Digital publishers are showing a greater willingness to make readers pay for subscriptions as they cope with growing competition from well-funded tech companies, such as Facebook, Google and
increasingly, Amazon.
The pay-walling of the internet -- which defies the “information wants to be free” mantra that inspired countless hackers -– will have several profound
effects on the digital publishing industry.
A slew of digital publishers last week announced they would put up
paywalls on their websites, as CNBC’s Alex Sherman reported on Saturday. The list includes New York Media, publisher of New York, Verizon’s Yahoo Finance and Uzabase’s
Quartz. Their moves followed stricter paywalls at Conde Nast’s Vanity Fair and Wired, Bloomberg News, The New York Times, The Wall Street Journal, The Financial Times
and The Washington Post.
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Remarkably, The New York Times has reported online growth every quarter this year to more than 3.1 million digital-only subscribers, or
about 75% of its total distribution. Digital ad sales have been more sporadic, making steady subscription revenue a welcome sign.
In many ways, digital pay walls mark a return to pre-internet
years, when publications could depend on subscription revenue. But the explosive growth of online audiences compelled many publishers to adopt a strategy of reaching as many people as possible to
boost their marketability to big-name advertisers.
Internet directories like Yahoo or search engines like Google weren’t necessarily considered a threat if they helped to drive traffic
to publisher websites. Facebook also was a source of traffic, although the social network has had rocky relationships with some publishers over revenue sharing.
Facebook doesn’t need
professionally produced content from publishers, especially if its users keep coming back to share vacation pictures, cute animal videos and life hacks. Viewers still tune into the user-generated
content of “America’s Funniest Home Videos” nearly 30 years after the series started.
Consumers show a willingness to open their wallets for digital content, as evidenced by
the more than 200 streaming video and music services like Netflix or Spotify now available. U.S. consumers subscribe to an average of three on-demand streaming services each, translating into spending
of about $2.1 billion a year, according to a Deloitte estimate.
The willingness of younger consumers, especially millennials and Generation Z, to pay for online content likely bodes well for
the digital publishing industry. A new generation of consumers is being trained to accept that digital content has a price. But publishers will have to focus their efforts on creating high-quality,
original content that can’t be found elsewhere.
Unfortunately, the difference between digital haves and have-nots could widen as high-value news content becomes less available to
lower-income groups. These groups may be more susceptible to the misinformation, propaganda and fake news that proliferate on free social media platforms, like Facebook, which benefits from
sensationalist content that engages audiences.
While every digital publisher wants a solid mix of advertising and subscription revenue, market forces likely will disrupt their business models
for years to come.