the audit

Paywall illogic

Steve Buttry distorts our arguments—and the evidence
December 13, 2012

Followers of the hot ‘n heavy paywall debate—all seven of you—may find it hard to believe, but there’s plenty of room for consensus on whether digital subscriptions are good, bad, or indifferent for news.

But we’re not there yet.

Digital First’s Steve Buttry was irritated by my use of metaphors in my last post, where I, for instance, compared people who still argue that paywalls don’t work, indeed can’t work, to Japanese soldiers holed up on islands refusing to believe the war is over. Actually, it didn’t go far enough: It’s more like Lt. Onoda getting the orders from Major Taniguchi but fighting on.

But seriously, metaphors are more or less what’s left when free-news advocates, losing on the facts, rely instead on junk argumentation. To wit: Crudely misrepresenting others’ arguments and ignoring evidence.

See, this is what got the GOP in trouble.

Buttry and folks like Mathew Ingram have been flat wrong about this topic for years and can’t bring themselves to admit it the simple fact that (modern) paywalls have demonstrated they can help newspapers and have not been shown to hurt them. Simple? Apparently not.

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As we’ve said before, even famed digital advocate Clay Shirky has has shown flexibility in the face of overwhelming evidence. And a constructive step it was.

But Buttry would much prefer to argue against anything else. Says he:

I am willing to say that anyone who thinks the matter of whether paywalls will help news organizations find a prosperous future is settled is completely lacking in credibility. Specifically, the paywall cheerleading by Ryan Chittum and Dean Starkman of CJR is mystifyingly lacking of thoughtful analysis and skepticism.

But in fact, he’s really arguing against “Ryan Chittum and “Dean Starkman,” who are, indeed, much easier to defeat!

The thing about blogging about someone else’s post is, in order to not look foolish you have to actually read their post first, particularly when that post calls out the very straw men you’re trotting out again. I have never said that paywalls will lead to a prosperous future. I have said they are a new revenue stream that can help slow or in some cases stop the losses that are enervating newspapers.

As I said in the post he was responding to (and in the part explicitly addressed to him!):

One more time: A paywall is not a magic solution. It is not a panacea, Steve Buttry, and we’ve never said or implied that it is. Nothing is, least of all gauzy exhortations to “innovate.”

The guy just can’t help himself.

Here we find Buttry again refracting the issues I raised through a fun house mirror (emphasis mine):

Even if you take the most positive view of paywalls’ performance so far, we are a long way, measured in years, from establishing them as an important revenue source for healthy, growing media companies.

No kidding. We’re talking about stanching the bleeding right now. We’ll talk about growth once the losses have stabilized. In the third quarter, Gannett’s new meters almost offset its steep print-ad decline and they are projected to increase subscription revenue by 25 percent next year, along with $100 million of operating profit, which is pretty “important.” If Gannett, with its poor newspapers can do it, perhaps even Journal Register could.

And then there’s this:

Even if they start providing a consistent, significant revenue source, they will always be subject to disruption and competitive challenges. This is the silliest thing about Chittum’s war analogy: The Allies did win World War II. The digital marketplace is not a war media companies can win by dropping a new kind of bomb (I added that to Chittum’s metaphor, but subscriptions certainly wouldn’t fit there). The digital marketplace is a continual competitive struggle, where today’s victory becomes tomorrow’s vulnerability.

But no one argues that, natch. It’s not exactly a deep insight to say that companies that have adapted once will have to continue adapting.


Chittum and Starkman delight in the reported “$100 million” in revenue delivered by the New York Times paywall, as though that proves that paywalls are a successful digital business strategy for newspapers.

Yes, we delight in the $100 million I’ve estimated the Times paywall is bringing in. You’d think someone who “genuinely hope paywalls are successful” would too. But no, according to Buttry, we can’t learn any lessons from the NYT, whose success “is meaningless (for other papers) on at least four levels”:

It’s the New York Times. Nothing that it does extrapolates to other news organizations.

Remember when the FONsters told us the WSJ and FT were unique and so the NYT and others couldn’t charge? Convenient! In fact, this is pure nonsense. Yes, the Times is the greatest American newspaper and it has national and international reach. But it still faces the same business model problems that plague its lesser peers: High fixed costs, the rapid decline of print advertising, and the pitiful failure of digital advertising to make up the difference. The Times will surely be the most successful general newspaper with digital subscriptions, but it’s empirically false to argue that “nothing that it does extrapolates to other news organizations.”

