How David Simon is wrong about paywalls

Let me count the ways. Ten, in fact.

David Simon is a talented writer and storyteller, but is he qualified to give advice to publishers about how to save their dying industry?

As qualified as anybody else, I suppose. But when he suggested in a recent piece for CJR that people like me who disagree with his position on paid content were unqualified, that got under my skin a bit. Simon wrote, “These folks (paywall opponents) don’t understand the first thing about actual journalism.” He also lumped us in with an imaginary crowd of people who supposedly think amateurs can replace professionals, though we take no such position.

To Simon’s credit, he engaged readers in comments on his CJR piece, but the conversation turned more into a quibble over the definition of ad hominem than a dialogue about the important issues facing newspapers.

I decided to step back and lay out my thoughts in a more organized fashion.
First, Simon and I agree: that journalism is important. That newspapers giving their content away for free online is a bad idea. That investigative/enterprise journalism is expensive. That the beat system plays an important role in watchdog journalism, and beat journalism requires paid professionals who are in it for the long haul.

That said, there are at least 10 arguments against paywalls.

1. The New York Times is a poor model on which to judge the success of paid content.

The Times is unique. It isn’t a local paper. Even the New York news covered by the Times has more national gravitas than local flavor. The Times has a global audience, and as a truly outstanding journalistic institution it has some key advantages: Namely, it comes closer than most other outlets to producing journalism on a consistent basis that people will actually pay for; and it produces journalism that people all over the world will consistently link to. These are powerful forces for creating the kind of added value that might lead to paid subscriptions.

The Times takes advantage of these assets by keeping its paywall porous. Not only is it easily defeated, the Times rewards people who follow links from other sources by not counting those articles against the monthly quota (see comment #45 by Greg in the CJR conversation with Simon).

While Simon, near the end of the thread, notes some high-minded predictions about the potential growth of the Times paywall, he has not provided evidence that it will ever do what he claims a paywall can do: Support, on its own, New York Times journalism. By this standard, which Simon created himself, the Times paywall is an abject failure.

The Times has a newsroom budget of $200 million annually. The most optimistic estimate I could find for its paywall revenue is $100 million.

2. Simon’s math doesn’t make sense.

Simon believes that if his old paper, The Baltimore Sun (which once had, he says, 300,000 subscribers) went to an online-only, pay-to-play model, it would generate $3.6 million in revenue for the Sun, which he believes could sustain the Sun newsroom. In 2009, before a round of layoffs, the Sun had 148 editorial employees (elsewhere in comments Simon said the Sun once had a newsroom of 500 staffers). I can’t find payroll figures for the Sun, but total personnel costs had to be between $10 million and $15 million in 2009, so on that basis alone Simon’s math doesn’t make the grade, and that’s to maintain a newsroom that even Simon finds weak and emaciated.

A metro newsroom—the newsroom Simon is most concerned about protecting—needs between $50 million and $100 million to provide the kind of big, serious journalism Simon advocates. At $10 a month per subscription (Simon’s figure), the news site would need 416,000 subscribers to cover a $50 million editorial budget.

While in a city like Baltimore you could do that level of journalism, even enterprise/watchdog journalism, in an online-only way for $3.6 million, that isn’t what Simon is proposing. He wants “day-in, day-out comprehensive coverage of entire metro regions” (recent comment). In 2009, he wrote that the $3.6 million budget could provide a metro newsroom “that covers local politics, local culture, local sports, and financial news.” I don’t see how $3.6 million even begins to get that job done.

3. Even if a paywall alone can’t support big-time metro journalism, the early returns show no signs of slowing the bleed out.

One of the best and smartest metro newspaper editors of the past couple of decades, John Robinson, has said newspaper paywalls are a Band-Aid on a bullet wound.

It’s an assessment backed by some hard facts.

While the Dallas Morning News logged 50,000 subscribers, it’s unclear how many of those are mere up-sells from print subscribers (hardly counting, then, as online-only revenue and loyal digital subscribers). The paper also saw monthly pageviews drop by 9 million. Consequently, digital revenue was down 11 percent to $7.8 million. The paper’s parent company, Belo, reported a net loss in the first quarter of $3.9 million. Meanwhile, the newspaper is spending $4 million a year to promote online subscriptions.

