Pay Models for Online News

Making content king online


In short

It is no secret that journalism faces financial difficulties and sustainability questions. Especially in the field of digital news, news organisations keep looking for innovative and effective business models. A growing consensus emerged about the fact that digital news should be equally paid for. Specific pay models for digital news have been created and successfully applied by a considerable amount of media websites worldwide. The most well known to have efficiently adopted pay models for digital news are The New York Times, Financial Times, The Economist, Le Monde, The Wall Street Journal and De Correspondent [1]. Up until now, three principal models have been the most extensively used and discussed regarding their effectiveness and functionality: paywalls, memberships and crowdfunding.

However, some critical reflections are needed:

  1. Pay models are not always useful as the readers decline and choose loopholes or switch to alternatives.
  2. Certain persons will never be able to afford to pay for news and in this way, digital pay models form a socio-economic inequality in society.
  3. Some pay models are met with emotional confrontation from the users, which leads to the devaluation of a news source and total refusal of all products of its’ brand.
  4. The devaluation relates to the questions of pay models’ effect on the quality of journalism. Consumers might turn against a perceived ‘business before citizen’ attitude.
  5. Pay models are unable to solve fundamental problems due to their partial applicability and highly critical effects on different levels.

Nevertheless, the popularity of digital pay models is based not only on success stories but also on actual positive and acquitting aspects:

  1. Pay models contribute to the quality and efficiency of professional journalism as more resources can be devoted to the sake of working for the public interest.
  2. Paid for digital news equalises the borders between all markets (especially newspapers market) and their rights of being paid.
  3. Pay models reinforce and enable citizens’ involvement in journalistic processes and allow an exclusive possibility to share responsibility owning the news website together.
  4. News sites in most cases use revenues not so much for the purpose of profit, but for the execution of journalistic tasks.
  5. Such methods as crowdfunding allow the entrance of valuable initiatives of journalism which would not find enough of resources to establish a website by themselves.

Based on various considerations and best practices, several recommendations can be formulated for publishers willing to explore pay models. Using pay models they should:

  1. Cleary present their motivations and the necessity of additional revenues to the readers;
  2. Try to establish a transparent and respectful relationship with the readers;
  3. Offer unique content or services not to be found for free or at all;
  4. There is no one-fits-all solution, thus regard pay model as a partial revenue method and understand its’ potentials and limits;
  5. Combine the existing pay models, include other tools and consider future alternatives.

This white paper presents the extensive review of currently the most common pay models in digital news content. Firstly, the concept of digital journalistic content and the reasons of why it lacks revenue is covered. Secondly, the definitions of three principal pay models are introduced and discussed including representative examples. After that, the positive and the negative views, as well as future alternatives, are presented. Finally, guiding recommendations are suggested, keeping in minds the functionality and value of applying pay models.

Paying for news: a short history

The ongoing digitization of news, leading to free and easy-to-use journalism, has driven the wide adoption of digital news [2]. Even though its definition and nature are debatable, in general, digital journalism is

“an old practice in a new context — a synthesis of tradition and innovation”[3].

Including all varieties of the discipline in the sphere of the Internet, the essential function of digital journalism is to adopt digital technologies while researching, producing and delivering news and information to media-literate communities.[6]

One of the most essential all-time challenges for journalism is its economic sustainability. In the beginning, the low costs and easy to entry barrier for newcomers were seen as a principal asset of online news over the more complex economic models of press or television. However, the production of digital news also meets challenges of sustainability because of several reasons.

  1. The economic structures of mainstream media mainly based on austerity and advertising revenues are hardly applicable to online news. Digital advertising is monopolised by major companies such as Facebook or Google[7].
  2. The largest part of news users is unwilling to pay for online news, regarding it as free content.
  3. Online competition for peoples’s attention has soared, including from social media and citizen journalists [8].
  4. Journalism is not a viable model by itself, requiring additional revenue sources next to reader fees.

Over the last years, this led to an increased awareness that digital news should aspire to find a way to expand revenues. This is not to say that news organisations have not yet looked into this.

“the first newspaper [that started] to charge for access to its content was the Wall Street Journal, in January of 1997, a year after launching its website”[9].

Rather, the issue has become more pressing in recent years as advertising revenues have dropped and competition has increased [10]. Seeing many media companies which already enabled paying for news some time ago, three principal and most common ways of asking readers to pay for access to digital content are distinguished. This paper will overview these methods and their functioning in some particular cases as well as will evaluate their motivations, possible effects and usefulness.

