Wishful Thinking And Misinterpreting Surveys Won't Save The News Business

from the that's-not-enough dept

Renan Borelli points us to Atlantic Business staff editor Derek Thompson’s recent defense of news paywalls, coming in the form of a series of posts responding to the Pew Research Center’s State of the News Media report, and also to a January Harris poll of online adults and their news reading habits. Thompson argues that the numbers in the latter “weren’t so bad”, but his reasoning makes very little sense.

“43% of those surveyed read the newspaper [online or offline] regularly, and 23% said they were willing to pay a fee to continue reading. That means even before the dawning of the Age of the Paywall, more than 50% of regular newspaper readers said they would pay for online news. As for the other 60% of respondents: who cares? They’re hardly reading newspapers online anyway.”

This is a surprising attitude for a business expert, and one that would certainly be foreign to a newspaper publisher. 43% reading daily means a lot of room to grow volume and frequency of readership, especially when you consider that 72% said they read at least once a week, and 81% at least once a month. It would be foolish to disregard that audience. Besides, 50% (a shakily extrapolated estimate to begin with) is hardly a good reader retention rate, and Thompson ignores the clearest message of the survey: less than a quarter of online adults would consider paying a monthly fee for news, and only four per cent said they would pay more than $10. Moreover, “how much would you pay” surveys are notoriously unreliable.

Thompson also makes the curious argument that people have demonstrated their willingness to pay for news online by paying for internet access to reach that news. This is irrelevant and confuses value with price: yes, by making online news one of the reasons they pay for internet access, people have shown that they value it. But this demand doesn’t set a price, it creates a market—one that is highly competitive on the supply side and will always offer free alternatives. The simple fact that a market exists does not say anything about the best pricing strategy within it.

These poorly thought out arguments come from the first post, which Thompson admits was rushed because he wanted his “opening salvo to get out fresh and early”. The second post looks at the Pew report’s breakdown of online ad spending by format, which shows the expected dominance of search advertising, followed by display ads—where newspapers get most of their online revenue—in a distant second place.

Based on this, Thompson seems to take it as granted that advertising can never pay the bills for online news, so paywalls and “other exciting ideas” are the future. He makes no mention of increased spending overall or growth in the display ad sector, of news gaining a foothold in other ad categories, of increasing the efficacy and value of advertising, or of going after brand new markets—all missed opportunities on the road to a walled garden.

In his third post, which discusses some of the “other exciting ideas” mentioned in the Pew report, Thompson finally starts to make a bit of sense. He is skeptical of micropayments, seems ambivalent about microaccounting (basically micropayments billed monthly), and he scoffs along with everyone else at the idea of blocking Google. Conversely, he is enthusiastic about improving targeted ads and curious about the possibility of newspapers gathering more demographic information from their online readerships. Unfortunately, he still seems to think that WSJ-style paywall models are the best strategy for the immediate future.

Perhaps the most common mistake that paywall supporters make is forgetting that people haven’t paid for the news in 180 years. Newspaper readers used to pay for paper, ink, trucks and delivery boys—and often barely paid enough to cover that bill. Now they pay for internet connections instead. Then and now, the reader only pays for access—advertising always has and will continue to pay for everything else.

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Comments on “Wishful Thinking And Misinterpreting Surveys Won't Save The News Business”

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ChurchHatesTucker (profile) says:


I’m a WSJ (dead tree) subscriber, and I don’t get to access the super sekrit content unless I pony up more.

B/t that and the spiral-into-the-ground that has been the WSJ lately, I think I’m going to dump the dead tree and just ignore the online paywall crap, since they haven’t let me in despite propping up their buggy whip business.

I’ve no doubt that they can keep their heads above water by catering to the Masters of the Universe, but it’s increasingly less interesting to me.

Hephaestus (profile) says:

Re: Re:

“denouncing this so harshly suggests you dont want them to try.”

We want them to succeed, the problem is that they cant succeed in their current form.

What is destroying newspapers has multiple sources. Advertising rates in news papers have been undercut by craigslist, google adwords, ebay, and various groups (yahoo,etc). The price competition from these other forms of advertising has basically cut their revenue stream off.
Readers news habits have changed to online, distributed amoung multiple sources, and things of interest to them not what is being spoon feed to them. Most papers are under huge debt loads and are down sizing which reduces their ability to report the news.

What they are doing wrong online. Old school newspapers arent adapting to the online world making them less relevent. They do not quote and link to sources. They do not allow comments and remove ones that prove them wrong. A sizable chunk of what they do is press releases and wire service articles rehashed. They are percieved as biased and representing interests. They are not trying to build online communities. Everything they write can be found else where, there needs to be a reason other than the news to come visit the site.

About the article tile mike used … “Wishful Thinking And Misinterpreting Surveys Won’t Save The News Business” … he is right. You now have most of the reasons the News Papers are failing, do with it what you will.

Anonymous Coward says:

Re: Re:

Umm, how about newsday?

2.2 million daily visitors. Add paywall allowing Cablevision subscribers free access.

New numbers:
1.5 million daily visitors. Guess how many signed up after 3 months? 35. Less than 3 dozen.

It has been tried. 35 of 700,000 is .005 percent (yes I already multiplied by 100). Assuming this rate holds, you can turn 1,000,000 daily visitors into 50 paying visitors with a paywall. Great business model!

Marcus Carab (profile) says:

Re: Re: Re: Re:

You’re right of course, and that’s why it’s possible that this was a good decision on Cablevision’s part if, as they say, it was all about reducing churn in their main subscriber base: television subscribers. It is not a particularly good model for newspapers, since it was based on entirely different factors. Pretty much the only thing it can teach us is exactly what AC is pointing out: that when given the choice, as a regular user, to pay or go somewhere else, very few will choose to pay.

Jeff (profile) says:

Re: Paywalls for news make perfect sense

I agree with you completely. They keep making empty threats, that they are going to put up paywalls, and they are going to block Google. Yep, quit whining and do it. I want to see it happen!!

The reason they don’t is because they know they face a quick death in online readers and advertisers. “Hmmm… let’s see put up a paywall and force over half of our readers elsewhere, and the advertisers with them when they realize they are gone, sure let’s do it….NOT!!” They know what’s going on, but they just keep wanting the govt or someone else to fix it for them and force readers or money to them.
And then the old “we are going to block Google from showing short intros to our stories and then linking to us, because it’s theft!” They know if they block Google from showing these, then they will loose all that traffic coming in.

These guys are just trying to game the system and blame someone else for their old fashioned business model dieing.

I’m waiting for the first one to actually block Google then get all butt-hurt when their competitors are getting all the traffic and they go off and sue because Google isn’t listing them anymore.

Anonymous Coward says:

Re: Paywalls for news make perfect sense

No one wants to be the first to do it. Financial rags work well enough behind a paywall because the information is time-sensitive and the readers have the money.

Regular rags don’t have that luxury. There might be some sort of attempt to get as many newspapers to put in place a paywall at the same time but that’s like herding cats.

Then there will be newspapers or news services like the CBC in Canada or the BBC in Britain that will flourish if a majority of online newspapers decide to place a wall in front of their online readers.

It’s like herding cats. Is it worth it? What’s the alternative? Actually competing for attention online?

Well, that’s just crazy talk.

Bradley Stewart (profile) says:

Hard Cheese For Writers

I believe and not only that these people have to paid for their work. The problem is it seems every time I turn around I get a bill for something else. I just don’t have the money to support them. I might squeeze myself just a little harder financially if I could get a channel menu of pay news online for a flat monthly fee. I think now that fee could not be higher than 12 bucks a month for me.

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