Thursday, October 25, 2012

The Paywall

One of Canada's most popular newspapers, "The Globe and Mail" has announced that its online edition will begin charging readers $20 every month. Close on the heels of that announcement, the Newsweek magazine announced that they will be stopping the publication of their print edition and go into an all-digital subscription model from the New Year Day of 2013.

Readers' reaction to G&M's announcement was swift and vitriolic. Barring a few exceptions, every one of them was derisive, dismissive and dire. In Newsweek's case, Reuters' Felix Salmon predicted that "The chances that Newsweek will succeed as a digital-only subscription-based publication are exactly zero".

It is unlikely that these organizations, whose professional perch is built on their ability to gauge the pulse of current affairs, would have fancied that even a significant minority of their readership will pay to get what they were receiving for free till now - while material of comparable or better quality continues to be available for free elsewhere on the internet. So what made them try this hazardous route? I guess it was the "memo from the boss".

The technology infrastructure that is required to implement and maintain an online publishing system, comes at a significant cost. One can safely assume, in G&M's case, that it involves at least 150 people (this is just for the publishing system, not to maintain an overall IT infrastructure for their  day-to-day operations). If one were to assume an average of $8000 per month in personnel costs (roughly $6000 in wages and $2000 in associated costs like real estate, hardware and consumable costs), that is a cool monthly expense of $1.2 million right there. Then there are several other costs - software licensing, server lease, data retention, legal, Internet Service (ISP), training, consulting and a whole slew of other establishment costs. And that's not counting the cost of the content itself, which, depending on where it is sourced from, can vary from day to day and month to month. Clearly, the bean counters would have routinely circled, bolded and underlined this huge drain on the corporate resources in their periodic reports to the boss.

Corporations and shareholders do not tolerate under-performing assets very long. The only time an under-performance is condoned is when it is used to gain market share. There is no such argument to be made in Globe's case.

For decades, the pulp-and-ink news media operated on a simple business model. The cost of material, content and operations were funded entirely through print-advertisements. The cost that the subscriber paid, was pretty much limited to the cost of transporting the material from the press to the door. With the advent of the internet, the news corporations were delighted to have a modern channel to deliver their product - and advertisements - directly to the consumer quickly and efficiently. This (among several other factors) prompted them to invest heavily in technology infrastructure.

To be fair, this model worked for several years. Until the advertisers realised that the online advertisements are ineffective, that is. Advertisements are generally of two types - ones which retain a brand or a product image in the consumers' consciousness and the ones which inform or push product information to the customer. While online banner and overlay advertisements did a commendable job of the former, it did a miserable job of the latter. Bandwidth considerations and available screenspace have always been barriers to conveying any significant amount of information unless the user was lured to click on the "teaser".  And savvy users have begun to block off online ads altogether, using browser extensions (AdBlock and NoScript for Firefox and Chrome comes to mind immediately). Even on the 'brand consciousness' front, the marketers must have found that the Return on Investment (ROI) was much greater for a TV ad  compared to a box ad online.

Once the financial crisis hit the world markets, the advertising budgets became tighter, 'analytics' factored into advertising channel decisions and focus shifted from retaining existing market share rather than hunting for more. And to add to that, the explosive growth of social networks afforded tech-savvy corporations dirt cheap (even free) options to connect directly with their target audience.  No wonder that "for every $7 lost in print ads, papers are only managing to secure $1 in digital revenue" as quoted by the Globe.

So, the print media, which already invested heavily into technology, was left holding the bill. They had to pay up or close down (mind you, even closing down comes at enormous costs). I can't blame G&M for trying ways to find money, but the writing on the wall is there for all to see. The 'paywall' for their online edition is not going generate enough money to pay for their online publishing infrastructure. And like Newsweek, sooner or later they are going to realise that in a world where mobile computers like smartphones, tablets and ultrabooks will be the norm, nobody is going to want to carry tabloid-sized pieces of loose paper containing yesterday's news on their subway ride to work, either.

So what would it take for information owners to get their consumers pay for their product? If entities like 'Consumer Reports' (an online and print product ratings company) and Carfax (an online vehicle history provider) can make money on their content, how is it that reputed news organisations are unable to get people to pay for professional journalism? The difference boils down to one word - 'trust'. People no longer trust the mainstream media to provide them with unbiased, accurate and complete information. In fact, the readers' reaction to Globe's announcement confirmed it- most people claimed to have been informed more by the readers' comments to news articles, than the articles themselves. Only when news media works in the interest of the readership (like 'Consumer Reports' and 'Carfax' does),  there is chance that readers might "eventually" pay.

This erosion of confidence in mainstream media developed over decades. The slide began when news came packaged as entertainment in the Cable News Network (CNN) and the audience started flocking around television to enjoy the package of news and brilliant visuals with brackground jingles to suit the mood. Advertisers soon realised that there are more eyeballs on the tube than on the pulp. At one point (in early 2000's), there was even a survey which indicated that over 40% of Americans got their news from late night comedy shows! Rupert Murdoch's media empire took it a step further by running a blatantly commercial news enterprise that pandered to the politicians, industrialists, religious groups, celebrities and the man-on-the-street alike. He became all-powerful and had the money and numbers to show for it. Other businesses which relied on advertisers' support simply had to follow suit or go out of business.

Over the years commercial news channels opiated the audience on free news 24x7 with live footage of matters important and immaterial. Reporting took a backstage and 'storytelling' became the norm. One thing the 'news consumers' did not realise quickly enough, is that the one who pays the piper calls the tune. Discerning readers protested when they were fed political and corporate propaganda day in and day out, but nobody cared.  The establishment was happy with the remaining vast majority that came back to them over and over for their junk-news fix that was doled out free. Even now, one can safely assume that people will rather have free 'entertaining' news than quality, professional and objective journalism that they have to pay for.

As a proud news corporation with a storied heritage, Globe did not go cap-in-hand to their readership begging for sustenance. Instead they made a value proposition which included "a new personalization tool called Dashboard, an enhanced Streetwise column and a subscriber-only business commentary service called ROB Insight". The vocal majority of their readership howled and ridiculed.

I really wish they succeed with their digital subscription model. I do care for the thousands of educated hardworking employees who put in years of service under difficult conditions. It is very hard to keep commercial interests and social responsibility balanced in today's greedy self-centered (this applies to the readership as much as it does to the powers-that-be) fast-changing world . Many of those professionals will find it hard to get into an equally gainful employment in the current economic environment, if they were to lose the current one. Especially the journalists - they will be asked to play on the same field as the hacks with no more than a thought, a thesaurus and a pair of thumbs. For their sake, I wish the paywall works.

But, will I be subscribing? No, Thank You!