The Paywall Conundrum – To “Wall” or Not to “Wall”

Newspapers have traditionally relied on 80% of their revenue to come from Advertisers while only 20% is generated from print subscriptions. The NAA has reported that newspaper advertising (print and online) has seen a nearly 38% decline from $9.6 billion in the second quarter of 2008 to $6 billion in the second quarter of 2011. It is then no surprise that this has left publishers looking for alternative ways to generate revenue – and it inevitably brings them to the paywall debate.

As paywalls were first considered, the largest concern was traffic. If paywalls lowered the page views, the content may be viewed as less in demand, or less valuable. More importantly, lower page views mean less inventory to sell. But lower page views may be worth the risk, if it means generating more revenue from the digital subscription base.

It took only a few of the big players (New York Times, Boston Globe, Dallas Morning News, and Minneapolis Star Tribune) to go the paywall route to re-energize the debate. Over the last few weeks the trades have been boasting research indicating that the paywalls are having a far better impact than initially hoped. The new report from the Audit Bureau of Circulations suggests that the paywall for the NYTimes is looking like it will be a success. Their reporting suggests that the paywall has increased both digital and print subscribers. But is that enough?  The naysayers out there would reply with an emphatic no – and assure you that the paywall is nothing more than a band aid solution to the revenue challenges that newspapers face.

There are media buyers that look to measurement tools such as Comscore and Nielsen as the holy grail of audience insight. These folks may tell you that the loss of subscription revenue will pale in comparison to the risk of decreased online dollars. Particularly for newspaper publishers who are historically the largest local site in their respective markets, a slight decrease in traffic could mean the difference between being #1 in the market versus #2. This could mean a smaller piece of the overall online budget for that market or, worse, not making the buy at all. If newspaper websites are to continue to have a stronghold in their markets as the largest local site, maintaining page views needs to go hand in hand with discussions surrounding paywalls. At a minimum, publishers should carefully examine yield and ensure that any gains to subscription revenue will at least account for any decrease in digital advertising revenue because of decreased page view measurements.

From apps to tablets, and video to mobile, even to selling their data, or lead generation tools like opt-in newsletters  – content publishers have a wealth of opportunities for which to generate revenue. Paywalls are one solution – but likely not the end-all, be all.

Have you toyed with the idea of a paywall? Have you implemented a paywall model and seen positive results?