEJ, The Search for a New Business Model, http://www.journalism.org/analysis_report/search_new_business_model

Print revenues are falling Source: PEJ The Search for a New Business Model, http://www.journalism.org/analysis_report/search_new_business_model

Digital ad revenues growing Source: PEJ, The Search for a New Business Model, http://www.journalism.org/analysis_report/search_new_business_model

A miracle cure: paywalls

Little research, plenty of noise In November 2012, Google returned 2.6 million search results for newspaper paywalls whereas Google Scholar gave 484 search results for the same term. So far academic research on paywalls has concentrated on the question: Will they pay? Most of the research so far has concluded that newspaper audience is not willing to pay for general news content (Chyi 2005, 2012). Paywalls are a recent phenomena and therefore research around the topic has just started to emerge.

Rapid increase in paid content There has been rapid increase in number of paywalls in past couple of years, over 300 newspaper paywalls in the US alone. It is estimated that by the end of 2012 20% of US’s 1,400 dailies will charge for their digital content. Major newspaper groups such as News Corporation, New York Times Group, Pearson, Gannet and Axel Springer have introduced paywalls.

What is a paywall? Paywall is a system that prevents Internet users from accessing website content without paid subscription. Different kind of paywalls: Hard – no free content Soft – some free content Metered – restricts number of free articles Freemium – some content free Premium - charging for premium content

Case studies: what was researched? The research undertaken analysed different paywall models, and how their impact on media corporation revenues in the US and UK, Slovakia, Slovenia and Poland, Australia, New Zealand and Finland. The analysis was based on data collected from annual reports, market announcements, press releases, corporate websites and personal communication. Major challenge: lack of transparency in media corporations disclosure and (non)comparability of figures

Metered model: Financial Times A metered paywall model was pioneered by FT – it introduced a paywall in 2007, 10 free stories a month This year the number of its digital subscriptions exceeded its print circulation first time, it now has around 300,000 online subscriptions In the US, a standard FT online package costs $US 300 per year Roughly speaking paid online content brings 13% of the FT Group’s annual sales Problems: In November 2012, it brought down paywall on its highly influential blogs – so far papers philosophy has been that “if the content is of value, it shouldn’t be free”; internal problem - bloggers might feel undervalued

Metered model: NYTtimes.com The New York Times Group launched its metered paywall for The New York Times online NYTimes.com in March 2011, allowing its readers to view 10 articles each month at no charge In July 2012 it had 532,000 digital subscribers ; cheapest online package US$180 dollars a year NYTimes.com’s revenue from digital subscriptions presents roughly 7.2 percent of the total annual circulation revenue Problems: discounts, paywall easy to bypass, articles available via search engines and social media

National paywall: Piano Media Cable TV based model introduced in Slovakia, Slovenia and Poland Subscribers pay a monthly fee to get a package of content from various publishers available behind the paywall Cheapest subscription fee in Slovakia is US$59 per year – gives you an access to the content of nine publishers Gives audience a relatively easy access to multiple content via one payment system Problems: revenue split between Piano Media and different publishers - Piano Media takes 30 percent of revenues; need high volumes of regular readers to create substantial revenue out of the system

Softening hard wall: The Times Rupert Murdoch’s News Corporation introduced hard paywalls for its UK based The Times and Sunday Times in June 2012 – no free articles The Times and the Sunday Times have combined digital subscription of 233,073 copies The cheapest subscription package for The Times is $US154 a year The revenue from two papers combined subscriptions represents around 8.9% of News Corporations annual publishing revenue Problems: paywalls brought down for major events, such as Queens Jubilee – the business model is unsustainable; softening of wall: readers can read couple of sentence for free via Google search (none of the content was available via Google earlier on)

Charging for premium: The Australian Rupert Murdoch’s News Limited launched a freemium paywall for The Australian in October 2011 – some content on site free (mainly provided by news wires) Charges for premium content such as analysis Annual digital pass US$147 which gives an access to news content via web, tablet and smartphone The Australian has 27,796 digital only subscribers and 3,445 print & digi subscribers The revenue created by digital subscriptions represents 0.67% of News Corp’s annual publishing income Problems: visitor numbers to the site has plummeted, plenty of the subscriptions included in figures are trials and offers

Financial dailies AFR and NBR The Australian Financial Review (AFR) and the National Business Review (NBR) are charging for what they call premium content In Australia, AFR was last December forced to cut its annual subscription price from US$1188 to $US709; it has 20,000 digital subscribers With this subscription base it would make roughly $14 million revenue which represents 28% of Financial Review Group’s circulation revenue - this might be misleading In New Zealand, NBR has 3,000 individual and 165 corporate digital subscription, making US$0.57 million out of its paywall Problems: the way these companies disclose information about their digital only subscriptions makes calculations challenging; high pricing which might prove unsustainable

Bundling: Helsingin Sanomat Sanoma, the leading media group in Finland, launched a metered paywall in November 2011, offering 20 free articles a month It charges annual fee of $US151 for an access to its website, mobile apps and digital newspaper The main newspaper Helsingin Sanomat has already 130,000 readers with a digital access Sanoma’s news division share of the corporates digital revenue is around 12%, expected to be this year 14% The company has sold bundled packages = print + digi, successfully and around 33% of its readers has bundled package Problems: with already such a high number of digital subscribers, the uptake in digital only packages might be limited

Financial papers charge more Company Annual subscription in US$ (cheapest fee) Number of free articles per month NYTimes.com 180 dollars 10 Piano Media (in Slovakia) 59 dollars Financial Times 300 dollars The Times 154 dollars The Australian 147 dollars AFR 709 dollars Helsingin Sanomat 151 dollars 20

Number of digital subscribers (as known in November 2012) Company Number of digital subscribers Wall Street Journal 537,000 Financial Times 300,000 The New York Times 380,000 The Times 131,000 The Australian 40,000 Australian Financial Review 20,000 National Business Review 3,000 Helsingin Sanomat 130,000

Paywalls: not a saviour (yet) Digital subscriptions present roughly 10% of news companies total circulation/publication revenues , and therefore don’t offer a viable business model in a short term. The digital subscriptions numbers provided by news organisations are far from transparent, and some of these figures include cheap trial subscriptions, and possibly some of them include bundled print and digital packages, making calculations challenging Many newspapers have been forced to lower the price of their paywalls in order to attract more subscribers – the impact of this needs to be further assessed Some of the news companies have recently softened their paywalls in order to gain wider audience: for example, The Times in UK has made some of its content available on Google search - it is too early to say if this has given a boost to its digital subscriptions

The big questions... The main question is how sustainable the online news paywalls are: it is paradoxical that their come down when major news events occur – as seen in case of Queens Jubilee in the UK, and Hurricane Sandy in the US. Even the bigger question is will the people pay for a general news content in a longer run? The recent study of NYTimes.com by Cook & Atari (2012) suggest that people are willing to pay for online news if they are offered compelling justification: such as that the news company will go under without online contributions The increasing digital subscription numbers seem to suggest that readers are willing to pay for general online news content – but more accurate data is needed to asses this

Why should we worry? Paywalls might provide stable extra income, but at the current levels their are not producing enough revenue to rescue failing news organisations. Paid content has implications for democracy and public sphere: what about if all the important political and business decision are hidden behind paywalls? Charging for online news content might lead to digital divide between those who can pay and those who can’t.

Paywalls are icing on the cake Paywalls are rapidly emerging, and we might be entering to a paid content era. But as David Brauchli, CCO of Piano Media, puts it: “any money they [publishers] get from subscription right now is icing on the cake. We hope that changes over time, but for now, this is where the industry is.”

Thank You!