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August 9, 2010 / Alistair

The Times paywall. Is there a better way?

Ok, so this blog post is something I wrote for my uni course and is 4,000 words long. But don’t let that put you off. Right now we’re on the cusp of a huge change in the publishing industry. The newspapers are losing £100,000’s per DAY and online ad revenue isn’t paying the bills. The Times have hidden their site behind a paywall, charging £2 per week for access, will this work? Find out here…

Firstly, a big thank you to Adam WestbrookTom Dunmore and Andy Ihnatko for helping me with this. Go follow them, because they’re awesome.

Why is this important?

Starting in June 2010, News Corporation’s Time and Sunday Times newspaper will launch their own websites, replacing the current www.timesonline.co.uk site. These new sites,www.thetimes.co.uk and www.sundaytimes.co.uk, will only be accessible for paying subscribers. The price was announced  at £1 for a day’s access, or £2 for a week’s subscription and existing subscribers to the print editions will be given the online content for free. (Mostrous and Steele, 2010)

This news came just two months after the ABC – who independently verify media performance – announced that: “All quality national newspapers recorded a fall in their average circulation in December [2009, compared to December 2008]” (Luft, 2010). PressGazette.co.uk reports that the Times’ daily circulation in December fell over 13% year-on-year, the Guardian fell 12%, the Telegraph fell 9% and The Independent fell 7%.

The Guardian and Observer are loosing £100,000 per day and The Times and Sunday Times are loosing £240,000 per day, as reported by Guardian editor Alan Rusbridger and Sunday Times editor John Witherow on BBC Radio 4.

The daily newspaper circulation is falling and one newspaper is going to start charging for online content; add these two facts together and the future of news looks uncertain to say the least.

While the internet has proved incredibly popular for the record industry – Apple have sold more than six billion songs through iTunes since 2003 (Schonfeld, 2009) – it seems that news is harder to sell, as it is available for free from so many outlets. By locking it’s own content, the Times is in danger of persuading readers to go elsewhere.

It is a commonly-held belief that music costs money and so users are happy to pay for it online, but news can currently be had online for free. The BBC, according to Chris Tyron of the Guardian, “makes all newspaper executives think twice when it comes to making the internet pay. It has played its part in creating the notion that news should be free, which stands as a barrier to introducing any element of pay to newspaper websites.” (Tryhorn, 2009).

Up until now, newspapers have funded their websites through advertisement revenue, paid for by companies who place links to their products on the news pages. But as I will explain later, revenue gained from advertising is falling and readership is expected to fall further still.

The aim of this project is to ask industry insiders how the publishing industry will survive the transition from print to online, and how a payment system such as Murdoch’s paywall will work. The proposed paywall has gained criticism from many and I will of course aim to speak to these individuals, as well as industry insiders who are more familiar with online news and digital journalism. The research will discover what Murdoch’s plans are, why they are frowned upon by some, what the general public think about paying for news online, and how other technologies can provide the answer to the all important question; how will newspapers survive the digital revolution?

Hypothesis

Rupert Murdoch’s paywall will be the first of it’s kind – the FT has one but, as I will discuss later, this is successful due to it’s exclusive content – and the general public will have a hard time accepting it. The majority will not want to pay for news online and will simply go to another site. Newspapers are physical entities and this command value; a website is not physical in the same sense and so consumers will find it difficult to attach a value to them. The future is not in charging for access to a website, but by presenting the information – news – in a stylish, well-designed way that can be read anywhere a newspaper can, not just at one’s desk.

Background

Compared to it’s printed sibling, online news is relatively new. According to Paul Larkin of NewspaperSoc.org.uk, the Daily Telegraph was the first national newspaper to launch a website on 15 November 1994 and the first regional or local news site was Tindlenews Online, which launched in December 1994. The Times launched their website, timesonline.co.uk, on March 18 1999 (WebsiteTrafficSpy.com). Almost all news websites have offered their content for free.

Perhaps the most high-profile newspaper site to use a paywall is the Financial Times (www.ft.com), who have charged for access to their site since 2002. Unregistered users can view RSS feeds and mobile content, as well as the website’s home page, while users who register (with their name and email address) for a free account can view some news content and receive news by email. To view breaking news and have full access to all news and content, readers must pay either $3.69 per week for a standard subscription, or $5.75 for a premium subscription; the latter offering free ePaper access and other exclusive content. (FT.com accessed: May 12)

The FT’s paywall has been a success for them, with 126,000 paying subscribers registered as of March 2010, each paying a minimum of $192 per year and thus bringing in at least $24m of revenue. (Cellan-Jones, 2010)

