Wishful Thinking And Misinterpreting Surveys Won't Save The News Business

Predictions

from the that's-not-enough dept

Renan Borelli points us to Atlantic Business staff editor Derek Thompson’s recent defense of news paywalls, coming in the form of a series of posts responding to the Pew Research Center’s State of the News Media report, and also to a January Harris poll of online adults and their news reading habits. Thompson argues that the numbers in the latter “weren’t so bad”, but his reasoning makes very little sense.

“43% of those surveyed read the newspaper [online or offline] regularly, and 23% said they were willing to pay a fee to continue reading. That means even before the dawning of the Age of the Paywall, more than 50% of regular newspaper readers said they would pay for online news. As for the other 60% of respondents: who cares? They’re hardly reading newspapers online anyway.”

This is a surprising attitude for a business expert, and one that would certainly be foreign to a newspaper publisher. 43% reading daily means a lot of room to grow volume and frequency of readership, especially when you consider that 72% said they read at least once a week, and 81% at least once a month. It would be foolish to disregard that audience. Besides, 50% (a shakily extrapolated estimate to begin with) is hardly a good reader retention rate, and Thompson ignores the clearest message of the survey: less than a quarter of online adults would consider paying a monthly fee for news, and only four per cent said they would pay more than $10. Moreover, “how much would you pay” surveys are notoriously unreliable.

Thompson also makes the curious argument that people have demonstrated their willingness to pay for news online by paying for internet access to reach that news. This is irrelevant and confuses value with price: yes, by making online news one of the reasons they pay for internet access, people have shown that they value it. But this demand doesn’t set a price, it creates a market—one that is highly competitive on the supply side and will always offer free alternatives. The simple fact that a market exists does not say anything about the best pricing strategy within it.

These poorly thought out arguments come from the first post, which Thompson admits was rushed because he wanted his “opening salvo to get out fresh and early”. The second post looks at the Pew report’s breakdown of online ad spending by format, which shows the expected dominance of search advertising, followed by display ads—where newspapers get most of their online revenue—in a distant second place.

Based on this, Thompson seems to take it as granted that advertising can never pay the bills for online news, so paywalls and “other exciting ideas” are the future. He makes no mention of increased spending overall or growth in the display ad sector, of news gaining a foothold in other ad categories, of increasing the efficacy and value of advertising, or of going after brand new markets—all missed opportunities on the road to a walled garden.

In his third post, which discusses some of the “other exciting ideas” mentioned in the Pew report, Thompson finally starts to make a bit of sense. He is skeptical of micropayments, seems ambivalent about microaccounting (basically micropayments billed monthly), and he scoffs along with everyone else at the idea of blocking Google. Conversely, he is enthusiastic about improving targeted ads and curious about the possibility of newspapers gathering more demographic information from their online readerships. Unfortunately, he still seems to think that WSJ-style paywall models are the best strategy for the immediate future.

Perhaps the most common mistake that paywall supporters make is forgetting that people haven’t paid for the news in 180 years. Newspaper readers used to pay for paper, ink, trucks and delivery boys—and often barely paid enough to cover that bill. Now they pay for internet connections instead. Then and now, the reader only pays for access—advertising always has and will continue to pay for everything else.

Filed Under: content, journalism, news, paywalls