You can't fight what your audience will support

If your typical day begins with coffee while perusing online newspaper, you may want to protect your credit card.

This is because as of March 2011, it will cost you up to $35 a month to peruse the New York Times. But the Times is not the only publication investing in an online paywall as an attempt to generate desperately needed revenue. Currently only a handful of news organizations charge for online content, including The Wall Street Journal, The Financial Times and Newsday.

But is this a necessary evil for newspapers to survive or just a costly mistake that will increase popularity of free news sites? And is charging for newspapers a guaranteed way to increase viewership, revenue and advertisements?

Not at Newsday.

Long Island’s daily paper spent roughly $4 million to redesign and relaunch its site charging online readers $5 a week, or $260 a year, to get total access to news. In three months only 35 people signed up. Newsday’s free Web traffic nosedived, and advertising revenue decreased.

The $4 million that Newsday spent is chump change compared to the reported $40 million New York Times allocated to set up its new paywall.

A factor behind Newsday’s problem is the popularity of free news sites and blogs. In a major media market like Washington D.C. or New York City, a variety of newspapers cover the same geographic area and news. If the New York Times is charging for content but the New York Post is not, what is to say that the frequent former NYTimes.com reader won’t turn to the NYPost.com for free news?

Hundreds of news blogs like Drudge and Huffington Post populate their sites with breaking news and analysis. If online news consumers get stuck behind pay walls, they can search for articles from free news sources.

More traditional newspapers look to investigative stories from non-profit news organizations to publish at no cost. However, the same news story written by Texas Watchdog picked up by the Dallas Morning News and Houston Chronicle is available free on TexasWatchdog.org. As more newspapers use this free content from non-profit journalists, papers that charge will increasingly overlap quality content with those that don’t.

A website charging news consumers is not only costly to the readers but to the newspapers. Newsday’s $4 million redesign has provided a mere $9,000 in revenue. Not many newspapers in this current environment that can risk losing millions of dollars. The current numbers are still out for the New York Times paywall but with $40 million spent, they are going to have to draw a significant audience to recoup their costs.

And let’s not forget that a March 2010 Project for Excellence in Journalism survey reported that 82% of people with favorite news sites said they’d find somewhere else free to find their news if they started asking for payments. Of the more than 2,000 people survey by Pew only 19% said that would pay for online news.

And although early indications are that the New York Times paywall is racking in the readers, a reported 100,000, how many of them joined when it was offered for a free subscription and how many are paying the lowest cost of readership? If half of their readers are reading for free or at a low cost, there is no way that they will break even on this money experiment.

With the majority of the audience unwilling to pay and readily available free options, why should the New York Times paywall be any more successful than the Newsday one? The only way to ensure the success of charging for online content is for every online news site to charge, or no one charges.

Newspapers have to do something to stay afloat, but charging for online content is a risky venture that inflicts the financial burden on readers who are frankly unwilling to pay. If paywalls are the only solutions for the newspaper industry, then publishers and editors need to go back to the drawing board.

Newspapers have to do something to stay afloat, but charging for online content is not the answer.

Jason Stverak is the President of the Franklin Center for Government and Public Integrity, a leading journalism non-profit organization. The Franklin Center is dedicated to providing reporters and non-profit organizations at the state and local level with training, expertise, and technical support. For more information on the Franklin Center please visit www.FranklinCenterHQ.org.

About Jason Stverak

Jason Stverak is President of the Franklin Center for Government and Public Integrity, a leading journalism non-profit organization. The Franklin Center is dedicated to providing reporters, citizens and non-profit organizations at the state and local level with training, expertise and technical support.