Online Pay Walls Will Hurt Newspapers
While a few select newspaper publishers may succeed with a strategy of erecting pay walls around their online content, most of these attempts will fail, according to the new 2010 Media Outlook report from Fitch Ratings.
This prediction reinforces the negative tone of Fitch's generally grim forecast for newspapers, which sees the overall decline in newspaper ad revenues slowing but not reversing in 2010.
The rationale behind online pay walls is clear: Newspapers are in desperate financial straits, due to the implosion of print advertising revenue and the steady decline in print readership. Plus, they have failed to build a substantial online ad revenue base, despite a decade of experimentation. All that remains is to attempt to monetize their large online audiences directly by charging for content.
However, Fitch warns that only a few industry leaders, like The Wall Street Journal and The New York Times, have a reasonable hope of succeeding with this strategy. In areas such as national, international, business and entertainment, news content has become commoditized, with the majority of metro dailies offering content so similar that readers will not feel a need to pay for it.
Thus, Fitch expects most newspapers that experiment with pay walls to reverse course after seeing online audiences dwindle, especially as some news outlets are likely to continue offering their content for free.
Although Fitch believes the steepest declines in newspaper ad revenue have passed, it holds out little hope of recovery in coming years.
The newspaper business has indeed suffered an unprecedented collapse over the last couple of years. According to the Newspaper Association of America, total ad revenues in the first three quarters of 2009 came to just under $19.9 billion, down 44% from $35.3 billion in the first three quarters of 2006.