Paywalls don’t work all that well. And they don’t make that much money. And they are annoying. And there are a host of other potential problems when publishers deploy them.

Still, reporters and publishers have to get paid somehow. If paywalls don’t work, what will?

Why Publishers Are Bleeding Revenue in the First Place

The Atlantic’s Alexis C. Madrigal believes the division of content and distribution channels by big tech is one reason for the rise in paywalls.

In the print and broadcast days, media companies were able to control both content and distribution. That’s not the case anymore. Now, Google and Facebook are the distribution channels, and they are taking all of the ad revenue, too.

Publishers simply don’t have the advertising products to compete with the big tech firms. They don’t have many other ways of getting users to view their content without going through one of the big tech platforms, either.

Madrigal reports that in 2016, internet ad revenue totaled $75 billion, split roughly in half between desktop and mobile. But desktop advertising hadn’t grown since 2013. All the growth was on mobile devices, and it’s here that Facebook and Google have claimed almost all of the ad revenue.

The Washington Post’s Megan McArdle posits that publishers have raised paywalls as a way to wrestle back control of both content and distribution. For more than a century, newspapers worked in a two-sided market where they sold subscriptions to viewers and then sold those viewers to advertisers. And it was the advertisers who covered virtually all of the costs of production.

“Then the Internet came along, and suddenly, we didn’t own the only pipeline anymore,” McArdle writes. “Anyone can throw up a Web page. And over the past 20 years, anyone did — far more than could support actual advertiser demand.”

Unsurprisingly, no publishers won in the end, only the tech platforms that get content for free and then monetized it with ad networks. If publishers continue to give away content for free, McArdle says, they are all but signing their own death warrant.

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Ads Aren’t the Answer

If the bulk of revenue from journalism is swept up by ad platforms, wouldn’t it make sense for publishers to build their own networks and once again own the entire pipeline?

Not so, writes The Globe and Mail’s Simon Houpt. “The price of static online ads used by most news sites has been falling for years, making it difficult for them to earn enough to pay for even the creation of popular articles. And many journalists worry that popular articles that pull in traffic are not necessarily the most important ones.”

Houpt’s last point is particularly important. Paywalls, to their credit, negate the need for clickbait articles to subsidize good reporting. These low-quality, attention-grabbing articles are the bane of serious journalists everywhere. In a digital publishing model built around online ads, however, those articles are often the most valuable.

Perhaps what is most interesting about the rise of paywalls is the lack of uniformity in their application. A couple of years ago, the Columbia Journalism Review analyzed the country’s top 25 most-visited daily newspaper websites and found almost no cohesion in the way paywalls were used.

“There was little agreement on a paywall strategy and certainly no consensus solution to the problem of the ‘ideal’ newspaper paywall,” reports CJR’s Ariel Stulberg. Out of the 25 sites, 15 had a paywall of some description. But the cost, the amount of free content and the ease with which the paywall could be subverted all varied wildly. The only similarity was outlets owned by the same organization had the same type of paywall.

A lack of consistency in how paywalls are applied isn’t conducive to high levels of adoption. If consumers know easy workarounds are available, they might not be moved to pay for access.

Put another way, would you still pay for Netflix if your neighbor could access it for free through a private browser?

Most Paywalls Don’t Work That Well

Whether it’s private browsing, browser add-ons or entering through a Google search, there are plenty of ways to read content that would otherwise be paywalled. In fact, of the multiple paywalls I hit when researching this article, only one actually stopped me from reading the article. So, well done to The Independent.

Paywalls don’t make fiscal sense to most publishers, either, says TrueVentures partner Om Malik. The truth is many papers don’t have a large, loyal audience needed for it to work. Malik says the publishers who are currently putting up paywalls are substantially overestimating the size of their audiences, and reality is going to hit them hard.

“They will soon realize the size of their ‘real audience’ and will soon realize that they don’t pass the ‘value for money’ threshold,” he writes. “There are very few publications that have a feeling of must-reads and must-haves.”

Part of the problem is users read several publications every day because it is free and easy to do so. When push comes to shove, however, they are only likely to subscribe to one or two. That’s a game that has only a handful of winners and many losers.

If paywalls don’t really work for established national brands, they certainly don’t work for regional news outlets. In his book “The Internet Trap,” Matthew Hindman, a professor of media and public affairs at George Washington University, looks at the huge problems facing local news organizations when it comes to monetizing their content.

Gannett, the country’s biggest newspaper chain, is a prime example, Hindman says. In 2013, the organization adopted paywalls across all 80 community newspapers but signed up just 46,000 subscribers. A few hundred thousand more have come subsequently as part of the “Trump bump,” but these come at heavy discounts — so much so that Gannett reported a close to 9-percent fall in year-on-year revenue in 2017.

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Paywalls Also Help Create Echo Chambers

For some, the problem with paywalls is much more significant than their lack of effectivity.

Ogilvy’s Rory Sutherland believes paywalls risk splitting the internet into echo chambers. At the moment, for instance, most center-right publications have paywalls while left-leaning publications are mostly free to access. Most far-right publications are free to access, as well. This is having a big impact on people’s opinions.

Citing psychologist and Influence author Robert Cialdini, Sutherland explains that opinion is formed not by the quality of argument but by the quantity. At the moment, paywalls mean that most people miss out on the center-right viewpoint when a story breaks.

Method London’s Joshua Leigh thinks paywalls can have an effect similar to social media filter bubbles. “If news ends up moving away from the open web and if we all align ourselves to outlets that fit our worldview, are we not in danger of isolating ourselves from each other and splintering our realities further?”

Policy consultant Prateek Sibal warns that paywalls could even lead publications to become more partisan. It would make sense for paywalled publications to produce content that their subscribers care about, Sibal argues. “This means that issues that affect those who are unable to pay will be covered less and less.”

Publications don’t even need to have a paywall to become echo chambers. If one publication remains free while all others are paywalled, some consumers will inevitably end up on the free one.

Take the free-to-access Breitbart network, for instance. Research by the Columbia Journalism Review, reported by Yochai Benkler, Robert Faris, Hal Roberts and Ethan Zuckerman, found that Breitbard became an insulated media system in the 18 months prior to the US election.

“This pro-Trump media sphere appears to have not only successfully set the agenda for the conservative media sphere, but also strongly influenced the broader media agenda, in particular coverage of Hillary Clinton.”

Not everyone concludes that paywalls lead to echo chambers, however. Dr. David Levy, director of the Reuters Institute for the Study of Journalism, believes consumers will still access a variety of sources. “I think you are probably highly-engaged in news and my assumption is that you are likely to be consuming a diet of a multiplicity of [sources].”

So, What’s the Solution?

It’s clear that paywalls are a bad solution to a bad problem. But if paywalls aren’t the answer to reimbursing quality journalism, what is?

In a followup piece, we’ll explore alternative solutions that could save media revenue streams and keep quality journalism afloat.

Images by: Roman Kraft, Joshua Earle, Greg Shield

Epic Presence Team