The Digger’s pay wall may be doomed, but what’s to lose?

At a regional news debate at City University yesterday evening, media blogger Roy Greenslade asked us (me, freelance media reporter Jon Slattery, Northern Echo editor Peter Barron, Times web development editor Joanna Geary and paidContent:UK reporter Patrick Smith) if we thought pay walls would work. I said I thought Rupert Murdoch hadn’t much to lose as a result of pay wall experimentation. I noticed a little challenge to that on Twitter so here’s why I think that, in a bit more detail…

My boss – Journalism.co.uk founder John Thompson – once called pay walls a ‘no hoper’ strategy and I’m inclined to agree with him when it comes to regional – and probably national – paid content. I’m happy to be corrected if it all works out in the pay wall publishers’ favour. Time will tell.

But let’s take a look at the actual risks involved for the pay wall pioneers, namely News International and Johnston Press. Let’s suppose it does flop (and remember that – as yet – Johnston Press are only trialling pay walls for three titles) … so what?

We’ve seen pay wall peekaboo before: now you see it for free, now you don’t. At the New York Times; on parts of UK sites; and various magazines. The readers come back – and multiply – when it’s free.

Now, I’m unlikely to extract a figure for how much pay walls cost to put up from News International or JP towers, but I suspect it’s not too great an investment and certainly, cheaper than buying MySpace (do drop me a line if you run a pay wall construction company and know the answer).

As a point of context, former Times online chief Anne Spackman once claimed that online comment pre-moderation systems cost a six figure sum to maintain (she didn’t specify the period and wouldn’t later be drawn on the statement). Not so much of that commenting manpower/equipment needed for imprisoned content…

Now let’s say the Great Paywall of Wapping fails:

a) People stop visiting the sites and go elsewhere for their news

But the real risk at play – (b) that people stop buying the Times – is the least likely outcome. As paidContent:UK’s Patrick Smith pointed out at last night’s debate (as in the past), Murdoch’s real strategy motive may be a bid to boost whatever print sales he can.

Say a) is the outcome and sales / subscriptions decline and the print sales don’t make up for lost advertising revenue. Well, Murdoch can bring the wall down. The Times is probably a big enough brand to lure those news bloodsuckers back to its site – and the advertising cash with them. Back to square one, but little really lost – just a bit of egg to wipe off News International’s face.

I’m not alone in this view: Peter Kirwan dissected the ‘bogeyman’ in August 2009, in a Wired.co.uk piece that adjusted the frame of the pay wall debate [I recommend reading it in full]:

“As a risk-taking entrepreneur running a $30 billion-turnover quoted company, Murdoch is one of the last representatives of a near-extinct species.

“Like most entrepreneurs, Murdoch is capable of conceiving great enthusiasms that can be dropped rapidly if they don’t work out.” [my emphasis].

Also, consider Murdoch’s other businesses: cable and film, in particular, and the fact that 70 per cent of News Corp’s revenue comes from the US.

As pointed out by Peter Kafka, reporting rather bluntly on News Corp figures in  November:

“Newspapers: Getting hammered. Operating income was a mere $25 million, a decrease of $109 million in the last year.”

$109 million down isn’t good, but it’s in the context of News Corp overall revenue, $7.2 billion (down 0.3 bn).

So what’s to lose in Murdoch’s bid to re-gain $109m +? He isn’t enjoying advertising dollars from his news sites so he needs a new strategy. If it doesn’t work, he can go back to the old system… or (as his shareholders might prefer) pull back from newspapers and invest elsewhere.

It’s the same with JP: they’re struggling to make money online so this is a last ditch attempt to bring some in. It doesn’t work, well they haven’t gone back any further than they were.

They try it. It works – they win. It doesn’t work – well, back to square one. Like Kirwan said, a game of entrepreneurial risk, with – in my view – fairly low stakes.

Instead of worrying about whether the Digger is doomed, I suggest we take Kirwan’s lead and re-write the ‘paid content’ debate to include Guardian sponsorship and membership drives:

“Increasingly, the question isn’t about whether or not to introduce a paywall. It’s about where to locate it: around content, reader affinity, affiliated retailers – or at the entrance to festival tents in the British countryside.”

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4 comments

  1. Pingback: Has Rupert Murdoch got nothing to worry about? « Illegitimi Non Carborundum
  2. alexwalters

    Great response, Judith, I hadn't considered it this way before. I think my skepticism is born of the fact that News International are already a way behind in the race for digital supremacy. While the Guardian, The Telegraph and The Mail have already breached the 30m unique user barrier, NI's flagship title languishes 10 million behind. I genuinely believe that we face a future of global big brand media, and that organisations like the Telegraph (particularly after the introduction of the new digital division headed up by Will Lewis) are rapidly establishing themselves in that mould. How content is to be monetised is still a murky area, but it is my firm belief that paid-for/free hybrid models will become successful and that advertising confidence online will make a quantum leap when they do. That is not to say, however, that it's going to work out that way. If the experiment doesn't work then The Times may struggle to make the global impact that its rivals are making as we speak. For instance, more people currently visit the Telegraph website from a US IP than a UK one. The flipside of the argument is that, the way things stand, something's got to give. Advertisers are still jumpy about spending money online and, for all the phenomenal numbers of people visiting newspaper websites, they aren't 'sticky' users, and thus aren't worth much. So, on balance, Murdoch is right to take the risk and commendable for doing so, but I don't think that NI can take the hit without flinching if it goes wrong – The Telegraph, Mail and Guardian will simply represent too much of a threat. If the experiment does work, then they win again – they already have a bigger reach and can implement a similar strategy rapidly and with the benefit of learning from NI's mistakes along the way.

  3. kevglobal

    Alex,In terms of, “Advertisers are still jumpy about spending money online”, maybe in terms of local in the UK but definitely not in terms of national advertising. The internet advertising bureau (which of course has an interest in putting a nice spin on this) says that in the UK, online ad spend was the only advertising segment that grew in the first half of 2009 and now accounts for 23.5% of total UK ad spending. http://www.iabuk.net/en/1/iabresearchadspendads…The issues for news websites is the percentage of online advertising that news sites capture, an oversupply of online advertising causing downward pressure on CPMs and lack of development in local online advertising. In terms of paid-for/free models, I think we're going to see a lot more experiments along an FT/McClatchy model where a few page views a month are free but after that registration kicks in with some content areas being premium. That way the kind of casual, search-traffic wouldn't be hindered, but loyal, heavy users of a site would pay. We'll see, but the experiments are going to start soon.

  4. alexwalters

    Kev, Thanks for your points, the ad stats are particularly interesting. In terms of the paid-for/free models, I think you're spot on. I spoke to Ed Roussel, digital editor at the Telegraph, last week, and he said that they saw their model going along similar lines. I think that Murdoch's gamble is likely to pay off, but I don't consider it risk-free. Judith and others like Patrick Smith are right that most of Murdoch's revenue comes from elsewhere, but that isn't to say that a body-blow to his UK newspapers online wouldn't make both News International and the wider NewsCorp blink. I have a contact who was part of NI's financial setup until recently, I'll see if I can get an inside perspective and post again.

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