Recently many reports have been published claiming that that more and more people have started to pay for digital news. The most recent report being Reuters Institute’s study, which showed that twice as many users were willing to pay for digital news as compared to last year (To read or download Reuters Institute’s Digital News Report 2013).

extraWhile I trust the reports making the rounds, I think we should take this with a pinch of salt – most people won’t be paying for content anytime soon and even those who are paying will stop paying once they find free alternatives that match their requirements (though I don’t have access to any numbers, I think at max 1-2% of the users of a particular news source will be paying users).

There could be so many hidden reasons for this increase in people paying. What if:

1) Paying is easy this year than it was last year – maybe the news sites have introduced more payment options, a mobile app perhaps where one can pay via a single click

2) More people have access to mediums of payments such as credit cards, billing integrated mobile apps for instance

3) What if most news sites have cut down their subscription costs this year after they met miserable numbers last year? Thus resulting in more users lapping up the offering this year?

4) What if these news sites are now available on more Platforms (read OS) and now support more devices than before?

Whatever be the reason, before going around town saying the digital new payment paranoia has been cracked it will be a good idea to also check what per cent of users were renewing their subscription, and what percentage of users were getting offline print copies of the News if they subscribed to the online news (this is key because some newspapers would do this to increase circulation. And an increased circulation means improved Ad revenues).

I personally think introducing a PayWall before your content is kind of foolish. It goes against the grain of any consumer Internet business where competition exists – get the user to your product, let him/her use your product and THEN monetize.

This is the reason I am partly sympathetic to a “Soft PayWall approach” something that Financialtimes.com proposes to its users – read eight articles every 30 days for free. To read more, subscribe.

Paying users in news sites

Do note that paying for Whatsapp upfront is different from paying for digital news – the Whatsapp experience can’t be had anywhere else, but the same news can be had in so many different places.

Hard PayWalls can work to a certain extent but for that one has to be a market leader in a certain category of news that nobody else can provide like you do. This is exactly the reason (the uniqueness) why WallStreet Journal has more than 900,000 paid subscribers and Boston Globe has fewer than 50,000 paid subscribers for their digital news.

Another key element of news reading is that it appeals only to 25 years plus segment – this means, a good chunk of the readers of these news sites will be 25 plus. I expect only users between 25-40 to form a major part of the paid subscribers. Anybody who is over 40 years of age might not be as comfortable paying for online news because they belong to a different era. Today’s 40 plus folks would have first interacted with Internet when they were 25 years old (15 years back)…and I am sure they still don’t believe in online payments. Leave alone paid news.

If I were responsible for a news portal, I would do this math (it has some assumptions though):

If I asked my users to subscribe for digital news, this is how much I would make-

subscription model for news sites

And if I ran my advertising department well, and refrained from subscriptions for digital news this is how much I will be earning-

ad model for news sites

*CPM = a certain CPM has been assumed to arrive at the revenue from advertising. How much?….it doesn’t matter.

What do you think?