Newspapers Hope Readers Will Throw Money Over the Wall

As the financial screws continue to tighten on traditional media companies, more and more are choosing to throw their eggs into the basket labeled “paywall,” despite a conspicuous lack of evidence that erecting barriers to non-paying readers — or turnstiles that charge them after they’ve read a certain number of articles — has any beneficial effects. The latest to go this route is the Dallas Morning News (s ahc), which put up its wall this morning, and the New York Times (s nyt) is also said to be close to launching its metered-access plan as well. In the long run, however, these walls are really just sandbags against a rising tide of free content.

The Dallas Morning News paywall, which the paper has been working on since the middle of last year, does have some holes in it that are designed to mitigate the extent to which it shuts out readers. Non-subscribers to the paper will be able to read headlines, blogs, obituaries, classifieds and any syndicated content for free, but local news will be blocked. And the news doesn’t come cheap: A subscription to the print newspaper and all of the Dallas publisher’s digital content (which includes an iPad (s aapl) app) is $33.95 a month, and an online-only subscription is $16.95 a month. By comparison, Rupert Murdoch’s new iPad app The Daily costs $3.96 a month or $39.99 for a year.

Last month, Dallas Morning News publisher Jim Moroney admitted he was unsure whether the paywall would work or not, telling the Nieman Journalism Lab that “This is a big risk — I’m not confident we’re going to succeed. But we’ve got to try something. We’ve got to try different things.” Moroney was similarly blunt in a memo to his newsroom staff about the reasons for the launch of the paper’s paywall:

So why, beginning tomorrow, are we going to require a subscription to access much of the content we originate and distribute digitally? The reason is straightforward: Online advertising rates are insufficient at the scale of traffic generated by metro newspaper websites to support the businesses they operate. We need to find additional and meaningful sources of revenue to sustain our profitability.

The bet being made by papers like the Morning News — and Gannett (s gci), which is experimenting with paywalls at a number of its papers, and says it plans to roll the strategy out to other publications — is that a paywall can do two things: One is to keep existing print readers from cancelling their subscriptions so they can read for free online, and the second is to generate more revenue, not just from subscriptions but by convincing advertisers that readers who pay for their content are more desirable.

This is the argument being made by News Corp., (s nws) which launched paywalls at two of its British newspapers late last year, and saw its online readership plummet by more than 90 percent. The company has said it isn’t concerned about the decline, and that advertisers are proving to be receptive to its claims that the remaining readers are more engaged and therefore worth more. What impact that will have on the company’s actual finances remains to be seen, however.

The New York Times, meanwhile, is expected to launch its “metered access” plan soon, which is based on a similar model used by the Financial Times that provides a certain number of free articles per month before readers hit a wall. The NYT has experimented with a paywall before; in 2005 it launched TimesSelect, which put the paper’s columnists behind a wall, but the service (which former Guardian digital head Emily Bell credits with helping to jump-start The Huffington Post) was shut down in 2007. And some financial analysts are skeptical that the new wall will be any better: William Bird of Lazard Capital recently rated the stock a “sell,” saying it was like buying “a declining annuity,” and that the paywall was unlikely to help.

The reality is that the biggest problem for traditional newspaper companies — a combination of high costs and falling ad revenues — isn’t something a paywall is going to help solve. At best, it’s a stop-gap measure that might slow their decline somewhat, and an ultimately futile attempt to reimpose scarcity on their content in an age when the supply of free content is virtually unlimited, thanks in large part to the rise of new-media entities such as the Huffington Post.

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Post and thumbnail photos courtesy of Flickr user Giuseppe Bognanni