Los Angeles Business Journal

The Steep Price of Free

COMMENT By Charles Crumpley Monday, May 9, 2011

If you use the Business Journal’s website, you may have noticed that our so-called paywall was tightened recently. That means you won’t be able to read much unless you are a subscriber and pay us.

I know. That’s annoying. We’re all accustomed to reading news websites for free. But don’t be surprised if you soon start running into more paywalls on newspapers’ websites.

I attended a journalism conference at the University of Missouri a few weeks ago, and most of one day, coincidentally, was devoted to this issue. The takeaway: Paywalls are going up.

The New York Times got a lot of attention when it erected a paywall on its website a few weeks ago. But quietly, several small daily newspapers recently have started requiring their website readers to pay after a certain number of clicks each month. More newspapers are thinking about it.

This trend, if we can call it so, is new. Most newspaper owners and publishers have long harbored a belief system that went something like this: If we make our websites free and compelling – make it a destination for readers – that will result in lots of online traffic, and lots of traffic will result in lots of ads, and lots of ads will result in a new, sustainable business.

It’s a perfectly plausible notion that has been proved wrong. We’ve had more than a decade of experience now, and the sustainable business model is still a fantasy. Why would anybody think that it’ll suddenly work tomorrow?

Worse, there seems to be a growing awareness that giving away your news online is actively hurting the core business. Advertisers are not willing to pay a premium to be in a print edition if the same news is being given away on the website. And they’re not willing to pay much at all to be on a website that’s free.

What’s more, a couple of people at the conference made a case that free websites were actively pushing down the number of subscribers for paper editions, accelerating the frightening swoon in circulation in the past decade.

A nice example came from Andy Waters, general manager of the Columbia (Mo.) Daily Tribune. He said his newspaper a couple of years ago proudly improved its free website. It was so good that readers said, in effect, “Thank you. Now, we no longer need a paper subscription at all.”

So the newspaper went the other way. It erected a paywall in December. The reaction? It was bad at first, Waters said, but quickly settled down. The paper has gotten a reasonable number of online subscribers since, but he said he didn’t care if they got no new online subscribers. As he put it, it would be a victory if it would stop the bleeding of the print edition.

One newspaper that’s long had a paywall is the Arkansas Democrat-Gazette (and criticized for it). The digital director of that newspaper showed a chart of circulation changes for newspapers in states around Arkansas from 2000 through 2010. Most of those papers showed big drops – 20 percent, 30 percent, 40 percent or so in many cases. The Democrat-Gazette’s? Up 3.2 percent.

If you throw in the fact that the Wall Street Journal has long had a paywall, and its circulation over the past decade has fared better than most, you might conclude that free websites are hazardous to a newspaper’s health.

Yeah, newspaper paywalls are annoying. But expect to see more of them as more publishers tumble to the fact that it’s hard to make money by giving away what you sell.

Charles Crumpley is editor of the Business Journal. He can be reached at ccrumpley@labusinessjournal.com.