The Memphis Commercial Appeal has traded a 30-percent drop in traffic for 1,600 people willing to pony up $9.99 a month for digital access. The good news is Sunday subscriptions are up by 1,000 since the paywall was erected. Editor Chris Peck said online revenue is not down, despite the drop in traffic. It’s been years since I worked for Scripps, the Commercial Appeal’s parent company, but if it still relies heavily on bundled classified ad revenue, which it then counts as online revenue, a change in website traffic would not affect revenue. As a company, Scripps continues to report flat or declining revenue in just about every category.

The Columbia Tribune has seen a 25-percent drop in traffic, a decline in engagement, and watched some traffic shift to a different, still-free local news source, all for a meager $80,000 in subscription revenue. And this from a paper that had achieved an impressive 15 percent of its revenue from digital prior to putting up the paywall.

The Arkansas Democrat-Gazette is often cited—as Simon did in our discussion—as a model for newspaper publishers. The fact is, whatever strength the paper had in circulation, it isn’t clear that charging for online content was the reason. Unlike many newspapers in the country, owner Walter Hussman kept subscription prices low in order to buoy circulation numbers. Unfortunately for the paywall stalwarts, Hussman was forced recently to double newsstand prices for the paper to help offset declining advertising revenue. This is not the action of a healthy newspaper company.

The Minneapolis Star Tribune has 300,000 print subscribers and is charging a modest $1.99 a week (much less than Simon’s proposed $10 per month for the Sun) and has only 20,000 online subscribers (“only” being relative to our previous points about what’s required to sustain the kind of journalism Simon expects paywalls to sustain). Since the paper is now held by private equity, earnings reports are hard to come by.

While some of the raw numbers attributed to early adopters of paywalls might seem impressive, there are two things not being fully disclosed by publishers: the percentage of bundled packages with primarily print-minded subscribers and the churn rate for digital subscriptions. The higher the churn rate, the slower growth publishers will see over time and the higher the cost of customer acquisition.

We also don’t know what percentage of digital subscribers (bundles or not) are older readers. Newspapers need a strategy that works with a younger audience, and if young readers are buying digital subscriptions at a low rate, the paid online model can hardly be said to represent the future of quality journalism.

Meanwhile, a stat that should alarm publishers and paywall advocates is the low, low conversion rate of unique visitors to paid subscribers. Here are stats provided by Ken Doctor: “The New York Times broke the 1-percent barrier last year, 390,000 subs compared to 33 million U.S. unique visitors. The Commercial Appeal is at .8 percent; The Star Tribune is at .25 percent with its four-month initiative. The Columbia Tribune is at .2 percent.”

There is just no clear evidence so far to indicate that paywalls—even for the most successful general-circulation paper, The New York Times—are doing anything to help stop the bleeding. Newspapers continue to pile up losses while putting their hope in a savior that shows no evidence of being able to work miracles.

4. Paywalls are too easy to defeat on the open Web and the technology is costly.

Metered paywalls—the fad paywall of the moment—set a limit on the number of stories (10 or 20) one person using one browser on one computer can access in a month. Typically, coming to an article from a third-party link, such as a tweet, Facebook status update, Google News search, or blog post, does not count against your monthly quota.

Following the @nytimes account on Twitter, as 5.2 million people do, is just one way to avoid the paywall. Another route: Use multiple browsers. Since the metered paywall is cookie-based, and each browser keeps its own cookies, every time you access a metered site from a different browser, the quota counter resets to zero. If you install Firefox, Safari, Internet Explorer, Chrome, and Opera on your Mac, for example, you’ve upped your New York Times quota to 50 stories a month.

If you own an iPad and an iPhone, that’s 20 more stories per month. If you have a home computer and a work computer, that’s 20 more. Does your spouse have a computer and do you share it? Ten more stories.

Of course, you don’t need to hog that much hard-drive space or own all those devices. It’s an easy matter to wipe your cookies from your browser settings and start over. There are now third-party apps that will automate this process for you.
This isn’t an argument for defeating the New York Times paywall or any other metered site, simply evidence of how easy it is to defeat if for someone who didn’t want to pay for news.

