Paywalls an act of desperation

There have always been publishers who, with varying levels of success, have charged for their content. They tend to be specialist products, or offer high powered financial content like the FT.com or the Wall Street Journal does, but the commoditisation of news and the strategic decision by independent online publishers to embrace and publish high quality opinion and analysis (something newspapers have claimed will be their saving grace) have meant that most content stayed free.

Spilled over to South Africa

The debate has now spilled over to South Africa since Avusa, publisher of the Sunday Times, The Times, Sowetan, Sunday World plus regional titles such as The Herald, Daily Dispatch and others, announced its intention to introduce paywalls on certain of its content properties.

BDFM, the publishers of the Financial Mail and <.i>Business Day, has made similar noises. BDFM is a joint venture between Avusa and UK-based Pearson.

Last week, the Digital Media & Marketing Association (formerly the Online Publishers Association) hosted debates in Johannesburg and Cape Town around the feasibility of paywalls and by extension the feasibility of the local online publishing industry.

The Cape Town leg of the debate effectively pitched Avusa Media Live GM Elan Lohmann and BDFM Digital GM Bronwen Auret, both in support of the view that paywalls are a viable business model, against iafrica.com GM of publishing Bridget Pringle, News24.com GM of publishing Geoff Cohen, and Bizcommunity.com's own MD, Robin Parker. Oh, and against virtually all the delegates present.

Interesting statistics

Both Lohmann and Auret came up with interesting statistics around the feasibility of paywalls but in both cases fellow panellists or the audience countered these quite effectively.

Auret, whose portfolio includes two of the foremost financial publications in the country, held up the success of FT.com's paywall. The site has 5 million unique users and subscription revenue has overtaken advertising revenue on the site, Auret told delegates. It was then pointed out that FT.com could only convert 113 000 of these users into subscribers. That is a conversion rate of less than 2.3% for some of the best business content in the world.

Lohmann announced that paywalls would be implemented at its Eastern Cape properties of the Daily Dispatch and The Herald within the next two months. He claimed that he needs as little as 2000 subscribers on each (representing a conversion rate of 3%) to break even. By my calculations, the Dispatch would need to convert more than 6% of its print circulation and The Herald more than 8% of its print ABC to make the 2000 subscriber target.

Support the newsroom

Media24's Cohen pointedly asked if this fee will support the newsroom of these papers, at which Lohmann had to admit that it did not. At a guess, it would pay salaries for the very small digital team and the tech infrastructure but this hardly makes the site profitable and 2000 subscribers isn't going to generate much ad revenue.

This is at least partly the point, says Lohmann; the region is so poor that ad revenue is hard to find. Yet Avusa thinks it's rich enough pull in paying subscribers?

News24's Cohen pointed out that the Internet unbundles information (remember the days when publishers thought they would keep people on their portals with their shotgun content strategy?) and there is little chance of wrapping that particular parcel back into the paywall, er packet.

Supporters of paywalls misses the supply side from the equation - there is plenty of supply and 'brand name' journalists won't be enough to attract a viable subscription base because there are thousands of other worthwhile and unique voices out there available for free, Cohen argues. Instead of looking at paywalls, publishers need to find workable revenue models and adjust cost models to make their businesses viable.

Last act of desperation

Parker described paywalls as a last act of desperation for publishers still married to print businesses. Largely similar news services and little real differentiation between the content of news portals (and between different newspapers these days) mean little incentive for users to pay for content online. Parker's suggestion that South Africa no longer has a pool of quality journalists drew no contrary views from the panel. In fact, he was backed up by Lohmann, who also stated that newspapers lack a pool of quality journalist today.

That's probably a story on its own - media execs saying we don't have journalists able to do the job - and journalists saying small newsrooms with limited scope for investigative journalism offer them little chance to go beyond the basics. I happen to think we have some excellent journalists in this country, and that increasingly you find them online rather than in print, as they launch their own media platforms.

Following Parker and Lohmann's comments, the debate swung away from the viability of paywalls to the sustainability of the business models adapted by publishers in the first place.

Shift and adapt

If your distribution model changes, surely the rest of the business needs to adapt with it? And if the industry is shifting, then associated upstream industries surely also need to adapt their businesses. Yet here we are, media planners still clinging to their 16.5% and TV sized budgets, and ad agencies doing more of the same.

At this stage, Parker pointed out that Bizcommunity prefers dealing with clients directly (most online publishers do: it's hard enough for print outfits to make it through the data cloud that hangs around media planners at most agencies) - third party involvement diminishes warmth (read budget).

The point being made, indirectly, is that the larger multibillion rand 'media landscape' has hardly moved at all, and that publishers are simply too scared to move on their own in case they leave upstream industries and their control of media budgets behind. This 'all stick together and sink together' strategy is definitely not going to keep media's boat afloat.

Parallel industry emerged online

Possibly this is why a parallel industry has emerged online. You have digital publishers, digital media planners and digital agencies. Who get bought up by offline outfits hoping to stem sinking budgets. Who then tag offline legacies and relationships to the digital outfits who finally implement solutions that makes perfect sense offline but little online.

Some DMMA members took offense once the debate veered towards "your business model is broken." That is a pity. Currently publishing's business model is not scaled for the Internet. Consumer behaviour has also changed and the newspaper model no longer serves reader needs. As moderator Justin Spratt told the debating panel, the online model for content consumption sucks. Passwords or payments for every other site, some stories closed, others open, flashing ads aimed at distracting attention - all of these combine to diminish the user experience. Saying publishing's business model is broken suddenly doesn't seem so ridiculous after all.

I went to listen to a panel of publishing experts debating online business models. I ended up listening to their audience and the frustration they expressed at the legacies 'big media' is bringing to the web. The following goes for marketers, ad agencies, media planners and publishers: we need to fix our relationship with our consumers. And, for some reason, I don't suspect Mr Murdoch is the man for this particular job.