Breaking down the paywall: Looking at the newest strategy to save the newspaper

The number of online news organizations implementing paywalls is increasing, according to an eByline study. Photo illustration by Timothy DeWitt, staff photographer.

For years, the proliferation of free online news content has encroached on newspaper revenues, causing a marked decline of the industry. But lately, online news organizations have begun vying to reclaim their share of the market with a controversial tool: the paywall.

The number of news sites using paywalls to block previously-free online content, has increased significantly in recent years. Since the New York Times put up its paywall in 2011, 72 other news outlets have followed its lead, according to information collected from Ebyline, a Los Angeles-based company that provides software and services for professional journalists and news publishers.

But the effectiveness of paywalls is a question debated among both industry professionals and online readers. Some argue they’re necessary for online newspapers to stay afloat, while other argue they chase readers away.

Paywalls hinge on newspaper size

Newspapers and magazines have been losing revenue for years as subscribers drop off and head online.  Digital advertisements have sought to bridge the revenue gap, but according to research by media consultant Alan Mutter, advertisements account for less than 10 percent of digital revenue for most sites.

Enter the paywall, the news industry’s latest attempt to make more money. Several recent studies suggest that it’s working.

The Nieman Journalism Lab, a journalism research center at Harvard University, released a study that showed both the New York Times and Gannett increased profits after adopting paywalls. The study declared the industry was bouncing back.

But not everyone is convinced. Many media professionals are skeptical about paywalls. Some wonder whether they can bring money in without keeping readers out, and some aren’t sure whether they can keep small newspapers afloat.

“The New York Times only works because it has a large audience,” said Michelle Ferrier, a communications professor at Elon University. “They can put a paywall up and get away with it because they have highly-valued content and a large base of support.”

A recent Ebyline study supports Ferrier’s position. The study examined what kinds of news sites are adopting paywalls and whether the size and circulation of the paper affects paywall success.

The research drew from a list of news sites with paywalls and combined the sites’ circulation and daily newspaper online data.  Results showed that big newspapers are using paywalls more than smaller newspapers.

Ferrier is the founder of a small news site called locallygrownnews.com. The site, which focuses on local eating and sustainable lifestyles, has a niche subscriber base in and around Alamance County. Ferrier has not erected a paywall.

“My site is very hyper-local, and you have to make money a variety of ways,” Ferrier said. “A paywall wouldn’t work because I don’t have a big enough audience.”

Small newspapers and online news sites like Ferrier’s account for a large percentage of online news content in America, with two out of three papers having a circulation under 25,000, according to Ebyline’s study. The study found 16 percent of these papers have chosen to use paywalls.

The Burlington Times-News is planning to jump on board: Starting next fall, the Times-News will erect a paywall. Editor-in-chief Madison Taylor said he has mixed feelings about the switch.

“I’m not a genius and I can’t say if it’s right or wrong,” Taylor said. “One of our biggest concerns is losing our audience, but we hope since our competition has already set up paywalls before us, our readers will stick around.”

Readers weigh in

Concern about paywalls revolves not only around the cost, but its effect on content produced.

In Ferrier’s opinion, those who read and comment on content can affect the actual content itself. If only middle-upper to upper-class, college-educated, 40-something-year-olds are able to pay for news, “their issues, the ones they care about, are the only ones that will be addressed,” Ferrier said.

The demographics of two of the most successful papers with paywalls—the New York Times and Wall Street Journal—are skewed toward readers with higher household income. The average income for a New York Times subscriber is around $74,000; for the Wall Street Journal, 31.5 percent of subscribers have an income of over $100,000, and 10 percent have an income of over $150,000, according to statistics supplied online by the newspapers.

“A paywall takes what is a valuable function in a democracy, and it makes it accessible to only those who have money, and it disenfranchises those who don’t have money,” Ferrier said.  “If people have to chose between food on the table and news, they’re going to feed themselves and their children first.”

The cost of paying for online news may also push away the younger demographic, according to Mark Fox, an adjunct communications instructor at Elon. He predicts readers older than 45 will mainly be consuming digitalized news if advertising can successfully target an older audience.

“Two-thirds of the world isn’t willing to pay for online content,” he said. “The prepared users tend to be older and less targetable to advertisers.”

Senior Megan Martin said that as a college student, paying for news doesn’t seem worth it given her lack of income and the lack of a permanent community for those studying outside their state.

“Living somewhere full-time, I would want access to things such as town events, sale circulars and up-to-date focused local news,” Martin said. “But I feel that global news can be accessed easily online or on television, so to me a subscription to something like the New York Times wouldn’t be necessary.”

Junior Joe Bruno expressed a similar feeling. He said he doesn’t feel the need to pay for national or international online news.

“Until all online news providers have paywalls, there is no incentive for me to pay when I can find the same story somewhere else,” he said. “As of right now, I’m not in love with a brand enough. Now, if my local hometown paper had a paywall I probably would subscribe.”

But some students don’t recognize the viability of paywalls as a means to increase newspaper revenue. Junior John Bowden said newspapers may need to find a different way to make money.

“I respect the idea that newspapers have to find a way to monetize online content, and I don’t personally have a problem with paywalls, but I’m just absolutely sure they aren’t going to work,” he said. “It’s a great way to drive people to your competition. Any story you can get behind a paywall, you can probably get somewhere else.”

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