If you build it, will they pay? Paywalls ignite debate across Canada

TORONTO – Whether they’re lauded as the future of online media or labelled a scourge on the flow of digital information, opinions abound on the rise of paywalls in Canada, and the conversation is only going to get louder.

The concept itself – asking readers to pay for editorial content online – isn’t a new one, but it’s now being instituted at many media outlets across the country.

Those in the newspaper industry say it’s a natural and necessary evolution. But are Canadians willing to fork over their credit cards to sign up?

Observers say it’s too soon to tell, but they warn that those who hope paywalls will crumble could be waiting a long time.

“I think the paywalls are here to stay,” says Vincent Mosco, a Queen’s University sociology professor who studies the media industry.

“I think it’s an inevitable development that has no guarantee of success.”

Experts say quality journalism costs a lot of money, and declining revenues from print advertising coupled with lagging digital ad sales have created a funding dilemma for many news organizations.

The economic downturn of 2008 compounded the problem as it diminished advertising spending in general and forced many people to cut back on spending, which included cancelling subscriptions to newspapers and other print products, said Mosco.

Many in the industry hope paywalls will provide a new source of revenue as personal spending picks up once more. One frequently cited example of such success is the New York Times, but observers caution that the paper is an “elite” product.

“One of the reasons why the elite newspapers succeeded while the day-to-day kinds of newspapers have not is because the former have invested in top notch journalism … whereas what we’ve seen in the mainstream of ‘next tier’ newspapers is that they’ve been cutting back substantially on their investment in good journalism,” says Mosco.

Canadian media companies implementing paywalls, which range from $6 to $20 per month, seem well aware of the challenge they face in maintaining the size of their readership while simultaneously trying to make a new funding model succeed.

“The one thing we did learn about the audience is that people don’t like change at the beginning,” says Paul Godfrey, President and CEO of Postmedia Network.

Some Postmedia papers – including the Montreal Gazette, the Ottawa Citizen and the Vancouver Sun – have been experimenting with paywalls this year. The company plans to put the rest of its newspapers behind a paywall in the first quarter of 2013.

“We knew that, ultimately, in order to really succeed or save the industry from total collapse that you had to start charging for online, knowing full well that this wasn’t an instant cure…It’s a marathon, not a sprint, to bring in more revenue,” Godfrey says.

The Postmedia papers with paywalls have seen “slow, steady growth” so far, and while Godfrey expects a minor dip in online readership numbers when all the company dailies start charging for digital content, he expects the decline to be a short-term one.

“If you provide compelling content the reader is looking for – high journalistic quality, columnists that are fan favourites – people will return,” he says.

Similar feelings are echoed at The Globe and Mail, which launched its much-anticipated paywall just a few weeks ago.

Although many griped about the newspaper’s plans to charge for digital content, the Globe’s publisher says the paywall’s initial performance has been pleasing.

“I think it’s safe to say that the response so far has been in excess of our expectations,” says Philip Crawley.

“Long term I think we see digital subscription revenue playing a pretty big role, but it’s going to be a slow, steady build…We have both new and traditional revenue areas that continue to do well, so this is another string to our bow.”

Perhaps even more important than the revenue it could eventually bring, paywalls will now allow newspapers to provide richer data about their readers to advertisers, and that, says Crawley, is incredibly valuable.

“The agencies are saying…’We want you to tell us what the intentions of your audiences are,'” he says.

“We are working very hard to develop more intelligent data. The paywall, by gathering more information about how people consume our content, helps us to do that.”

Simultaneously, adds Crawley, the information a paywall can glean could also help newsroom staff gauge how audiences react to different stories, which in turn would help them better understand readers’ wants and needs.

The Toronto Star, which boasts the highest newspaper circulation numbers in Canada, will also be watching the evolution of its audience very closely once it puts up a paywall next year.

“People who are more deeply interested in the issues of our region and our population are going to become a larger component,” says publisher John Cruickshank. “We’re going to know a lot more about this audience…That’s the kind of information that will allow us to talk to advertisers in a more informed way.”

While the Star has yet to reveal when its paywall will launch and how much it will cost, the paper says it will use a metered system, which asks online readers for a fee once they surpass a certain number of articles. Cruickshank hopes the move won’t dramatically impact the number of online visitors.

“The real question is where you set the dial… We want to have lots of sampling,” he says. “On the other hand if there are people who are coming to the website every day who aren’t subscribers, then we think they should be contributing.”

Whether enough readers will agree with that thinking remains to be seen and some observers are skeptical.

“The undifferentiated local paper is in great trouble because there are so many free substitutes and even if some people may step in and say they’ll pay for the content, I’m not sure that’s enough to support the decline in revenue,” says Kaan Yigit, a media analyst with Solutions Research Group.

A poll conducted last month by the market research firm found 15 per cent of respondents said they would pay an access fee if their favourite newspaper started charging for online content – a figure Yigit says is too low to be sustainable.

To offset future losses, he suggests newspapers may centralize to reduce costs, use more syndicated content and explore more online video features which, when paired with video advertising, could be a growing source of revenue.

Yet some say part of the paywall model actually allows newspapers the potential to boost their print following.

“One of the reasons papers put up paywalls is to protect their print circulation,” says Kelly Toughill, Director of the School of Journalism at the University of King’s College in Halifax.

“If I have to pay for it online, maybe I’ll take it in print and my value is far higher as a print customer than an online customer because print advertising is far more valuable.”

Ultimately, Toughill suggests readers will become accustomed to paying for access to news online if the content truly fulfills an audience’s needs.

Whether outlets can do that in Canada, however, remains to be seen.

“I think we’re moving into uncharted territory,” Toughill says. “People are thinking differently about the business model of journalism, are willing to innovate and have let go of a lot of the assumptions that were holding back innovation.”