But let’s try, try again. Take the metered model, which the NYT took from the FT and made better. It found that it could open up a big new spigot of circulation revenue while maintaining its digital ad revenue—something I’ve been arguing for going on four years now. Other papers, like the Star Tribune and Charleston’s Post and Courier followed suit and found it worked for them too. The thing is, no other newspaper needs to be as successful as the Times with digital subs. They have much smaller and much cheaper newsgathering operations. In fact, it was precisely the Times’s success that emboldened others to give it a try.

Buttry’s Point 2:

The gross revenue figure tells us nothing until the Times reveals how much it spent to develop its pay “meter,” how much it costs to operate and promote the paywall and how much its advertising revenue declines because of the traffic it loses from the paywall (or how much extra revenue it gets because advertisers value subscribers more than they value the non-paying audience). We don’t know whether the net revenue to the Times from its paywall is $90 million, $10 million or even a net loss.

“We” don’t know only if we don’t want to know. We do know the NYT spent about $25 million developing its meter. We know it hasn’t materially hurt ad revenue. And while we don’t know how much it costs to operate, we do know this is very high-margin incremental revenue. Certainly more than 50 percent and probably well above 75 percent. It’s in the numbers. And again, it’s low hanging fruit.

Point 3:

The Times announced this week that it is attempting to buy out 30 more journalists. I won’t call a company’s strategy successful until the business is growing, not cutting.

Another straw man. The “company’s strategy” is demonstrably not just to throw up a paywall and stop trying to make money in other ways. The paper just launched a DealBook conference. It spends money on R&D with NYT Labs. But yes, perhaps selling muffins at a newsroom cafe at the bottom of 620 8th Avenue is what it will take to commence growth. Look, if a newspaper with cratering revenue comes up with a $100 million, high-margin revenue stream and you can’t call that a “success” then the failure is yours.

Point 4:

We’ll never know what kind of revenue the Times might have generated if it had spent the millions that it poured into the paywall on more forward-looking strategies.

You’ve got to wonder what halfway competent businessman would look back after at least quadrupling an investment in its first 18 months and think, “Maybe I should have put that $30 million into… what? A social-media startup”? What’s the proven alternative that would have been better?

Buttry goes on to pooh-pooh the success of the Star Tribune’s meter, which garnered 20,000 subscribers in its first six months, creating a new $2 million annual revenue stream twenty times as large as its digital-ad losses—and the paper doesn’t even charge print readers an “upsell” for the website, which is what’s driving Gannett’s success.

As for my $100 million estimate, which is conservative, Buttry claims that he flat doesn’t buy it. Shock. But he also claims I haven’t showed my work. Well, here you go. You have to back into numbers sometimes, as I did a few months ago with Buttry’s bankrupt employer. We don’t just pull numbers out of our you-know-whats.

And he actually says this: “In fact, about the only people repeating the fiction that it’s tough to make money online are those in the newspaper business.”

Um, your own newspaper company is bankrupt.

Finally, apologies to all you regular Audit readers who find the paywall fight tedious. This would just be another edition of Someone Is Wrong On The Internet, but this is much more about what passes for argumentation about a critical subject. Besides, these fallacious arguments are having real consequences, all around the country.

The Washington Post listened for too long. Thankfully, it looks like it’s finally learned its lesson.

To give credit where it’s due, Buttry does attempt to offer what actually qualifies as evidence of his position.

He provides an anecdote from a paywall at a “small regional daily” that has garnered fewer than 300 subscribers in its first few months. Okay. But we’re not told anything about this paywall. Is it a hard and fast one like the Times of London? Is it a meter? How expensive is it? How good or bad is the paper it’s trying to sell?
If you want this anecdote to mean anything, much less disprove that newspapers “gain additional revenue through subscriptions and lose little if anything in digital ads” with modern paywalls, as I wrote, then you have to know all of these questions and more.
But hey, it’s a start.

(2:08 p.m. I added “modern” to paywall in the sixth paragraph above)

Further reading:

Anti-paywall dead-enders: Why worry about evidence when you can argue against straw men?

Owens’s straw man army. A commentator takes 10 swings at paywalls, and misses each time

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.