One downside of paywalls: Where does your growth come from?

Anyone who has been following the debate around newspaper paywalls probably knows I am not a big fan of them as a strategy, for a number of reasons. While I admit they can bring in additional cash — and that can make a big difference for companies that have seen their revenue decline precipitously over the past few years — I still see them as problematic. Alan Mutter, a former journalist and veteran technology CEO, puts his finger on one big problem: namely, that they are focused more on keeping existing readers rather than finding new ones.

As Mutter (who likes to call himself the “Newsosaur”) puts it in his blog post, paywalls or subscription plans — which have been increasing in popularity to the point where a majority of the large papers in the United States now have them — seem like a great deal on the face of it. You put up a pay barrier, allow some leaks through social media, pick the number of pages that your pay “meter” accepts before triggering the demand for payment, and then sit back and let the extra revenue roll in. But as Mutter notes, it’s not quite that simple:

“All good? Not necessarily. The reason to worry about paywalls is that they severely limit the prospects of developing a wider audience for newspapers at a time publishers need – more than ever – to attract readers among the digitally native generations that represent a growing proportion of the adult population.”

Not everyone can be the New York Times

As an example, Mutter looks at the paywall put up by the Charleston Post and Courier, and how it increased revenues with only a small dropoff in circulation — in other words, a win-win as far as newspaper paywalls go. However, Mutter also notes that since the paywall was erected a year ago, the Post and Courier has only gained a small number of new readers: about 1.5 percent of its overall circulation. That’s verging on no growth whatsoever (Note: We’re going to be talking about paywalls and other forms of monetization at paidContent Live on April 17).

New York Times

Although Mutter doesn’t mention it, someone is bound to point out that the New York Times has seen dramatically larger growth in the number of new digital subscribers: according to the Columbia Journalism Review, it has been seeing average increases of more than 10 percent every quarter. However, it’s also true — as the authors of the recent Columbia report on the future of “Post-Industrial Journalism” noted — that the NYT is an outlier in almost every sense of the term, and therefore isn’t a good benchmark for all papers.

Mutter, who does strategic consulting for media companies, says the 1.5-percent growth in circulation the Charleston Post and Courier has seen is about the average for the industry. That’s light-years away from what the NYT has experienced. And that’s one reason why I’ve described paywalls in the past as a “sandbag strategy” — they keep the water from coming in, but they don’t really do anything to help companies figure out or deal with the reasons why the water is rising in the first place. As Mutter notes:

“The modest take rate is worrisome, because it means that the Post and Courier, like most other papers, is not attracting nearly as many new digital readers as it needs to. Digital readership matters, because digital, not print, represents the future for newspapers (and most of the rest of the media, too). Unfortunately, newspapers so far have failed to attract a significant number of individuals who came of age in the digital age.”

Where do new readers come from?

The average age of a newspaper reader is currently somewhere around 57 — a survey conducted for the industry by Scarborough Research showed that more than two-thirds of readers are over the age of 45, Mutter says. While paywalls may be doing a great job of keeping those users from bolting to the web to read everything for free, and possibly of increasing print circulation (which is where a majority of newspaper revenue is still coming from), how do they help bring in new readers? The short answer is that they don’t, or at least not very many.

Paywalled papers have all kinds of tricks for trying to appeal to non-readers: the New York Times not only allows social-media links for free, but it and other papers also open up their paywalls for important stories like Hurricane Sandy. And some papers offer incentives — the recently launched hard paywall at the Orange County Register comes with free baseball tickets. But is that going to be enough to produce any kind of sustainable growth? And what happens to those papers if it isn’t?

Post and thumbnail photos courtesy of Shutterstock / Voronin76 and Flickr user jphilipg