Paving the way for paying for news

Due to financial challenges, journalists are obliged to seek for a sustainable income and charging for access to news is one of the most flexible ways to get more revenues. Otherwise, the quality of digital production risks to decline as extreme means of cutting expenses (decreasing resources of staff, reducing the scope of news, etc.) would be necessary for news organisations to survive.[11] These circumstances lead news organisations to search for ways to make their online audience pay for news. It relates to “Software as a Service” (SaaS) model implying licensing and delivering services grounded on paying for the access. The model is generally applied in the fields of healthcare and its’ applicability is seen in the field of journalism as well. However, the definition of journalism as a commodity and clear determination of the service or product offered is still a debatable issue in some cases [12]. We can distinguish three principal ways for news organisations to generate income from their audience.

Paywalls, subscriptions and freemium models

The first model of setting a pricing for online news is the use of paywalls, something often aligned with subscriptions. The paywall is considered already a standard feature of the industry because of its successful implementation in various cases [13]. Paywalls are broadly classified in two categories: hard and soft paywalls, based on the level of access to content without a fee. Hard paywalls require users to pay for (almost) all the content, which makes it a quite challenging and complicated approach. It is defined as orientated to the principles of premium content of high value, targeted audiences and market domination. This type is mostly associated with mainstream news sites such as The Times. In this case, the newspaper was already leading in print and had its readership, allowing the company to apply a more radical use of paywalls to its digital properties without losing a loyal audience. As people were already used to pay for subscriptions, the decision to merge the markets including the web page and enabling to reach the news on other devices for the same subscription was an acceptable and beneficial shift for both sides. Soft paywalls offer more freedom through what is called a metered model, which is illustrated by The New York Times. This type of paywall lets readers access a certain amount of content without paying and only invites them to buy a subscription once they want to read more articles beyond that amount [14].

The New York Times has adopted the perspective of paying for online news explained by a principal objective of all news websites — high-quality journalism [16]. Their news website’s mode to ensure sustainability is based on a paywall and “a variety of digital subscription packages”[17] .

The New York Times explicitly presents their pay model technique introducing various possibilities to users with or without subscriptions, however from 2011 when the subscriptions were activated the settings of access to their news stories was adjusted several times accordingly. The specific model of The New York Times is explained as metered model, which provides a limited amount of articles fee-free and requires to buy access after exceeding that amount. The number of articles accessible decreased gradually from 20 to 5 units per month in addition to unrestricted access to look through the home page, fronts and classifieds. In terms of variety of subscriptions, the price varies from 3 to 8 euros monthly depending on additional informative entertainment content and excluding their academic section. It is acknowledged as easy and efficient for both readers and business holders of the web page. The New York Times emphasises that buying the subscription

“provides access to NYTimes.com from any computer or device, as well as access to apps on portable devices”[18].

Subscription is a way to extend the period of selling the product or the service and at the same time receiving a periodic payment from a subscriber [19]. Describing the case of The New York Times, it is crucial to include the fact that they have adopted the method of paywall without clear motivations or justification [20]. Nevertheless, after firstly having some difficulties, The New York Times is now considered as one of the first significant examples of charging for news in the digital environment.

The tactics of subscriptions chosen by The New York Times also partly represents the concept of freemium, meaning a hybrid access model . This method works when part of the free content is accompanied by a request to pay wishing to reach special content or more extensive usage. This model draws the attention of the audience by offering free stories which afterwards can be supplemented with premium services [21]. The use of this method is considered an effective way of increasing the attention of digital consumers and enhancing their loyalty to a particular website. Freemium in accordance with paywalls is considered to be the most used technique across Europe. [22]

Membership

Another revenue source for digital news producers is membership. As subscription is orientated to the loyalty of readers, membership is almost the ideal of this principle. Digital membership plays out the factor of belonging to a community. Creating this kind of community mentality, memberships offer a wide range of services or products which are accessible only if the user signs up. Membership methods could be also extended in terms of applying additional conditions and introducing the following classification of “general member” and “premium member”. In this case, membership fee gains emotional value which is especially evident in the invitation to support by The Guardian: “Join Guardian Members”[23]. The use of language persuades the reader that “if you read us if you like us if you value our perspective” it is worth to “become a Supporter and help”. In exchange, the reader receives exclusive benefits as membership to the global Guardian Members community or getting emails from The Guardian journalists. membership emotionally affects the audience, presenting them with a feeling of belonging to a larger community, and sometimes even of superiority over the ‘freeloaders’ [24].

Crowdfunding

Being a separate sort of a broader process crowdsourcing, crowdfunding is also a relatively often used method to receive money from readers for realizing journalistic initiatives. As the concept of crowdsourcing is mostly related to outsource services, ideas, and information to readers, crowdfunding specifically concentrates on money:

“the aim of crowdfunding is to gather financial resources as a small investment with no return to be produced in order to organize or carry out an activity”[25].

A significant part of crowdfunding is the essential role of the users who participate in the process of creation while commenting, voting and sharing the content.

