Episode 1 | Why have a paywall?

Welcome to the Paywall podcast where we discuss paywalls and paywall strategies. We will talk with some of the publishers that we work with at Zine 101. The things that work and the things that don't. There are so many amazing things you can do in the digital world as a publisher to not only increase your digital subscriptions, but also engage your audience.

Let's get started.

My name is Peter Erickson, Most people call me Pete. I'm the CEO and founder of a company called Zine101. We create a, we built a paywall, metered paywall for WordPress called Leaky Paywall, which has been in action for about four years. I am with Jeremy Green, who's our lead developer for Leaky Paywall here, here and also with Tyler Channel. And Tyler has joined us recently and is running support, but also runs his own business for supporting news publishers in the West Virginia and outlying regions, I would say, and has had a lot of success with it. So the three of us decided that it might be fun to get together and talk about all the cool things that are and all the positive things that are happening with publishers that are starting up paywalls. And so our topic for today is why have a paywall? So I'll just jump in a little bit upfront and say that when we started dealing with publishers about 10 years ago with our first product, which is called Issuam, which is a web issue publisher for WordPress, and that opened the doors to a lot of publishers, we then essentially got hired to build a paywall. And at the time, this was maybe five years ago, I remember tracking what the New York Times was doing because they were having a lot of success with what they called at the time a metered paywall. So before five years ago, most publishers and membership sites and content producers were putting up what you would call the hard paywall. So they were deciding what content to lock down and, and what content to open up and then taking, taking on memberships. And so what the New York Times realized is that the problem with the hard pay wall is you're blocking Google search and you're blocking social sharing as really two big deal killers for them. And so they created their metered paywall. And at the time, I think five years ago, they were offering 20 free articles per month as the sort of the free don't have to register or do anything. And then after 20 articles you, you would need to pay to get full access. And that started taking off. They hit their 1 million mark as far as subscribers Go. I think it was maybe a couple years later, pretty quickly. And, and I read a recent headline in the past week that says the New York Times tops 5 million subscriptions as ads decline. And I think that's pretty amazing because I remember thinking, geez, I think they're over 3 million now. I went digging, I was like, wait a second, they're over 5 million now? That's incredible. So here we are talking about why have a paywall? And I think for anyone who's looking at who's producing content really of any kind, whether being a news publisher or a magazine publisher, if there's content on the web that's valuable to your community, subscribers will pay for access. It's become very clear in five years we've seen publishers start with a paywall really from zero. And remember Modern Drummer magazine, when we launched them three years ago, maybe they had, they had, their content was really available as a PDF, their magazine is available as a PDF purchase really had very little traction on it. And when we launched, remember we launched the site for them, we had put all their magazine articles in this web issue format so that they were getting Google traction and social media sharing traction. And in two weeks they, they signed up 900 paying subscribers. And I know today that they're still getting, you know, double digit subscriptions every day. As far as paid subscribers go, it's been a pretty amazing ride. So the thing that I think it's really important is for any publisher to realize is that if you're starting to lean on digital ad revenue, you're probably already seeing that it's not paying the bills. And digital subscriptions is one of the answers to, okay, well, if print is declining and print ad revenue is declining and we have a website here, now absolutely is the time to make sure that website is publishing content the way you want it to publish and then ask for payments. Now there's also kind of a big debate on whether news publishers in particular take subscription payments or donation payments. And I don't think anybody's really landed on what the right model is. And I think each community probably has a slightly different model and that's publishing content. I mean, there are a lot of ways to do it. You publish the content on your website, take a subscription or ask for a donation, publish content in a paid newsletter and just require a payment to subscribe to that newsletter, or publish a free newsletter and ask for donations. And as far as local regional news coverage, all these models work and they do with recurring income, produce that nice stable income stream that you will grow over time as you produce more and more quality content for your audience.

