John Paton, the Gorbachev of paywalls

Digital First Media will roll out meters across its newspaper portfolio

No doubt about it, word from CEO John Paton that his Digital First Media will implement paywalls across its portfolio of newspapers is landmark news—at least for all six of us who follow these things closely.

As Robert Levine says: “It’s like the fall of communism — but with consultants.” The irony, of course, is that Paton is putting up walls, though unlike the iron curtain, he won’t shoot at you you get to cross 10 times or so before the gate shuts.

There have been signs of perestroika over the last year or so.

Clay Shirky, a member of the FON Politburo DFM’s advisory board (that’s my last Soviet joke, promise!), wrote last year in a back and forth with me that the Washington Post should implement a metered model.

Paton told me last year, amidst DFM’s bankruptcy, that people “will pay, I believe, for something that uses the medium for its strength.”

In February, Paton announced the “Subscription Project,” writing, “I’m a Chief Executive, responsible to my employees and my shareholders. So, I can’t work on theory alone. I have to try paywalls.”

Now, Paton says this:

After a lot research by our team, we believe an All-Access print-digital subscription initiative is necessary to buy us that proverbial gas in the tank. With the rise of digital and the fall of print, we’re at the point where we can launch a working All-Access subscription model.

You have to hand it to Paton for putting pragmatism over ideology. Seriously.

Our argument for paywalls, which goes back nearly half a decade now, has been that selling something with one hand and giving it away with another doesn’t make sense. Print still brings in the vast majority of revenue at every newspaper I know of besides the Financial Times, which gets most of its digital revenue from subscribers.

The paywall argument has always been about applying a tourniquet in the short term to give papers time to figure out the inevitable transition to all-digital. That strategy depends on boring old-economy stuff like getting money from core readers, who are worth exponentially more than marginal clicks.

And so Paton is half-right when he says this:

Let’s be clear, paid digital subscriptions are not a long-term strategy. They don’t transform anything; they tweak. At best, they are a short-term tactic. I have said that often enough in the past.

But it’s a tactic that will help us now.

Paton had better hope they’re part of a medium-to-long-term strategy. His papers need all the revenue streams they can get. Ken Doctor:

Circulation revenue was up 5% in the U.S. last year; I expect it to be up by that amount and more for 2013. Those are meaningful mounds of pennies, amounting to often a half a billion dollars for the industry. That’s why European dailies are now starting to strongly adopt the practice.

Paton likes to call paywalls a “tactic” rather than a strategy. I’m not sure that’s a meaningful distinction. Maybe “paywalls” are a tactic, but reader revenue is a strategy, and it’s one that makes as much philosophical sense as financial. Who better to pay most of the salaries of journalists than the people they write for? Isn’t that better than being largely beholden to more fickle commercial interests?


We’d love nothing more than for news companies to figure out a way to make things work without charging for news. But we’ve known for years now that digital advertising will never support a robust newsgathering organization in every town and city across the country (and that other, non-ad digital revenue sources are a long way from being sufficient). A digital-ad model depends on the kind of scale that not everyone can get and/or the kind of low labor costs that make a newspaper’s survival nonessential.

Lots of newspapers are already to that nonessential point or are awfully close. Better papers will have better paywall results.

What the meter model has shown for more than two years now is that papers can get new incremental revenue from circulation while hanging on to the vast majority of its digital ad revenue.

As I wrote nearly five years ago:

It seems to me that charging online would help newspapers slow their print circulation declines, and perhaps even give them a bit of pricing power on rates. Remember a print reader is still worth about nine times the revenue a (non-paying) online one is…

At the very least, this might give papers some breathing room to survive this economic crash.

It turns out that meters do help papers gain pricing power, though the slowdown of print circulation has been relatively minor, though that’s probably because papers with paywalls have been jacking up their print prices.

A year ago, I wrote about anti-paywall dead-enders who, despite evidence that metered paywalls work, held on to their legacy notions. They didn’t much like that then and they don’t like it now.

