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Not Quite the Year of the Great Paywall

The media is stuffed with pundits proclaiming that 2011 was the year of something or other. For the most part, it’s easy to ignore these trend pieces. Many are simply chum thrown in the water to attract readers over a quiet period, while giving journalists a chance to take a breather.

Still, a few claims caught my eye. One was Mashable’s assertion that 2011 was “the year the paywall worked.” In particular, it argued that the New York Times and Minneapolis Star-Tribune had set a path for others to follow by making money out of paywalled stories. Said Mashable: “News organizations stopped using ‘our content is worth paying for’ as a sole rationale and began strategically providing value for their online content. While the the New York Times‘s strategy was much-criticized when it launched in March, it has since turned a profit. The Minneapolis Star Tribune made an estimated $800,000 in digital circulation revenue during its first month of having a paywall, despite a 10-15% decline in web traffic.”

The numbers may be right, but the sentiment—that these examples prove paywalls work—doesn’t ring true to me. There has been a lot written about paywalls over the past year or two. Our own Mathew Ingram has been covering a lot of ground on the topic over the past few months. (Here’s another of his pieces.) As far as I can see, the jury is still out on the issue.

It’s not that paywalls can’t work—there are countless examples of success over the years. Still, we should be very careful that when they succeed, people take away the right lessons. So I thought I would highlight one small story from a few days ago that may be useful.

How a Paywall Can Kill Your Scoop

A few days ago, I followed up on a story about British Prime Minister David Cameron getting a custom-made iPad app to monitor real-time stats and news from around the U.K. The original story was broken by the Times of London, which famously went behind a paywall in 2010. Since reaction to the story was skeptical, I rang my sources in Westminster and confirmed that work on the app had been under way for a few months. That was that.

Then, as I watched the story continue to spread, I noticed a few things.

First of all, most follow-up reports didn’t give credit for the original story to the Times. Many nodded to a different British newspaper, the Daily Telegraph, which had basically lifted the story from its rival and republished it.

In a world whose media often accuse news of “over-aggregating,” the Telegraph (first published in 1855) has issues: Over the past few years a large number of individual reporters and news organizations have complained to me—sometimes officially—that Britain’s biggest-selling “serious” daily paper has systematically appropriated their work online and not given credit.

It’s unethical. It’s a fact of life. Fortunately, there are still ways to get the right credit out there.

Credit the Paywall for the Loss?

On Twitter, the Times reporter who broke the story, @SamCoatesTimes, tweeted it once and got a little traction. As more active users pushed the Telegraph version and others, the credit went elsewhere as versions of the story spread.

The Times was hit by a triple whammy. Because the original story was hidden behind a solid paywall, most people who heard about it or were writing tertiary reports couldn’t access it. And because the Telegraph chose to minimize credit for the story it had lifted, it was able to fool readers into thinking it had originated the story. The Times wasn’t out in public, owning the story, so it lost at every step.

When I commented about this on Twitter, I drew interesting responses. One person replied that it was “an excellent example of why a paywall is journalistic suicide.” Another said it was proof that “if your writing goes up exclusively behind a paywall, you can’t ‘break’ a news story any more.”

Fair points, but I don’t think it’s that simple. However, I do think the incident I described provides some really useful lessons about paywalls:

You have to own your market first. The more power you have in your own market before you build the paywall—whether it’s a niche specialty or a particular geographical area—the more you can succeed in the short term. The New York Times has brand power that far outstrips its circulation, and it has tried to use it to press readers to pay. In Minneapolis, meanwhile, the “Strib” faces a relatively low level of local competition: Other than broadcast, its big, direct competitors are the Minnesota Daily, which is a very active campus newspaper, and MinnPost, a nonprofit website. This gives it more leeway when creating a paywall. Few outlets have that luxury.

You can’t stand still. Even if an organization institutes a successful paywall, it can’t stop there. Many publishers erect a paywall and retreat behind it—what Mathew has referred to as a “sandbag strategy,”— a long-term defensive move that may crumble over time. Readers need to keep coming in, or else you are simply working to retain the readership you have (something that, by its nature, can only go down). For a start, building a wall opens your market to potential competitors. Take the Star-Tribune: It has done well so far, but is now vulnerable to an attack by an aggressive, lean news outlet with a commercial motivation to offer local news, free at the point of consumption.

The more that’s in back, the harder you must work in front. It’s not just publishers that retreat behind paywalls. Journalists do it all the time, letting their work suffocate behind barricades. Picture a news outlet as a boutique store, with most stock hidden in the back room. When a customer turns up, do you let them browse on their own and walk out when they can’t find anything? Or do you get out there and tell them what they’re missing? We already know that users on Twitter prefer to follow individual journalists, rather than institutional accounts. That gives individual journalists power, but means they have to work harder to promote their stories. And if the story is paywalled, they have to work even harder.

None of this is to say that paywalls can’t work. You have to understand what you are offering, rather than blindly follow examples put forward. When packaged well, paid products offer value to both readers and creators. Here at GigaOM, we have GigaOM Pro, a subscription-only product aimed at technology industry insiders for whom deep, sharp analysis of trends and news isn’t just interesting, but vitally important.

Like so many things in life, the question of whether paywalls can work is a complicated one that probably has no single answer. This wasn’t the year that paywalls paid off: It was the year that some paywalls paid off for some outlets, while the rest struggled. That’s not such a catchy headline. Then again, we all know that sometimes reality doesn’t match the simplicity with which news is delivered.

More from GigaOM:

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Johnson is a writer for the GigaOm Network

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