Supposedly, for this porous metered system, The New York Times paid $25 million.

I’ve not been able to come up with any information on what Press+ charges. At a minimum, we can assume the company takes a cut of every subscriber payment, and vendors of this scope also typically charge a substantial implementation fee.

So when newspaper X says it has 25,000 subscribers at $10 per month, that isn’t $250,000 in pure newsroom-sustaining revenue. It cost the company a sum of money to acquire and keep those subscribers.

And, of course, there’s marketing. Supposedly, the Dallas Morning News is spending $4 million annually to market its paywall. If newspapers aren’t marketing their paywalls, they will convert a lot fewer people into subscribers.

I worked my way through college telemarking for the Los Angeles Times and the San Diego Business Journal. Every large newspaper I’ve ever been associated with either had telemarketers or outside sales teams trying to find new subscribers. Circulation directors also spent a lot of money on direct mail, billboards, radio, and television.

As much as circulation directors want to increase the number of subscribers to their products, the truth is, they do well to just keep replenishing the leaky bucket with sand. It’s a constant battle against churn.

The cost of gaining a new subscribers involves marketing, a sales-rep commission, salary for the manager, and the discount offered to the new subscriber “just for trying” the paper. Once the subscriber is acquired comes the expense of retention—more marketing, more incentives.

The subscriber business is an expensive business.

Why do paywall advocates think it will be any different online? There simply isn’t going to be that much profit left over from subscription fees to generate any substantial change in the fiscal outlook for newsrooms.

The fact that paywalls are porous will only make the job of acquisition and retention that much more expensive.

5. It takes a packaged bundle to sell good journalism to the masses.

Simon is dismissive of the notion that the journalism itself has always been essentially free, writing: “But ‘readers never paid for the news’ is simply and utterly wrong. Until the Internet, they always paid for news. And pay for it they did, sometimes at a newsstand, sometimes on Sundays, sometimes weekly. But we all paid.”

As for who paid what for print news, in a survey last year, 85 percent of newspaper subscribers said they bought the paper for local news. That means 15 percent of the buyers didn’t care about local news. In the same survey, 67 percent said they wanted coupons in their newspaper, meaning for some percentage of people local news isn’t enough. Obituaries—not exactly the kind of high-end journalism Simon champions—is also another big reason people subscribe to a newspaper. Then there are sports, classifieds (always a big driver of readership), and Dear Abby (or the ilk).

A newspaper has always been a package, and that’s how it derived its economic value. If all a newspaper has is local news, it might woo droves of readers, but arguably not enough to make the newspaper profitable able to pay professional salaries to a lot of professional staff.

Paywall schemes disaggregate content and remove it from its traditional package. That diminishes the value of the subscription.

The need for a bundle to enhance the value of the subscription is a problem for paywall advocates. The financial truth of the matter is that a paywall reduces the subscription exchange to a single, discreet asset: news stories. There is just no evidence in the history of American journalism that a critical mass of readers will pay a substantial fee for just news articles.

As one of my heroes, Walter Lippman, pointed out in 1920, “Nobody thinks for a moment that he ought to pay for his newspaper.”

Simon counters that times have changed. “Did you really mean to suggest,” he wrote to in our discussion in comments, “that Lippmann, speaking of the American public nine decades ago—with its lower rates of literacy, basic education, college experience, urbanity, discretionary income—had a clue about anything current when he declared that people won’t pay for news?”
Yes, times have changed. Unfortunately, for Simon’s position, human nature hasn’t.

It’s been pointed out by numerous people in numerous venues—including during the discussion with Simon on—that the rate of subscription for newspapers barely covers the cost of printing and distribution. It does nothing to help defray the cost of newsgathering. That comes from advertising.

Which brings us back to a previous point: While online-only eliminates the cost of printing and distribution, quality journalism is still expensive. So far there is no evidence—either from empirical data or penciled-out math—to suggest online-only subscriptions will ever come close to paying for the kind of journalism Simon frets over losing.

6. There are numerous free alternatives in every metro market for news, which will greatly reduce the adoption and retention rate of paid digital subscribers.