What The Times are doing

On 26 March 2010 News Corp.’s Rupert Murdoch announced that the Times and Sunday Times would be locked behind a paywall from June, meaning that readers would have to pay a subscription to view the websites. This immediately sparked controversy from industry commentators, who believed that the paywall system would not work. On the day of the announcement Guardian columnist Jeff Jarvis wrote a piece titled ‘Rupert Murdoch’s pathetic paywall’, with the subheading: “So Murdoch has decided to milk his dying cash cow dry, one pound at a time, and leave the future to the rest of us. Poor guy”

This damning article suggested that Murdoch had surrendered and that the future had beaten him. Jarvis went on to say that Murdoch has no new ideas on how to raise revenue  and even claimed that Murdoch does not use a computer, questioning how he can possibly understand the Internet: “According to his biographer Michael Wolff, Murdoch has not used the internet, let alone Google (he only recently discovered email) and so he cannot possibly understand the dynamics, demands and opportunities of our post-industrial, now-digital media economy. I use the internet and teach it and write about it and I still can’t grasp the complete implication of the change. I don’t think even Google can.” (Jarvis, 2010)

Jarvis is certainly not alone. In January 2010, shortly after Murdoch first announced plans to introduce paywalls by the summer, Guardian editor-in-chief Alan Rusbridger said that newspapers are at rick of “sleepwalking into oblivion” if they are to shut themselves off from the openness of the Internet (Busfield, 2010)

Sunday Times editor John Witherow spoke with Mr Rusbridger in an interview with Steve Hewlett about paywalls and mobile applications, especially for the iPad, were discussed. Witherow said: “We’re going to do an awful lot of multimedia on both of these sites” and he went on to say The Times will launch an ‘all-singing, all-dancing’ iPad application. Rusbridger also showed his appreciation for the tablet computer: “The iPad is going to fundamentally change things [for journalism]…we absolutely believe that this has got to be the route forward”

Both editors highlighted the need for instant access to up-to-date news and accepted that a newspaper cannot offer this, whereas the Internet can offer news the moment it breaks. They also both agree that the BBC is a major threat and that in order to compete, newspapers must offer something different.

Experts’ Opinion

During my research I spoke to some leading technology journalists, namely Andy Ihnatko, technology correspondant of the Chicago Sun Times and regular guest on the TWiT podcasts, Stuff magazine editor-in-chief Tom Dunmore and freelance video journalist Adam Westbrook.

As mentioned above, the Financial Times website does attract paying users, as does the Wall Street Journal; Andy Ihnatko explained to me:

“The Wall Street Journal is a special case. Many of it’s subscribers see the Journal as a business tool; that part of their job is to keep on top of the news in the WSJ.”

But he believes that once the consumers have been ‘trained’ to see value in digital content, then paid-for online news will work:

“It’s unclear whether this general sort of pay model will work. But it’s not a silly proposition. People have been trained to buy ebooks now so the concept ‘I will pay money for professionally produced downloadable content’ already has some traction. If newspapers can tap into that mindset – and say ‘this newspaper is 120 pages of slick, expensively-produced material’ they could have a successful strategy.”

Tom Dunmore of Stuff magazine and website agrees:

“I think a big change is coming, as digital offerings – such as the iPad and Kindle – become more analogous to paper.”

The Kindle is an ebook reader sold by Amazon and uses an electronic ink technology that makes the screen more comfortable to read than a conventional mobile phone or computer screen. A range of newspapers including the Times and Daily Mail offer subscriptions that are sent to the Kindle devices every morning. However, the price is high – $259 for the device and $23 per month for a Times subscription. From personal experience I know that the technology is not a replacement for a traditional newspaper; there are no images and some text isn’t always formatted correctly, making some sections unreadable.

The iPad is a tablet computer sold by Apple, it is very similar to the iPod touch or iPhone, but has a 10” screen and is sold as a multi-purpose media device and, crucially, an ebook, newspaper and magazine reader. The iPhone applications market has grown exponentially since it was launched in July 2008 and by April 2010 over one billion applications had been downloaded. This shows that customers are very familiar with this micropayment system and are willing to pay for intangible software.

Both Tom and Andy believe that the application market could provide an answer; if newspapers and magazines offer their content in an application for a mobile device, rather than just a website on one’s computer, then the customer may be more inclined to pay for it. One month after the iPad launch, there is a range of newspaper applications available from the Wall Street Journal and New York Times. The WSJ’s applications offers news content for free, but further content requires a $17.29 per month subscription; a cost that has not gone down well with consumers, as a printed subscription costs $11.67 per month (Ricker, 2010)

Tom continued:

“At the moment, people feel that digital news has little ‘value’, which is why paywalls won’t work for the desktop experience. However, I would pay to read a newspaper on an iPad even though I wouldn’t pay to read it on my laptop. Why? Because the iPad offers a more tactile experience that breathes new value into theeditorial.”

