Online Paywalls and the Future of Media: A Few Hard Truths

Yesterday, both The Daily Beast (or, more accurately, whatever Tina Brown can toss together after they've absorbed the corpse of Newsweek and laid a bunch of people off) and the Washington Post announced that they may be instituting online paywalls in the near future, making readers pay to read more than a handful of articles. In many ways, online paywalls are the future of online media. But that doesn't mean they're going to work for everyone. A few unavoidable facts that media executives should consider:

1. For many large legacy media outlets, paywalls are inevitable, the whining of readers notwithstanding. It's very simple: producing journalism requires money. As readers flocked away from print and onto the web, newspapers and magazines found that the money coming in from online ad sales was not nearly enough to replace the money being lost in print ad sales and subscriptions. Revenue must come from somewhere to fill in this gap. If readers want to read the same content online, they will have to pay. They will whine at first, but they will get used to it.

2. If readers don't want to pay for content online that they happily paid for in print, that content will eventually go away, due to the fact that it costs money to produce real journalism. The most realistic outcome—and one that has already been happening in many legacy newsrooms—is that online paywalls will make up some, but not all, of the revenue that's been lost on the print side. Therefore these huge media outlets will shrink somewhat, and probably demand more from each employee, but they will not disappear. In the long run, the overall number of professional journalists will probably shrink, at least until online media figures out how to monetize itself as well as print did. (Since print newspapers were for many decades small monopolies virtually capable of printing money, this is unlikely.)

3. This does not mean that paywalls will work for everyone. Paywalls will work for content that is worth paying for. An easy way to determine whether content is worth paying for is to ask: is content that is more or less the same freely available at a million other places online? If so, you should not put your content behind a paywall, because people will just click somewhere else for it. When a media outlet evaluates itself in this way, it is necessary for its editors and executives to momentarily suspend their egos.

4. Examples of media outlets that can support paywalls: high quality national newspapers (NYT, WSJ, probably the WaPo, and... ?), sites that offer quality financial news to an audience for whom a paywall's cost is negligible (WSJ, FT, Bloomberg), sites that cater to very specific niche audiences with highly specific news that can't be easily found elsewhere (Politico, trade publications of all types, small local newspapers), sites offering very high quality proprietary longform journalism published on a frequent basis. Additionally, magazines that maintain their quality should be able to offer online subscriptions to their loyal subscriber base.

5. Examples of media outlets than cannot support paywalls: mediocre or shitty newspapers that have decimated their newsrooms, shitty magazines with little quality content, sites full of mostly opinions and listicles and other entertaining but easily reproduced things of that nature, most blogs. For example, Gawker Media—a fine, fine company that entertains millions of readers online every month—would not be a good candidate for a paywall, simply because no matter how good our content is, a paywall would immediately cause readers to go and seek out similar (lower quality, of course) content elsewhere online, where it is freely available. The situation is different for, say, Jane's Defence Weekly. The fact that readers like you is not enough to support an online paywall; readers must need you.

6. Guess which of these categories The Daily Beast falls into?

7. For media outlets that grew up online, this dynamic should not be a huge problem. Those outlets have always supported themselves with online ad revenue; they grow in response to the money they make. The problem comes for media outlets that either A) matured in print form, and swelled to huge and bloated proportions, and then, when print collapsed, found themselves trying to somehow stuff that huge, bloated operation into a sleek online casing; or B) media outlets that were founded with a big pile of money from investors, and grew bloated on that, rather than on revenue they actually earned; and when that money dried up, they found that they had all these people they needed to pay, but no real revenue.

8. Guess which of these categories The Daily Beast falls into?

9. This will all work itself out in the space of a generation. Which is no comfort to all the journalists who found themselves laid off before it got worked out.

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