It’s not just the comics, coupons, and movie listings that help subsidize serious journalism in metro newspapers. It’s also the police blotter, the run-of-the-mill city council report, the light feature about the old ladies’ sewing circle, and the list of new Eagle Scouts. All of these bits and pieces of journalism that serious journalists sneer at are a big reason why those 85 percent of readers who buy a paper for local news buy a newspaper in the first place.

They also want the accidents and petty scandals and courthouse dramas.
Investigative stories, enterprise pieces, lengthy features, and in-depth analyses are expensive and not the only reasons lots of people consume of local news.

And when you remove the expensive stuff from the equation, the rest is very cheap to produce. And in any metro market, it’s plentiful from a variety of sources.
In our conversation, I mentioned one such source of inexpensive news: TV news. David Simon immediately belittled TV news, as any diehard print journalist would.
Outside of the fact that his position is insulting to a lot of good broadcast journalists, it totally misses the point of discussing competition from free TV websites.

Then you contend that there are websites in metro areas that approximate the reach and depth of print journalism, and you actually cite TV news sites. I’ve read those sites. Been reading them for years in a variety of metro regions. Mr. Owens, please. Fully 75 percent of their content is AP- or Reuters-fed regurgitations of WHAT WAS PRINTED IN THE METRO DAILY a news cycle earlier and now has been aggregated and synthesized by wire services.

Which prompted me to visit the first TV station website I found in Simon’s beloved Baltimore, which turned out to be WBAL. Of the 10 local news stories I checked, 10 were original reporting by WBAL staff.

In my experience that level of news coverage is common. In a metro market, take three to five good-enough TV news stations (especially if one of them is better than just good), and the intelligent news consumer has options for free news.

And while a metro newspaper might lock away its best stuff behind a paywall, and getting the scoop is nice, there’s nothing preventing other news organizations from re-reporting (and I mean re-reporting) the paper’s story, and properly implemented fair use would allow other news sites and blogs to cite and credit the newspaper report. If newspapers follow the New York Times model, this sort of aggregation is explicitly allowed.

Other local news outlets don’t need to duplicate the mission and expense of high-purpose newspaper journalism to take a bite out of the digital paywall; they just need to divert the part of the audience — which is the bulk of the audience — that just wants a quick local-new fix.

7. The barrier to entry for producing local news is quite low in the Digital Age.

Of course, this is an area where my expertise is firsthand. It’s what I do every day—produce quick-and-easy local news for a ravenous local audience.
Some of the anonymous commenters in the CJR conversation took a look at The Batavian and belittled what I do, which is fine with me. They’re not our intended audience. We’re not trying to be a substitute for big, expensive journalism (though we’ve done a few enterprise and investigative pieces (examples here, here, and here).

Meanwhile, doing what we do, we’ve become the news source that everybody in town reads and have convinced some 130 local businesses to support by assigning to us a portion of their advertising budget. Perhaps the Church of Journalism folk will continue to sneer at this level of success, but I think it’s pretty good, and shows what can be done with the right combination of a free CMS, cheap hosting, hard work, and a content strategy that appeals to a local audience.

The real model, however, that should scare paywall publishers is This Watertown, NY-based site put one paid-content site in its grave in 2008.

The scenario went like this: The Watertown Daily Times erected a paywall. A former employee started an aggregation site much along the lines of The Drudge Report. By 2008, his site was dominating online traffic and online advertising for the Watertown coverage area. The Daily Times was forced to drop its paywall to compete. (By all appearances it has come a long way and now competes very well as a non-subscriber site; an executive with the Johnson Newspapers, the paper’s parent company, has said on Twitter that it has no intention of changing its current strategy).

In Simon’s analysis, if all newspapers and wire services would just put their content behind a paywall, then a site like Newzjunky wouldn’t be possible. The problem with this analysis is that Newzjunky didn’t feed off any of the news sources (at least for local news) that Simon’s plan would wall off. Newzjunky became an indispensable clearinghouse for local headlines relying primarily on broadcast outlets.

In metro areas, there are also increasing numbers of independent, hyperlocal publishers producing original content, often based on high-caliber reporting. None of these examples competes directly with a major metro, nor would they individually pose a threat to a digital paywall. But in a world where 1,000 tiny cuts matters, each of these blades diminishes the ability of a major metro to subsidize expensive journalism with a packaged bundle.

