Paywalls have worked for some traditional publishers, but may not work for digital natives

BI Intelligence

Digital paywalls have helped news publishers like The New York Times and Financial Times stabilize their businesses and mitigate revenue losses in the wake of print's collapse.

Now a new breed of digital-native publishers — like BuzzFeed, Vox, and Huffington Post — is considering whether to follow suit in a bid to decrease their reliance on the volatile ad market. 

Both the incumbents and the disruptors in the online news business must face the same challenge: Millennials are hesitant to pay for their content. Only 25% of US millennials pay for some sort of digital news service (newspapers, magazines, or news apps), according to a 2015 survey from the American Press Institute. Meanwhile, 55% of them pay for entertainment content.

This aversion is encouraging change in the pay-for-content model. Legacy publishers are being forced to reevaluate their existing paywalls and subscription offerings in an effort to drive up new subscribers. Likewise, digital-native publishers that have historically shied away from paywalls are now considering alternative pay-for-content models like micro payments, user-data exchanges, and membership programs that could attract millennials. 

In a new report, BI Intelligence looks at the rise of the paywall and how both traditional and digital-native publishers can benefit by requiring at least some readers to pay for content. We break down the types of paywalls including strict paywalls (all content must be paid for), metered paywalls (a limited amount of content is free), and the freemium content model (a blend of free and premium content is offered). We also examine the publishers that have embraced the different paywalls and whether or not their models were successful in driving revenue. Finally, we look at the future of the subscription model and other paid content models — like micropayments — that may be successful in the future.  

Here are some key takeaways from the report: 

• Most legacy publishers have already adopted digital paywalls, but few digital natives have them in place. In 2015, 77 out of 98 US newspapers tracked by the American Press Association have implemented digital paywalls. However, none of the top digital native publishers have yet to ask readers to pay for content. 
• There is no one-size-fits-all model for publishers looking to implement or succeed with paywalls. Publishers with highly specific and unique content tend to gravitate toward strict paywalls, while those with a more general interest focus often operate with metered paywalls. 
• The traditional paywall model, that asks users to pay for a subscription in order to access content, needs to evolve to be successful in the future. Millennials are more hesitant to pay for news subscriptions than their predecessors. Long term, publishers need to consider alternative models like micropayments, membership programs, and user data exchanges to monetize readers. 

In full, the report:

• Takes a look at the increased adoption of digital paywalls in the last decade. 
• Discusses the three main types of paywalls: strict, metered, and freemium content paywalls. 
• Identifies necessary characteristics for publishers that succeed with each paywall and points out potential threats to these publishers. 
• Lays out how millennials are shaping the future of the paywall model and forcing publishers to evaluate alternative methods to monetize users. 

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