Maybe the iPad and similar devices are appealing because of their newness. They offer a new way to read content, but the content itself can be read on a website or printed in a paper, without the need to pay for a £429 device.

However, Adam Westbrook agrees with Tom and believes that, as consumers are still happy to pay for mobile applications, then publishers must exploit this market:

“Apps offer huge potential to journalists, for precisely the reason you say – there is still a ‘sublime’ in using mobile devices and there is (currently) no legacy of getting news for free on mobiles. Publishers need to exploit this and charge people for news on specially designed, easy to use, innovative apps which don’t just republishweb news, but offer other high value local news services – for example geo tagging of crime stats etc. Some publishers are giving away apps for free, something which I fear may come back to haunt papers in the future”

On 17 May 2010 the assistant editor of the Times, Tom Whitwell posted some screenshots of the new-look Times website on Twitter. A full set of images from Whitwell was then published by PaidContent.co.uk on May 19, gaining a mixed response:

“Oh no! The new Times paywall site looks like a newspaper. Can’t see many people paying.” – Adam Westbrook

“Times paywall looked a forlorn hope. Guardian’s long shot looked the (slightly) better bet…”– Brian Cathcart, Journalism lecturer at Kingston University

“Looks pretty sweet, I must say” – SimpleSimonEmma

Online news may once – and possible still does – believe that its online content can be paid for with traditional advertising, as seen on many websites. However, the consumer is responding less to these advertisements; Dunmore explains why adverts on webpages are not working as well as they used to:

“Murdoch led this latest charge into digital, but he’s met plummeting ad revenues – caused by global recession, but also the ‘banner blindness’ that means that users have all but stopped clicking on adverts. Problem is, you can’t turn back the tide: on the desktop, everything is free; building a wall is akin to building a wall in the middle of the Atlantic and hoping it’ll stop the water: it’s not going to happen unless everyone erects a wall at once.”

According to www.clickz.com online advert revenues in the US fell for the first time ever in the second quarter of 2008, dropping 2.4 percent. They then fell again in the first quarter of 2009, down from $804 million in quarter one of 2008, to $696.3 million in Q1 of 2009, according to the Newspaper Association of America. The NAA also reports that the revenue has fallen so rapidly that industry insiders have revisited discussions of implementing subscription models “in the hope of counteracting the print and online ad decline.” (Kaye, 2009)

Survey

So the news industry knows that something needs to be done, but the future may not be as simple as making consumers pay for online content in the same way as they do for print. I wanted to find out how regular Internet users would react to being asked to pay for accessing the Times and Sunday Times websites. To get a response I conducted an online survey, asking the following questions:

1. The Times and Sunday Times websites will cost (for both) £1 per day or £2 per week to access starting next month. Would you pay for this?

2. Do you currently read a daily newspaper? If so, in what medium?

3. Do you visit the Times Online website? If so, how often?

4. How much would you pay per week to access a quality, well designed news website? You can access this site from you computer/phone/iPod touch etc

5. If the Times’ paywall system put you off their sites, where would you go for your news?

The survey was posted in the news and economics section of a general and automotive forum that I often use; the forum has 250,000 active members mostly from the UK. Seventy-nine people answered the survey and 96% (76 people) answered that they would not pay for the Times’ online content and 81% said that they get their news for free online and do not buy a newspaper.

These results, although from a fairly small sample, suggest that simply asking users to pay for a website that they are used to viewing for free is not going to work. Some comments on the forum mentioned that they would pay for certain content, such as financial (the Financial Times or Wall Street Journal) but the majority would simple go elsewhere for their news.

Sixty-four percent of those asked said that they currently visit the Times website either daily or at least weekly, with three people saying they did not know about the Times’ paywall. A third of those asked said that they do not use the Times website and instead get their news elsewhere; the most popular alternative was the BBC News website, with 52 percent.

When asked what they would pay, “Nothing, it should be free” was the clear favorite, with a 96 percent majority; two people of the 60 said they would pay less than £1 per week (for 7 editions with a printed value of £8) and one person answered £1-£1.99 per week.

These results are similar to those found by a Paid Content survey commissioned by Harris Interactive and published by the Guardian in September 2009. The results suggest that only 5 percent of Internet users would be willing to pay for online news from their favorite news site (not necessarily The Times) and 74 percent would find another free website. These figures may sound alarming, but according to www.WebsiteTrafficSpy.comwww.timesonline.co.uk receives 20.3 million unique hits per month; so if only 5 percent – approximately one million users – paid the £2 per week subscription, the paywall would gross roughly £500,000 per week, or £26 million annually. Of course, these figures are only estimates based on surveys, but it goes to show that a dramatic drop in traffic can still yield a sizable return and almost certainly return a profit.