8. The wrong people are pushing paywalls.

There are reasons to distrust the motivations of paywall advocates. David Simon considers any argument that looks at the people behind the movement as ad hominem, but at times you can’t separate the people from the statements and still make an honest assessment of the issue.

While there are people I know and respect involved in the paywall business, on the whole, a lot of the push for paywalls is being driven by old-school journalists and executives with publicly traded newspaper chains.

The irony is that these two traditional rivals have come together in a conspiracy to, in reality, kill newspapers.

Most of the paywall advocates I see and read around the Web are the same people in the late 1990s who proclaimed the Web to be a fad. They’re the same people who throughout my online newspaper career didn’t want to break news online, didn’t want to carry a video camera, didn’t want to feature current local news on the homepage, didn’t want to engage with online readers—they pretty much either worked actively or passively to sabotage every attempt at online innovation.

This same group of people are the ones who, even before the Digital Age, stood around the water coolers and decried the “bean counters” (I know, I used to be one of them, in every respect).

But paywalls are nothing but a bean-counter strategy to slow the bleeding.
Philip Meyer, in his landmark book The Vanishing Newspaper, wrote about how corporate interests will “harvest” their properties.

This is the “take-the-money-and-run” plan. Because newspaper customers are such creatures of habit, it could be quite seductive. It means raising prices, reducing quality, and taking as much money of the firm as possible.

No newspaper company is instituting paywalls to protect journalism. They’re doing it to protect profits, or at least slow the bleed out.

Look at the list of publicly traded companies with paywall plans (via Media Wire): A.H. Belo, E.W. Scripps, Gannett, GateHouse Media, Journal Communications, Lee Enterprises, Media General, MediaNews, McClatchy, The New York Times Co., Tribune Co.

That should be a clue to what’s really going on here. Shareholders demand profits, not good journalism. The failure of newspapers to build online news businesses that meet shareholder expectations have forced CEOs to try to find another revenue stream.* It doesn’t even, at this stage, need to be a terribly robust revenue stream, so long as it can be spun into a pretty lie for corporate boards and the shareholders who hold their proxies.

(*Any observer of newspaper industry trends during the online era will note that the industry is brazen about hopping from one revenue stream or content fad to another, from Top Jobs to portals, day parting to video ads, auctions to targeted banners, etc. When one company tries something and has just enough success to brag about it at the next industry conference, the rest soon follow. That’s part of what’s happening now with paywalls.)

To whatever degree paywalls are successful, the extra revenue won’t be reinvested in making news products better. It will either service debt, paper over losses in other departments, or help pay dividends.

Simon’s support of a consortium of paywalls involving newspapers and wire services does nothing to protect journalism in the current state of corporate governance for the majority of newspapers. It merely enables cost-heavy chains to carry on a bit longer.

The printies have truly gotten in bed with the bean counters, but not to their benefit, and they just can’t see it.

9. Paywalls don’t address the fundamental issues facing newspapers.

This is something the High Church of Journalism folks don’t want to discuss: What if journalism itself is broken?

There is a lot of short-term thinking that goes into analyzing the current state of newspapers. It sometimes seems if there was some Golden Age of Newspapers when household penetration was 100 percent and everybody in America loved a print reporter, then in 1994 it all went to hell in a hand basket of HTML.

Reality, of course, is different. Household penetration started to drop in the 1930s, circulation stopped climbing in the late 1950s, and the number of people per thousand who read a daily newspaper started declining in the 1970s.

The events driving down newspaper readership are numerous, but students of journalism history know that journalism has done a poor job of responding to changes in culture and civic life. Newsrooms have long believed their means and methods are sacrosanct and inviolate.
There is also the problem of so-called objective journalism. Journalists have been trained to consider themselves apart from the community, delivering “just the facts” from on high. This has led to a journalism that is stilted, predictable, and boring.

Objective reporting was born in the 1910s (what a coincidence, just before newspapers started their 100-year decline), and Walter Lippmann has traditionally been credited as the godfather of objectivity in news reports.

However, what is often thought of today as objective news reporting is not the objectivity of Walter Lippmann.

