In February 2013 we are hosting Digital Media Strategies 2013, the year's premier event on media business models for publishers. As part of the buildup to the event we're highlighting four key issues affecting the media, starting with paywalls.
Is 2013 the year paywalls become merely one part of publishers' revenue models, rather than a bold new experiment?
Paywalls for UK newspapers and B2B publishers have become firmly established - there are already close to 500,000 people paying for digital subscriptions at the Financial Times and The Times alone. At the same time, advertising revenues, both print and online, are still looking shaky.
But that's not to say paywalls have proved worry-free, or enough to guarantee the future of their publications - even those successful in persuading loyal readers to sign up. It still takes a lot of courage to turn off any amount of advertising revenue...
The Financial Times' trailblazing continues
-- Paying digital subscribers: (as of July 2012) 300,000+.
-- New digital subscribers via mobile: 15 percent.
-- Financials: H1 2012 revenues up 7 percent to £219 million.
One of the first major publications to put its digital content behind a paywall, the FT recently announced it had more than 300,000 digital subscribers, overtaking print subscriptions for the first time.
However, the paper showed its subs strategy hasn't completely removed its dependence on ads when it launched a recruitment freeze and restrictions on staff travel, citing the poor performance of the global advertising market.
Not everything the FT does is paywalled. Readers can see fewer than 10 articles for free each month and many of its popular blogs are non-paywalled. Reuters' Felix Salmon makes some insightful points here about the Money Supply blog going inside the wall.
The Times: subscriptions yet to plug digital losses
-- Paying digital subscribers: (as of July 2012) The Times 132,777, the Sunday Times 126,137.
-- Financials: Not broken out, but The Times and Sunday Times made a loss of £11.6 million in the year to July 3 2012 - but according to former Times man Dan Sabbagh that has now spiralled to a loss of £1 million a week.
The Times claims its paywall is going well and has event resulted in an increase in ad revenue, but not well enough to rein in the losses at the two papers.
Back in Summer, the Times paywall was relaxed, allowing headlines and excerpts from content to be shown by Google for the first time since May 2010.
The firm is also running a promotion with Google, offering the Nexus 7 tablet for £50 - a reduction of £149 - with 18-month subscriptions.
The Telegraph: new paywall initiatives
-- Paying digital subscribers: 300,000+ on iPad and mobile
-- Financials: 2012 - group profits down 7.5 percent year on year to £54.5m, revenues up 2 percent to £331 million
The Telegraph doesn't have a general paywall in the UK but it has begun charging for access for foreign readers. The paywall, seemingly modelled on the one in place at the New York Times, allows readers to see 20 articles before asking them to cough up £1.99 for a month's subscription.
The move has led to speculation The Telegraph is gearing up to put its UK content up behind a paywall - as its management may be convinced online advertising revenues won't be enough to sustain online journalism.
And in the ad-funded corner....
Despite the continued tinkering, it's clear that those three papers remain convinced some sort of paywall is the way to go. The basic fact is this: online ad revenues aren't enough on their own to support the operations of national newspapers, and that idea is gaining a lot of traction.
Of course, there are still the holdouts hoping that rising online as spend will compensate for the decline of newspaper ads (as you can see from our analysis of ZenithOptimedia's forecast here).
The Daily Mail's online revenues are growing rapidly. The firm's preliminary results for the 2011/2012 financial year shows a 72 percent increase in digital revenues from Mail Online and Metro to £31 million. That's good, but almost certainly not sustainable on its own without print income.
At Guardian News & Media meanwhile, editor Alan Rusbridger has repeatedly refused to rule out charging for content at some point down the line, but has shown few signs of doing so.
Digital revenues at the Guardian were up 16.3 percent to £45.7 million last year and digital advertising was up by 26 percent to £14.7 million. It's going in the right direction, but is a long way from plugging annual losses of £40 million and more.
Is the war over or just beginning?
Ryan Chittum at the Columbia Journalism Review recently argued that the battle was already over and those arguing against them were like Japanese WWII soldiers stranded on Pacific Islands refusing to accept the allies had won.
However, free web evangelists hackademics such as Jeff Jarvis weren't convinced:
CJR continues its monomaniacal crusade for pay walls. I want to psychoanalyze that. cjr.org/the_audit/the_…— Jeff Jarvis (@jeffjarvis) November 26, 2012
While there's a growing body of evidence suggesting paywalls can work, to me it looks like the battle lines are still being drawn. Paywalls have become a respectable revenue model, but that doesn't mean someone else isn't going to come up with a way to make ads work.
Or how about this for a new rule of publishing in 2013: no business can succeed with a business model entirely based on advertising and without some form of direct payments. Is that a good framework to live by?
Find out more about paywall business models at Digital Media Strategies 2013 on 19/20 February in London.
Image via flickr curtousey of kennethkonica