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Newspaper Paywalls: Too Little, Too Late for a Fallen Giant Industry?

On Monday, the L.A. Times starts its new ”membership“ program, joining the New York Times, Boston Globe and others


On Monday, the Los Angeles Times joins the growing number of newspapers to erect paywalls that charge for full access to their web content.

But is it too little too late for the increasingly struggling print media, which has yet to find a viable substitute for revenue losses caused by decreasing advertising and circulation?

The Times, which will cut off access for non-subscribers — they're calling them "members" — after 15 stories a month, joins a crowded field of companies who have adopted a similar strategy of "metering" use.

Also read: L.A. Times to Put Up Its Paywall March 5

Ken Doctor, a prominent news industry analyst, told MarketWatch this week that he thought 20 percent of dailies would have paywalls by the end of the year.

Among those already in place: the New York Times, the Boston Globe, the Dallas Morning News and the Minneapolis Star-Tribune.

And Gannett, the nation's largest publisher, will roll paywalls over the next year at every publication but USA Today.

But even participating papers don't expect paywalls to return the print media to its Golden Age of huge profit margins or even to stem the staff cutbacks now so prevalent in the industry.

Also read: Can Tablets and Paywalls Save the Troubled L.A. Times?

They do, however, create a new revenue stream and get consumers accustomed to paying for online news.

By forcing paying users to register, the papers also gather more information about the reader, positioning them to better target online advertising, at a time when print advertising is the lowest it has been in 60 years.

“The arguments against paywalls say, ‘Here’s why it won’t work.’ But you shouldn't be comparing the new model to a working status quo,” Robert Levine, the author of “Free Ride,” told TheWrap. “You’re comparing it to a non-working status quo. If what you’re doing isn’t working, why not trying something else?”

Paywall advocates say consumers have demonstrated a readiness to pay for online content.

“There’s no question that we all have embraced paying for a variety of digital content that 10 years ago we did not pay for,” Emily Smith, SVP of Digital at the Los Angeles Times, told TheWrap.

And there are some success stories.

The New York Times, whose first experiment with a paywall — TimesSelect — lasted only two years, from 2005 to 2007, has lured almost 400,000 subscribers since it installed its paywall last March, according to its most recent earnings report. 

Also read: NY Times Page Views Fall After Paywall

Under TimesSelect, certain popular content — mostly the paper's popular columnists — was put behind the wall. The program was ditched because it was feared that actually suppressed traffic.

With its metering system, the Times allows readers 20 articles before the paywall kicks in. To get full access, non-print users are charged $15 a month. (The L.A. Times "membership" program, after a four-week introductory offer, will charge $3.99 a week for non-print users to view more than 15 articles.)

Another success story, the Financial Times, which launched a paywall back in 2010, has reached 267,000 digital subscribers and gets 47 percent of its revenue from the digital side of its operations. The New York Times based its model in part on the FT, which puts up a wall after 10 articles.

And the Boston Globe, in fact, has two sites: Boston.com, a free site, and BostonGlobe.com, a pay site that has signed up some 16,000 paying subs since launching in October. The paper's belief is that while consumers won’t pay for content they can get everywhere, they will pay for the Globe’s news analysis, features, opinion and video.

“There is a very large willingness to pay for content in the digital space,” Chris Mayer, publisher of the Globe, told TheWrap. “And that is certainly an encouraging sign to publishers.”

While the New York and Financial Times are essential reading for a certain subset of the population, there remain questions about other newspapers. Can the Chicago Sun-Times — a distant second to the L.A. Times' sister paper, the Chicago Tribune — get its readers to pay? Can the Long Beach Press-Telegram?

The best guess is that those that succeed will do so by making themselves indispensable to their readers.

“The people most likely to pay for a paywall, the dedicated readers, are the ones who are worth the most to you anyway. People least likely to pay aren’t worth that much.”

Local newspapers aren’t going to attract a huge scale, so making their dedicated readers pay has worked for some. In his book, Levine profiled the relatively small Arkansas Democrat Gazette, which has used its paywall to cut off circulation losses on the print side and save its business.

Still, success stories remain few — and the doubters many.

“The average newspaper might sell online subscriptions to the equivalent of 2 percent of its print subscribers,” Alan Mutter, a professor at University of California at Berkeley’s Graduate School of Journalism and a former top editor at the San Francisco Chronicle, told TheWrap.

“It’s not turning out to be a very significant revenue stream,” said Mutter, who agrees with the paywall on principle but doesn't think in the long run it will save many papers.

Experts like Mutter say the real answer is in fixing the advertising model. 

Companies like Google and Facebook dominate online advertising for a few reasons. For one, they offer search and video, something that commands a far higher rate from advertisers.

For another, they have so much data about their consumers, they can more effectively target those ads, again making them more valuable.

And newspapers?

“Their digital ad model is not really the digital advertising model,” Mutter said, calling it "Ben Franklin ancient."

Of course, that’s one reason paywalls make sense. They provide revenue — and that number could increase as consumers get used to paying. And they identify that core, committed user advertisers crave.

“You can have many fewer readers and make more money with a paywall." says Levine — though, he adds, that formula doesn't work quite as well for local or regional papers that don't have a mass audience to start with.

"It's best if you are able to get the best of both worlds like the New York Times."