Yeah, I feel like that's one of the things that a lot of regional news outlets, they struggle with. Well, we're more of a public service. We don't want to have to charge people and, you know, and have for years relied upon digital or not digital, but just ad revenue from their print product and their circulation is, you know, that doesn't really make any money for them. That's just sort of a cost. It offsets the cost for them. So. And those who have tried, at least the ones that I've worked with, have gone with a membership style where they charge 5, 10, $15 a month. And, you know, it works, it works for them even in, even in markets where there's like 2,500 people. And I tell people that all the time. I'm like, you know, I get pushback because they read it, they read a headline from the New York Times and they're like, ah, five million subscriptions. That's great. But I'm, I'm in like, you know, a town of 2,500 people. There's no way on earth that that that would ever work, especially given the Internet challenges in a state like West Virginia. And that's really not a problem. I mean, people subscribe, not just in West Virginia, but they subscribe across the country. And it actually works. I mean, I had a client who got the Welch news down in McDowell County, West Virginia, and within a matter of 10 days of going live, this was about, you know, a month before the coronavirus, you know, hit, they saw 100 new paying subscribers. So, I mean, in a market of 2500 people, that's not bad.

Yep.

And what was their, what was their rep, what was their subscription income, digital subscription income prior to that? 0.

So the same day that I launched their website, we launched the paywall. So there was, you know, all of that was done in tandem.

So.

Yep. And I think one of the reasons why it's. The paywall is working now is because people are so used to kind of the subscription model of getting anything really these days from, you know, Netflix to Amazon. We've just been kind of conditioned to. That's just the way that the world works now. So I think it's a good time as far as that's concerned too, because a lot of people previously have been, why should I pay for news digitally? Everything should be free online. And I think that mindset shifting with everything going on in the world of quality content is worth Paying for. I think people are starting to get that and they're showing that with their pocketbook whenever they pay for those digital subscriptions. So just the fact that they're going up shows that people are starting to think that way.

Yeah. And I think it's always hard, too. In many ways, the news industry sort of set this precedent that we're going to put all of our content online for free. And then when the ad revenue wasn't there, it can sometimes be difficult to convince people that they need to pay for this content now when they were otherwise getting it for free for all these years. So I think you're right. I mean, it's now that there's information everywhere. If you're paying for the content, it's more than likely going to be of more value, hopefully, at least. Hopefully it's accurate content if you're paying for it. So, yeah, that's.

Yeah, I think that especially for local regional news publishers, you know, they have a bit of a monopoly in their area. And, you know, if you're, if you're producing, if you're the number one producer of local content communities want to know what's going on. They have nowhere else to go. They will pay you. It's pretty simple. Some people. What I hear sometimes is, oh, well, the New York Times, they're like a special animal, right? Like, they're the New York Times. They got branding, they got all this. Yeah, of course they're doing well because they're the number one, you know, national newspaper or, or whatever. Right. And. But I think that's just completely. That, that's missing the whole point, you know, like, I'm looking at a chart again from this week that shows back in 2008, their, their, they're. Their ad revenue was twice their subscription revenue.

Right.

I mean, think about it. Advertising 2008, that's 12 years ago. Still. We're in the digital age, pretty modern digital age. And their ad revenue was twice their subscription revenue. And then you go walk forward to 2012, and their ad revenue is about the same as their subscription revenue. And then their numbers for last year, for 2019, their subscription revenue is now almost twice their ad revenue. So even a monster like the New York Times is seeing their ad revenue just get crunched. It's a quarter of where it used to be back 12 years ago. And their subscriptions have been growing, I wouldn't say explosively, but steadily. And so they've hit that mark because, you know, so they are, they are arguably the number one in their niche. Right. National news. And if you look at, you know, Wall Street Journal is another big one. They're probably number two, I would say. And then who's number three? I have no idea, you know, who the rest are. But they're. And they're all competing, right? They all want subscriptions. But the problem is, is, you know, to get the subscription, you kind of do want to be the number one in your niche, you know, and that's when things start to click. So, yeah, for local, regional news publishers, you have a monopoly. You have the ability to absolutely take subscriptions or donations. People will pay you. And if you're a magazine publisher and you have a niche which you are at the top with, again, it's the same equation. People will pay you. You know, let me just keep, keep rolling here. You know, when you look at ad revenue, digital ad revenue, there's just so many things working against the publisher today. You have Facebook and Google are, I think they're claiming 90% of the ad revenue today. You know, so it's, you know, it's just changed completely from Google introduced paid search and then Facebook with all the demographic targeting, you know, it's a very, very tough to compete against it. Although in a later episode, we can talk about sponsored advertising if we want, and of the goodness that's happening there. But, you know, today it's like, how many ad blockers are people running? You have 40% of readers that have installed ad blockers, so they don't even see the ads. And then there's ad fraud. I mean, the ad fraud is so rampant, nobody can agree, but everyone agrees that it's just rampant, you know, that, that the publisher is getting, if they're lucky, they're getting 30%, you know, of the dollar spent in ad revenue. And then they don't, they don't, you know, the robot clicks are off the charts and very hard to, to know exactly what they are. So the, the, unfortunately, the digital ad game is, I think, kind of done. You know, the display ads, they don't do well on mobile. You know, we're all on phones or if you look at your Google Analytics, probably tracking 70% of your audiences on their phone. How do you squeeze ads, just these big fat display ads onto your phone? It just doesn't, you know, you can interrupt and we, you know, with our app platform that connects to leaky paywall, we've done tests with interstitials in the apps where you go from one article to the next and it loads up an ad like an interstitial. Is sort of a full screen ad shows up, you have to look at it for a couple seconds and then it goes away or you have to tap it to go away or whatever it's called an interstitial. And the aggressive publishers that went for this, they just bailed because their readers just said, no way, this is garbage. We don't want this.

