Can paywalls save news publishers?

This article first appeared in The Edge Malaysia Weekly, on September 9, 2019 - September 15, 2019.

Lau: Paywalls only work if you have content that nobody else has and which everybody wants. The problem is no one wants to pay.

Prem: What’s important is to have a good business model that promotes good journalism.

Jahabar: We believe in the subscription model as opposed to a free model that is influenced by shareholders and advertisers.

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TO charge or not to charge? That is the million-dollar question for news publishers as they continue to lose readers who used to pay to read news in print but now prefer to get it for free on online sites.

Putting up a paywall is the preferred choice but with the commoditisation of news that is readily available for free, many publishers seem afraid to make the move.

A paywall is a method of restricting access to content through a paid subscription and there are different models of it.

There is the hard paywall model where the content is accessible only to paid subscribers, thus impacting search and organic traffic numbers. Some opt for the soft paywall model where they take it down when traffic is high, for example, during a general election. Then, there is the metered paywall system implemented by The New York Times, which allows users to access a limited number of articles on a monthly or daily basis. Some media groups use the freemium model, which allows free access to selected articles.

But it has been reported that all these models have failed to get readers to open their wallets as the conversion rate from free registered user to paid customer is as low as 1% to 10%.

“Paywalls only work if you have content that nobody else has and which everybody wants. But the real problem is no one wants to pay,” says Leslie Lau, managing editor of www.malaymail.com, which has no paywall.

“Generally speaking for most media, current affairs and general news will have to be subsidised by other businesses within the group. For example, they can be part of a global entertainment conglomerate, like how The Wall Street Journal shares the same major shareholder as Fox. The fact is that not enough people are willing to pay for content online. Plus, advertising revenue is spread very thinly among so many players.”

The news portal www.malaymail.com is five years old and it has been nine months since the group stopped its 122-year -old print version, The Malay Mail.

On whether there are plans to eventually put up a paywall, Lau says, “No. It may work to a certain extent for large companies like The New York Times and The Wall Street Journal because the US has a larger population base for those two organisations to work from. But it won’t work in Malaysia. It’s a matter of scale and Malaysia’s market is too small for a paywall model to make up for the huge revenue that print used to get.”

In addition, there are many online consumers who want free content and passwords are shared. “Just google paywall and numerous articles will come up online on how to bypass the paywalls of media companies,” says a media industry player.

At home, one of the earliest adopters of a paywall subscription model is Malaysiakini, which was launched as a free site in 1999 but turned to using a paywall in 2002.

Malaysiakini’s paid subscriptions contributed more to revenue than advertising for every year up to 2010. Then from 2011, advertising income surpassed subscription, according to a website that the news portal put up in 2014 when it undertook a crowdfunding to raise money to buy an office building.

The news portal has said that it “fervently believes that independent media cannot survive without independent financing. Its financial strategy aims to create profits to grow the organisation instead of creating a return on investment for its shareholders”.

In 2014, Malaysiakini said it expected advertising to contribute 50% to total income and subscription to account for 40%.

In its note on the crowdfunding, it said, “Some have suggested that Malaysiakini should go free and not charge a subscription fee. But advertising alone cannot fully fund Malaysiakini. Moreover, Malaysiakini would become more reliant on advertisers and would find it significantly more difficult to keep reporting independently, especially on issues that could affect the advertisers.”

Interestingly, four years since the news portal’s crowdfunding, revenue from advertising has outstripped that from subscription.

According to its 2018 financial results, MKini Dotcom Sdn Bhd’s advertising revenue was RM6.09 million, up 26% from 2017. Its subscription revenue shot up 75% year on year to RM3.28 million due most probably to the general election in May 2018.

This means advertising accounts for around 55% of revenue. MKini made a pre-tax profit of RM847,000 last year against RM183,000 in 2017.

Based on a back-of-the-envelope calculation of the subscription rate of RM200 per year for individuals, among others, the RM3.28 million would translate into 16,400 subscribers, which is small compared with the more than 400,000 readers per day who access the site. “So, there are a lot of them out there who read Malaysiakini’s content for free. If every reader pays for his access to the site, Kini should earn a lot more,” says a media CEO.

Publishers have no choice today but to consider a paywall model to pay for costs that have risen exponentially amid declining revenue, says Jahabar Sadiq, founder of www.themalaysianinsight.com.

“The challenge of paywalls is users sharing passwords and people copying and pasting content to be forwarded on WhatsApp for free. We need to discipline people and make them realise that we all need to pay for information.

“We have 7,000 paid subscribers today, about 13 months since we launched our paywall, and we need to get to 25,000 subscribers to be profitable. We believe in the subscription model as opposed to a free model that is influenced by shareholders and advertisers,” he adds.

The news portal’s packages range from free for one week to RM150 for 12 months.

Malaysiakini co-founder and CEO Premesh Chandran believes good journalism is best aligned with some form of subscription or membership.  

“What’s important is to have a good business model that promotes good journalism. There are limitations to an advertising model as it is about page views and eyeballs … but sometimes, good journalism doesn’t draw eyeballs. Thus, a subscription or membership model is best.”

Elsewhere, instead of putting up a paywall, British newspaper The Guardian decided to ask its readers to make a financial contribution if they had liked an article in order to subsidise its investigative reporting, for example of Cambridge Analytica and the Paradise Papers recently.

The newspaper announced in May that it had broken even for the first time in recent years, thanks to the record online traffic, reduced costs and increased financial contributions from its readers.

In its 2018/19 financial year, Guardian News & Media recorded an operating profit of £800,000 compared with a loss of £57 million three years before. The company announced that it had 655,000 regular monthly supporters across both the print and digital versions of the newspaper.

Back home, Star Media Group informed investment analysts in June that it planned to put up some sort of paywall by the third quarter of this year. Industry observers will be keenly watching The Star for its next move. The newspaper’s print sales have dropped 40% in the past five years to around 150,000 copies a day at present. Star Media needs to find a way to cover the loss and charging people who visit www.thestar.com.my is what it is considering.

Two years ago, The Star introduced a paywall for access to its business news section in a tie-up with The Wall Street Journal. It has not indicated how this has fared but a check on its website revealed that StarBiz Premium is no longer available as a standalone service.

 

 

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