From Lippmann’s Liberty and the News:

With this increase of prestige must go a professional training in journalism in which the ideal of objective testimony is cardinal. The cynicism of the trade needs to be abandoned, for the true patterns of the journalistic apprentice are not the slick persons who scoop the news, but the patient and fearless men of science who have labored to see what the world really is. It does not matter that the news is not susceptible of mathematical statement. In fact just because news is complex and slippery, good reporting requires the exercise of the highest of the scientific virtues. They are the habits of ascribing no more credibility to a statement than it warrants, a nice sense of the probabilities and a keen understanding of the quantitative importance of particular facts. (Emphasis added)

No good scientist is about “just the facts.” Science is about gathering data, making observations, and offering conclusions.

Clearly, Lippmann, himself an opinion writer, didn’t see a problem with a reporter having a point of view and being a personality.

This sort of personality-driven journalism didn’t suit the 20th century newspaper publisher, however. Corporate journalism needs reporters who are interchangeable widgets. Take out one byline and insert another, and readers hardly notice the difference. This less-robust journalism, while not great for circulation in the long run, set the publisher’s mind at ease. He could worry less about stories that might piss off advertisers.

Now journalism is moving into an age where individuality and personality matter even more, but by and large journalism is unwilling to change with the times.

The Digital Age, with all of its intimacy and immediacy, is really about a form of personal journalism, where who the journalist is adds context and meaning and engages readers, giving the reporting more impact.

Putting up paywalls does nothing to address the question: Is your newspaper producing the kind of journalism people will actually pay for?

10. Paywalls continue the history of newspapers avoiding meaningful innovation.

A paywall is reactionary. It represents a mindset that says there’s nothing wrong with our journalism or our business approach. It is also an admission of failure at building a real online news business.

The basic notion behind a paywall is, “Journalism is expensive, therefore people should pay for it.” The notion ignores evidence to the contrary and locks in a mindset that believes the way we’ve always done it is the only way to do it. Paywall advocates are not innovators, and if you’re not an innovator in the fast-moving Digital Age, you’re dead.

One of the real dangers of the current paywall schemes isn’t that they won’t produce revenue; it’s that they will become the proverbial golden handcuffs, producing too much revenue to abandon but not enough to accomplish what advocates hope: save journalism. Newspapers will become trapped behind their paywalls, unwilling to jettison the revenue, unable to change course toward more profitable seas.
The result: The very notion of innovation will be even more repulsive in corporate boardrooms.

The primary reason newspapers have up to this point failed to build real online news businesses, as I pointed out before, is this resistance in their organizations to change.
Publishers—and primarily the corporate CEOs beholden to shareholders—have not wanted to do the hard things that go with building a new business, from doing things radically different to hiring enough of the right people to initiate innovative strategies.

Look at the initial approach publishers took to the Web: shovelware.
Shovelware was a word invented by one of the pioneers of online journalism (I don’t know who) to label the practice of taking the content feed from the daily newspaper and porting it over to HTML.

For years, from 1994 until about 2004 (when the Ventura County Star and a few other news sites transformed their homepages into manually curated creations rather than automatically fed billboards) every daily newspaper website in the country was updated once a day, after—and this is key—the print edition was already published.
As I’ve written before, the original sin for newspapers wasn’t giving away their content for free. It was failing to create new online businesses.

Throughout my career in the corporate world of online journalism, I watched promising and innovative initiatives wither and die because of lack of support, either in the newsroom or in the advertising offices.

Newspapers have long suffered from feebleness when it comes to insisting employees go along with changes, and impotency when it comes to spending the money necessary to institute innovative ideas.

Of course, not all of these ideas would have succeeded; innovation is as much about failure as success. But some would have, and collectively they might have made a significant impact on audience and revenue for newspapers.

Newspaper publishers—and the CEOs who hire and fire them—failed, generally, to embrace innovation.

And now, rather than take a hard look at their mistakes and figure out a new way forward, publishers are retreating behind paywalls, which feels like a last-ditch effort to fortify a dying business.

It’s just sad.

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Howard Owens is publisher of The Batavian, an online-only news site serving Genesee County, NY. He has been an online executive with the Ventura County Star, Bakersfield Californian and GateHouse Media. Tags: , ,