Where’s the market validation of paywalls for local news?

Image by Bank Phrom via Unsplash

Among my friends in journalism, paywalls are quite a hot topic right now. Everyone has pretty much given up on advertising as a business model, dominated as it is by Facebook and Google. Thus the emerging conventional wisdom is that getting the audience to pay out of pocket for news must be the way to go instead.

I’m not so sure about this idea, frankly. In particular, I’m concerned about the focus on subscription models for local publications, where the industry’s attention is increasingly focused. Rightly so, as such publishers are truly in crisis.

The problem as I see it is that the top of the sales funnel for locally defined publications is too narrow, perhaps to the point that it will never plausibly produce enough paying subscribers to provide bread-and-butter support for the newsroom.

This top-of-funnel problem isn’t present with the more national or even global publications where paywalls have succeeded so far, notably The Wall Street Journal, the Washington Post, the New York Times, and the Financial Times. (Full disclosure: I formerly worked for the first two names on that list — and thus competed against the latter two. 😉)

These are all brands that start with tens of millions of people who have at least some level of interest in their journalism — and thus potentially might be willing to pay for it. Thus, if these publications actually convert only a small percentage of that large audience into paying customers, it still translates into meaningful revenue.

Now, let’s consider some smaller, more local examples like the Tallahassee Democrat or the Lexington Herald-Leader that are much more representative of the median in the U.S. newspaper industry. To stick with the autobiographical tone here, I bring these examples up only because I interned with them in college and think they still do great work. So I’m not picking on anybody here at all. To the contrary, I say all that follows out of love.

These local newspapers’ top-of-funnel starts with… what… maybe a couple hundred thousand people? A million or two, tops, if you liberally count former residents, alumni of local colleges, out-of-town sports fans, and so forth?

Once you run those potential audiences through a realistic conversion rate, I doubt you’ll ever come out on the other end with “real money,” as the expression goes. It’s just a different dynamic than applies to the national names that everyone in the industry likes to compare themselves to and/or gossip about incessantly.

To put it a different way, I’d be curious to find a local paywall that:

  • Launched at least two years ago. And…
  • Is either generating sufficient revenue to support at least half the current headcount of the newsroom next year. Or…
  • Has over 250,000 paying subscribers. In such a case, we’ll assume the organization becomes a potential investment for venture financiers or as a standalone acquisition by some deep-pocketed individual owner who could support journalism in the future.

That’s what I think a minimum amount of real validation would look like for a local publication relying on a paywall as its main revenue stream, using a very conservative standard. (Of course, to be a truly blossoming newsroom, it would be nice to beat those metrics by a wide margin.)

To my knowledge, there’s not a single local example that fits the above parameters right now. But maybe I’m missing someone. If anybody could point one out to me either via Twitter or email peter[at]indizr.com, I’d be happy to update this post accordingly.

One final bit of context, for what it’s worth: Among the national publishers, it’s now been over twenty years since the Journal famously had the first successful paywall in the industry. I can vouch firsthand, people have been talking ever since about translating the subscription model over to a local context. So the current obsession isn’t new at all, even if it’s picked up more steam than usual.

No one’s actually pulled the feat off yet. If that’s not because of serious structural reasons that prevent digital subscriptions from working well for local, why else do you think it’s taking so long?

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Consultant and writer focused on Web 3.0. Former award-winning reporter for WSJ, Washington Post, and Vice. Sometime founder and product manager as well.