De Correspondent has successfully performed crowdfunding for the establishment of their project. The founders of De Correspondent emphasise the exclusiveness of the relationship with the supporters provided by the specific environment of crowdfunding. The request for contribution is reinforced by their different from mainstream attitude (“De Correspondent is an antidote to the daily news grind”), which is orientated towards quality worth of support:

“Our Correspondents cover the most important developments in their area of interest, rather than speculating about breaking news or the latest scare”.

Moreover, they support the idea of their journalism belonging to supporters, in this way showing them respect and staying transparent about their motivations. Again, it is associated with an emotional level of how a user perceives and is going to spend his or her money. In this case, users are attracted by an innovative approach to offer information opposing mainstream news as well as by a highlighted opportunity to participate and feel important. In addition, crowdfunding for De Correspondent allowed taking such remarkable commercial decisions as not turning to advertising and offering absolute transparency of costs. Nevertheless, in the case of De Correspondent, the crowdfunding played an essential role in the creation of a specific, community-orientated journalism platform. They explain the key points of crowdfunding as being fully orientated to the welfare of the community of their supporters [26].

Show me the money… or not?

Aalthough paying for digital journalism is partly acknowledged as a solution to financial challenges or at least a source of additional revenues by journalists, part of the readers still sees digital news as deliberately free content. Unwillingness to pay for online news is specifically evident in users’ reaction to some particular pay methods. This is an important note, as many news executives claim that pay models are an efficient solution to counter economic instability [27], certain experts are much more critical. Different attitudes towards pay models and their feasibility are distinguished in the field of digital journalism.

They say ‘no’ — the users and the experts

Not everyone agrees on the benefits of paywalls. News users still quite often refuse to adopt paywalls. This might cause pay models not always resulting in additional revenues, because instead of paying, consumers tend to change their habits and switch to alternative news sources, search for loopholes or other creative workarounds [29]. Refusal to pay might be inspired by a range of individual reasons or by simply being unable to afford it. The most common of reasons is represented by the attitude of people who believe that the amount they have spent on the hardware, software and connection should be enough to receive free content of digital news. [30] In the second case, people from lower socio-economic groups are left behind by being able to access only a minimal range of news. According to this tendency, pay models might bring a broader issue of social inequality creating a new digital divide [31].

Coming back to the importance of emotional levels in users’ choices to pay for news or not, being transparent about revenues is a significant factor. Considering the case of The New York Times, their choice not to reveal why they started paywalls and subscriptions could be considered as a strategic mistake. Explicit justification of pay models results in increased trust from users. In addition, people do not question the rise of the prices, however, they normally respond negatively when their behavioural freedom is restricted [32]. This may cause a feeling of not being respected and news brands being driven merely by commercial interests, leading to people valuing their preferred news sources less. On top of that, users might generally be less concerned with ‘saving journalism’ than with getting access to their preferred news source.

More broadly speaking, paywalls may strengthen the perception that journalism is a commodity over a needed public service. In this case, the use of fees for online content is only hiding the more complex structural problems of the news business. From a legal perspective, this includes the issues of copyright and antitrust affairs. Regarding economic aspects, the questions remains whether paywalls are capable of compensating the deficits of the news industry as the majority of users are likely to flock to free alternatives, especially when news organisations fail to be transparent about their motivations to put up paywalls. From a democratic perspective, concerns are raised by paywalls neglecting Internet’s fundamental principle of being open as well as the exaggerated emphasis on financial aspect in news production. Some professionals argue that journalism becomes basically a consumer product ignoring the principal superiority of journalism serving the public [33][34][35].

‘They say yes’ — the voice of reporters

Opposed to these concerns are the majority of publishers that see paying for news as an inevitable component of the contemporary ecosystem of news production. As regards the critical financial state of many traditional businesses in journalism, the additional revenue sources are necessary [36]. The users of digital news are receiving a value, meaning the ability to reach the content available anywhere, anytime, and it is legit to adopt a payment for such a service [37]. The democratic argument is then twisted in favour of journalists, who need the revenues to enhance their work in the interest of the public and public debate in a democratic society. In this sense, paying for journalism supports the fundamental functions of journalism: it provides journalists with adequate resources to spend on fact-checking and investigative journalism, gears their output towards fulfilling the interests of readers rather than of advertisers, and lets them write stories that add to the public debate rather than lure extra readers in. [38][39]

Moreover, paying for digital news may be interpreted as a way of equalising the value of news across devices and platforms. In this way, the revenues from buying a newspaper and paying an online access fee symbolise the equality of the markets [40]. Furthermore, the choice of memberships as pay method (e.g. adopted by The Guardian), provides exclusive possibilities for citizens to participate in journalistic processes and contribute to the creation or improvement of news. This outcome relates to the journalistic principle of accountability enhanced by sharing the responsibility with news users.