I think people too, like for me, you know, I subscribe to Hulu for content and I pay the extra fee every month to not have commercials.

Right.

You know, I want to get rid of as many ads in front of my face as possible and just get to the content. So for me it's worth, you know, the extra dollars to remove the ads.

I think that's a great strategy for a publisher. I think, you know, you could, you could easily do that with, with our software, I'm sure with others too. But you, you create a Premium subscription level. Five bucks a month, ten bucks a month. I've seen 15 bucks a month for local news publishers, magazine publishers, probably in the same ballpark, and create a premium level that's like one or two dollars per month higher and it wipes all the ads off the site. That's a big revenue gain.

When you guys were talking about this, it was making me think about, you're talking about the ads. When Google introduced this whole idea of like looking at a surve and like, you know, inputting data and then, and then showing you content. And I was just sitting here thinking about like how ridiculous that sounds to give, you know, to give that information to Google and let them make the decision on how much money they'll pay you for the content that you're producing on your site and just the whole ecosystem of Google and Facebook and the digital ad space and the way that they sort of the way ads are tracking with cookies and stuff like that, just so many ethical and moral dilemmas that you can get yourself into when you start thinking about the ways in which they run those systems.

That's interesting. You know, I think I've heard of those approaches before. I think the biggest issue for me is time, because we live in a world where time is the biggest challenge amongst us. And if you're forcing readers to spend time to do something to access one article, they probably won't even do it unless they're super motivated. And I think that's also the problem with one time payments for an article. It takes too much time to drop in a credit card and get through the whole transaction process. When you just want to read one you know, thing. Yeah. So I know that, you know, payment systems, you know, cryptocurrency, but, but, you know, like, payment systems where you can pay a nickel for things. I mean, they're those, those are an active development. The problem is they have to become popular, like, ubiquitous. Like the credit card. Everyone has to have it. That's the big challenge.

Yeah, yeah, yeah. And it's interesting. I've seen a pretty big trend lately too, with the ad blocker, where if you go to a new site, you know, they'll notice you have an ad blocker and not let you be the content unless you turn it off or subscribe. And you know, for me personally, 90% of the time, it's not even worth it. And so I just leave. Right, right. So, you know, figuring out a different. Different method there, you know, it's an important part of it.

Yeah. Because it takes too. It literally takes too much time to turn off your ad blocker and refresh.

Yeah.

We're just in such a hurry these days. Absolutely. Yeah. Maybe we'll talk about ad blocker strategy at some point. Yep.

I did want to touch on something you were mentioning a little bit earlier. You know, going back to the. The main question. Why have a paywall and niches and how that relates to having a paywall? Because we have seen some sites where a paywall didn't really work. And, you know, the number one reason being that the content was too general. If it's content you can find anywhere else for free, then, you know, there's not a lot of motion motivation for someone to pay for it. So do you have any thoughts on that?

