In an interesting blog post, The Blunt Bean Counter asks whether newspaper paywalls will save newspapers or if they are just a last ditch effort to save an industry that will ultimately fail. I think the answer is some of each.
Revenues for newspaper businesses will continue to decline as more people opt not to pay for a physical newspaper each day. It will take some time but people like me who like to flip through the dead-tree version of newspapers will eventually die off. Newspaper business people recognize this and hope they can replace subscription revenue from physical papers with subscription revenue from web site access.
For the most part, this won’t work; collectively, people will never pay as much for web site subscriptions as they pay for physical newspapers. The reason is simple: competition. It costs far less to run a newspaper as a web site than it does to deliver physical newspapers. Production and delivery costs are eliminated and there is far less need for administration and other jobs that traditionally existed with newspapers.
If a newspaper is able to operate with bloated administration, it will get undercut on price by a new competitor. No doubt people in the newspaper business feel that they have already cut to the bone, but the cutting will continue.
In the future we will need reporters, fact checkers, editors, and web site programmers, but we won’t need many of the overhead jobs that exist today. The music industry went through this fairly quickly and it will happen to newspapers slowly over the coming years.
Getting back to the original question of whether paywalls will save newspapers, it depends on what we mean by “save”. Paywalls will not allow the newspaper business to persist as it exists today. Overhead costs will be ruthlessly torn out of these businesses to the point where they will become radically different from today’s newspaper businesses. However, there is every reason to believe that paywalls will be used by some online news businesses in the future.