It’s quite something to see GigaOm’s Mathew Ingram spin this one, though he’s wont to do. My former colleague Sara Morrison:

And DFM’s Steve Buttry can barely muster a post. No word from Jeff Jarvis yet.

It’s no wonder Ken Doctor writes something like this, as biting as anything you’ll ever read from him:

Internet fundamentalists claimed that a erecting a paywall showed just how clueless and out of touch the Times was; didn’t it know it had to play and figure out a business model within the Church of Free, how God intended all news content to be offered up to the world forever on.

These theories had disastrous real-world consequences: incompetent newspaper publishers bought this nonsense or impotently failed to reject them.

It’s impossible to know what the newspaper industry would look like had it rejected the freehadists a decade ago when it was still healthy. It would surely still be in serious trouble.

But there’s no doubt that papers would be in significantly better shape than they are today. That’s worth being ticked off about.

Finally, as a preemptive measure let me reprint my handy guide to anti-paywall straw men:

Paywalls are not a panacea, a cure-all, or a magic solution.

Nobody thinks they are. Nobody (that I’ve seen) has ever said that. Digital subscriptions are an incremental source of revenue at a time when newspapers are bleeding to death and digital ads are bringing in four bucks a CPM. They won’t succeed everywhere, particularly at newspapers that have gutted their newsrooms, and they’re not enough on their own to assure we have robust news coverage. But it’s money on the table that newspapers can’t reject hoping for some nebulous future “free” innovation, which not one of 1,500 American newspapers has yet to find in some 17 years of the Web era.

A paywall is an all-or-nothing proposition.

This is false, of course. The meter model preserves almost all traffic—and thus, ad revenue— by allowing casual readers to visit 10 or 20 times a month while charging core readers for access.

If you charge online you can’t have a “digital first” strategy.

Lacy says about the Post, “But they’re one of the only great media empires actually looking for a digital solution to a digitally-created problem.” So charging on the innertubes isn’t “digital”?

Readers never paid for news. They paid for the delivery apparatus.

Ask one of those readers whether they fork over money for the paper or for what’s printed on it.

The single-minded focus on paywalls is slowing the development of other solutions.”

No it’s not. It’s just the lowest-hanging fruit. Come up with some other way to make money and papers will try that too.


Confidence Game. The limited vision of the news gurus

Anti-paywall dead-enders. Why worry about evidence when you can argue against straw men?

Paywall illogic. Steve Buttry distorts our arguments—and the evidence

Owens’s straw man army. A commentator takes 10 swings at paywalls, and misses each time

Doing the Math on Online Subscriptions. What do newspapers have to lose?

What’s Murdoch Up to with Google and
? Google traffic is worth far less than $15 per user per month

Loyal Readers and Junk Traffic. The bottom 75 percent of newspaper Web visitors provide just 14 percent of page views

Newspaper Readers Buy Papers for the Content. You’d think that would be obvious. Plus, the Walter E. Hussman Jr. Theorem

The Chasm Between the Value of Print and Web Readers. A person buying the paper brings twenty times the revenue of an online reader

The New York Times Paywall Looks Good. Leaky enough to preserve traffic and ads, but strong enough to add incremental revenue

NYT Paywall to Other Papers: “Copy Me!” There’s no excuse for other publishers not to follow the Times’s model

The WaPo Ombudsman’s Faulty Paywall Analysis. The NYT’s meter is saving or adding more than $70 million in revenue a year already

The NYT’s paywall overtakes digital ads. Meantime, the Globe’s drag on the Times, quantified

The Washington Post Co.’s Self-Destructive Course. Dividends, share buybacks, and an anti-paywall stance help bleed the paper dry

The hamster wheel vs. the quality imperative. The real problem with JRC/Advance free model and the unappreciated benefit of a paywall

Lessons from The Dallas Morning News’s failed paywall. The paper shuns the meter model and flops

Paywalls: Maybe Not So Complicated After All. Thinking over Clay Shirky’s piece on the success of the NYT model

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,