Well, I think that's why, like, USA Today and other smaller national publications are really struggling with subscriptions, because they, you know, you can find information about, you know, politics or, you know, what's going on in the world or sort of the bigger news of the country. You know, there's just so much of it out there that. Okay, well, why. Why would I give your. My money to. To you when I can wait, when I can get this for free? And I think that's ultimately the really big challenge with the, with the more. The smaller national publishers. And, you know, I, I remember reading a book on, I think it was a 7 immutable or 21 immutable laws of marketing or something like that. And this is, this is a. It's an old book. It's a great book. Everybody's into marketing, and one of the laws is that there can only be one or two major players in Any given industry, with a few exceptions. So, like, when you look at, you know, Coke, Pepsi, right? You know, you got a major player, you got a second player, and then who's left, right, A bunch of smaller players. You know, you have Hertz, Avis, right? The two biggest players. And so the reason we, excuse me, have this is because psychologically, our brains can only really hold sort of that number one position in our heads. Like, oh, this company does that. Right. And that they must. They're like the best at that. And then a number two, our brain has enough room to maybe remember a number two, but you get to number three and four and five in the top 10, forget it. You know, so with publishing, it's the. It's the same thing. You have New York Times, you have Wall Street Journal. Then I don't know who's third. Do you guys know who's number three? I have no idea. Right. And so. And now combined with the fact that you can get, you know, this, the. The news everywhere, it's. It's. It's a. It's tough. You know, if. If I were USA Today, I probably look hard at figuring out how I could produce unique content for USA Today. That's. That is just different, you know, And I don't know what that. What that niche is, but there's probably one there that they could really dial into somewhere.

Yep. And I think there's a lot of room, too. You know, you have your big markets, but then when you start to niche down into smaller markets, I think that's where the opportunity really lies, because you can be so niche, like with local publishing, if you're the only one writing content about your local area or even a specific topic. You know, we have lots of magazines that are very niche. You know, they might only have, you know, 5,000 subscribers, but those 5,000 subscribers are very committed to that particular niche, you know, so it's kind of that idea of like the 1000 true fans. Sometimes that's all you need to have a, you know, a profitable publishing company. You know, it's not going to be the size of some national players, but it can still be. Still make a good revenue stream.

So I have a friend, and this is like, sort of. It's a great point, and it dovetails on what Tyler said, too, about being in a small market. So I live in a small market. I'm up in New Hampshire, Nowheresville, New Hampshire. And I have a friend who started a newsletter. It's free, you can donate, but. And he only started a year ago. And he assembles the news from, from the colleges and the local newspaper and Reddit and Facebook and all the groups that are out there, listservs and things like that. He's got 6,000 subscribers now, you know. 6,000, right. Like in a year in a very small area. So you know, yeah, focus, focus on that niche. And I agree a thousand percent. And if you do a good job with it, people will follow you and then, and they'll pay you.

Also it reminds me of, you know, I've talked to publishers who are like, you know, well, can you, can you get me like, you know, half a million views or a million views a month or something? And you know, really the trick here is not so much views, it's like how about like a thousand or two thousand subscribers paying you 5, 10, 15, 20, $30 a month? You know, that's, that's really the goal.

That's right. That's exactly right. Yeah. So we should absolutely talk about how to bring those subscribers on what we've seen works future episode. The thing that I think is so cool is you can use a paywall to generate email leads rather than a pop up to generate email leads. Now pop ups work. You know, you put a mailchimp pop up in front of somebody and say, join our newsletter. It works. Absolutely. Do people hate them? Yeah, but they work. But with a paywall you can set up a free registration level which entices people to drop off their email address in a very organic relationship building way where now you're being the good guy as a publisher and building your email list which is good for, for converting paid subscribers. And you get the added benefit of getting advertisers to sponsor your bigger email list. So that's our wrap on why have a paywall. We're going to keep talking about paywalls and paywall strategies and we'll talk about some of the publishers that we work with, things that work, things that didn't work down the road. There's so much to talk about and what's really cool is there are so many amazing things you can do in the digital world as a publisher to not only increase your paid subscriptions, but to engage your audience better, build your, and build your email lists. And those are, those are some. There's some big wins available to you out there that are already happening and we're going to talk about them.

Thanks for listening to the Paywall podcast. You can find us@paywallpodcast.com Be sure to subscribe in your podcast player of choice and we'll see you next episode.