I spoke to freelance video journalist Adam Westbrook and he believes that the price is not the issue, but the need to pay in the first place:

“The price itself isn’t a significant point: the problem Murdoch faces is trying to get people to pay for anything at all. Consumers are very used to getting news for free, something they’ve been able to do for 15 years.”

Adam goes on to address the Times and its content in comparison to other papers with paywalls:

“The Times’ big problem (in my opinion) is it is a very middle of the road paper. What does it stand for? What does it do better than anyone else? Is it to the left or the right? The newspapers that are making the paywalls work – the FT and the WSJ [Wall Street Journal] for example – offer a highly targeted niche product. They areboth known for doing financial news better than anyone else, so people are prepared to pay for that. The Times would need to reinvent itself and find a niche in order to offer a product to a targeted audience who would be willing to pay.”

Previous paywalls

Rupert Murdoch is not the first to introduce paywalls to general news websites; Newsday, which is a daily paper based in Long Island, New York put its website behind a paywall in October 2009. The New York Observer reported that users had to pay $5 per week or $260 per year to access the Newsday site and would get free access if they already had a subscription to the printed paper. After three months behind the paywall, Newsday told the press that they had just 35 paying subscribers, grossing roughly $9,000 per year. The new website had cost Newsday a reported $4 million. In their defence, Newsday say that 75 percent of Long Island residents have a print subscription. (Koblin, 2010)

Another paywall failure this year comes from regional publisher Johnston Press, who imposed a £5 subscription in November 2009 for three month’s access to its sites, which include the Worksop Guardian, the Ripley & Heanor News and the Whitby Gazette. Some sites were free to access, but only published parts of news stories, then directing the reader to buy the actual paper to finish reading them. The paywall was soon dropped after a source at one of the titles said it had been a “disaster” and that the number of people subscribing had been in single figures, as reported by HoldTheFrontPage.com (Linford, 2010)

As the screenshots of The Times paywall website were published, a discussion was broadcast on Radio 4 between Alan Rusbridger of The Guardian and John Witherow of The Sunday Times. Witherow said that the Times and Sunday Times would “easily” loose 90% of its audience (Sabbagh, 2010). A huge number, but as calculated earlier, a much reduced readership would still bring in a healthy revenue. Witherow told BBC Radio 4 listeners that some advertisers prefer to be behind a paywall as they will know what sort of readers they are getting. This method of targeted advertising has been known to work online, especially in the consumer technology niche where podcasts such as the TWiT network are attracting sponsorship from companies such as Ford Cars, despite only broadcasting to a tiny minority compared to television or radio.

Alternatives and Conclusion

During the Radio 4 interview, both editors expressed their interest with social networking and how links to their content is passed around Twitter very quickly. Rusbridger joked that a scoop these days only lasts 30 seconds thanks to Twitter. However, Witherow confirmed that links to the Times from other websites will not be viewable without a subscription and he agreed that this would isolate them from the rest of the news industry.

While this exclusion may sound like the wrong choice, the New York Times are set to introduce a paywall system next year that will allow access to pages linked from elsewhere, and these pages will not be counted in an unsubscribed users’ allotment of free use. As American journalism lecturer Jay Rosen points out: “That means I could simply produce a shadow web site of NYTimes.com and offer free access to anyone to the entire content of the site!”

Tom Foremski of SilliconValleyWatcher.com has come up with an alternative idea where blogs and other sites can agree to ‘adtribution’ with the NY Times; this gives them a license to print quotes from the paper and their readers can click through from blog to paper without incurring any charge. The Times then sells advertisements to these blogs to make money. This gives the bloggers some prestige for being associated with the NY Times, allows readers to consume more content before being asked to pay and, crucially, brings in extra revenue for the paper. (Foremski, 2010)

Despite expecting to loose 90% of its readers, Rupert Murdoch is optimistic that his paywall is the answer newspaper journalism needs. The Guardian believes that, although willing to copy The Times if the paywall is successful, advertising is still viable and the rest of the industry is unsure to say the least. But one thing we do know is that newspapers must embrace the Internet because, as video journalism pioneer Michael Rosenblum said, ‘you either embrace the Internet or you die’ (quote provided by Adam Westbrook).

As for the future of the newspaper itself, Mr Rusbridger said on BBC Radio 4: “I would miss print, but if print goes and The Guardian continues digitally. that’s not the worst thing in the world.” He concluded, saying that he believes The Guardian have bought their last printing press and that the printed newspaper will be dead in“less than 20 years”

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