Jeffrey Klein

He spoke with Vanessa Valdivia about his thoughts on paywalls:

The LA Times recently launched a paywall this month, can you briefly discuss this: 

The LA Times is pursuing a paywall strategy that is very similar to what The New York Times and Financial Times have done. They are allowing free access to some part of the content and building out a pricing strategy for the rest content. The purpose of this is to be able to capture and benefit from both the casual and loyal user – the “fly-bys” and the “fans.”  This is important because the “fly-bys,” those who may come across an article through a third party search, often make up about 50% of a news website traffic. The “fans” make up a significant portion of the page views because they read a lot of pages and really value the content. The trick is to develop a paywall strategy that allows you to get the benefit of the casual user, as well as the loyal user, to maintain the traffic levels and get advertising tied to the traffic but also derive incremental dollars directly from loyal fans.

Why are paywalls such a contested concept?  

For a long time people thought that paywalls would not work at all, partly because of the amount of free content that exists online. Why would someone pay for it when they can get it for free elsewhere? However, The New York Times, Boston Globe and Dallas Morning News have demonstrated that paywalls are a viable strategy to bring in additional revenues. It’s not a panacea, it doesn’t solve the crisis. It’s a small amount of revenue in proportion to the total revenue, but every little bit helps. For example in 2010, The New York Times had almost 700 million in print circulation revenue – which was about 47% of their total revenue. If they can earn another $100 million from the nearly 400,000 digital subscribers they claim, that’s not huge, but it is a significant increase, and very profitable revenue because there are no costs for trucks, paper or ink. 

 Beyond additional revenue what else can paywalls provide? 

Paywalls can facilitate more creative advertising efforts. What is interesting about the Times is their approach in offering a “membership” service that would provide the reader with more than just access to the content. People who sign up for the Times membership and pay are part of a community that gets access to the information and special deals and discounts.  This is key because they are moving beyond paywalls as just a revenue stream and allowing news organizations to collect better, more valuable information on their readers. This demographic information is key for advertisers  Most newspapers are doing a horrible job of targeting and profiling readers to serve them relevant ads.  

How can the Times maximize their paywall strategy? 

The Times has not done a very good job of strategic development and investment. From technology to city politics, they try to be everything to everyone – and this strategy doesn’t work anymore. They need to articulate their key editorial and business priorities and put money in place to support that. And stop doing the rest. They have to carve out a niche or excellence in certain fields that will attract readers to their content and invest more in those areas. People will sign up for the Times, they have a loyal base. But they will much more successful if they have a content strategy that is clear, understandable and integrated.

In addition to the Times, Gannett has announced eighty of its newspapers will have paywalls. How will paywalls look across the board? 

In the end, the thing you need for a paywall to work is unique content. This does not mean unusual or hard to find – but one of a kind. For example, The Wall Street Journal provides financial information that is very hard to get elsewhere that is critical to people’s careers. The New York Times is unique for its brand and reputation of authenticity and excellence. Paywalls don’t solve the problem, they are just part of a broader solution and business strategy. News organizations have to pursue various revenue models, one of them being a paywall strategy. They have to get a lot more creative and innovative. Why didn’t newspapers invent the Groupon daily deal? Why aren’t they using video more effectively on their sites? If they are going to survive long term, news organizations need to diversify their revenue streams, from advertising and paywalls for niche content, to events, demographic targeting and even direct sales of goods and services.   

Vanessa Valdivia is a Master’s candidate in the Strategic Public Relations Program at Annenberg.