More importantly, the limited viability of news as a commercial product indicates that the additional revenues are vital for the existence of news rooms. In this context, the attitude of asking users to pay goes beyond commercial gains, and rather becomes an act of collaboration and mutual commitment to the democratic functions of journalism. In achieving this, news organisations will benefit from transparency, showing that reader revenues are necessary to safeguard the organisations’ very own existence.

‘It works’ — Recent success stories

Although the tendency to migrate from news channels using pay models to alternative free sources is still very common, a relatively large amount of major digital news websites is related to one or another charging model [41]. The New York Times, The Guardian, Financial Times and others have found successful ways to introduce these methods in their internal economic systems and are still using them in a profitable way. The trend to pay is also reinforced by global increase of crowdfunding projects which adopt the concept of financial support naturally as their primary idea. Crowdfunded companies such as De Correspondent are tuning into those news users who appreciate the public value of news, turning consumers into members of a journalistic, collaborative community.

Nevertheless, we should ask ourselves what factors explain these succesful endeavours. The generally known justification for paying is receiving something in exchange and in this case, the supply of exceptional content is one of the most relevant advantages. Hence, offering highly specified information or in-depth content legitimizes paying for this type of news. A perfect example here is the website of the Financial Times, which mostly presents news regarding economic issues in a sophisticated way. The professionalism and determined direction of the content allow the profitable application of pay models. It is in first instance a specific group of consumers that boost an individual high interest in the broad range of news, are confident in the quality of the content and are susceptible to attractive deals that are willing to pay for premium content [44]. Also, studies show the direct relation between the willingness of readers to pay for digital news and being loyal buyers of paper news products [42][43].

Hence, it is still critical to understand the applicability of certain pay models in specific cases. What seems to be key overall, is the necessary condition of presenting unique content to use pay models [47]. Other than that, there is no one-model-to-rule-them-all. It is crucial to consider all possible factors, and this includes looking at possible alternatives for the future.

Future alternatives of pay models

While understanding the rapidly changing nature of journalism, it is necessary to constantly search for innovative models and seek to ameliorate the current ones. The necessity of finding new perspectives for receiving additional revenue is also influenced by the controversial functioning of current models, which might not be beneficial enough to truly support journalism. In this context, various new possibilities to pay for news are being explored [48].

The idea of interactive or dynamic paywalls is taking the concept of paywalls to more complex levels. Patreon, originally a crowdfunding platform, now allows anyone to easily set up a paywall around their content, also for very small amounts. Kickstarter has expanded Drip, the previously subscription-based platform for supporting artists, to allow more variation in the amount or period of time one can support content makers [49]. The company Poool is proposes a dynamic paywall, using web metrics to tailor paywalls to individual behaviours.

Another avenue in paying for news can be found in Netflix-like all-you-can-read models. In Europe, Blendle, a company offering pay-per-article access to a cross-brands catalogue of newspapers, has taken the lead here? In 2017, they started offering a premium subscription model for 9,99€/month offering people 20 articles, tailored to their preferences, from across all the news brands in their catalogue. Another example is Texture, which is offering unlimited access to 200 plus leading magazines for 9,99$/month. The company was recently bought by Apple. Research shows that people are attracted by the idea of paying for several news outlets at the same time or the unlimited use of access across devices. [45]

When to build a wall?

With the general decrease in trust in media and increasing role of news content generated by social media, the digital news industry is experiencing complex financial challenges. This has led to an increased attention for — and believe in— paywalls as a way to achieve sustainability [51]. This is further being stirred by success stories from The New York Times, De Correspondent or the Financial Times. Nonetheless, critical voices about the efficiency and justification of the use of pay models nuance their actual functionality. How to go about then when considering the use of pay models?

1. Clearly state your reasons for charging for news

The necessity to clearly present why a pay model was applied is vital. This feature is highly important because it relates to news users’ psychological level of emotions. The crowdfunded project of De Correspondent illustrates this well, as they communicated from the onset their goals and why it was necessary for them to charge readers if they wanted to achieve these goals. In their A short guide to crowdfund journalism [52] the founders highlight their principal interest to serve the public and work for the sake of quality journalism. They continue to emphasise the journalistic ideals in their whole format of activity and the structure of the website. Moreover, they focus on their financial transparency, in this way treating their members with respect, which in turn leads to a committed and trustworthy member base.

A related aspect is the importance of inciting a sense of collaboration when looking to commit people to pay for news. The Guardian’s membership model is devoted to creating a relation between journalists and the readers. People’s inclusion in the journalistic work and its processes guarantee a special relationship that goes beyond a mere money-for-product transaction, but includes a partnership for better journalism. It includes having the readers heard, showing the appreciation of their support and rewarding their loyalty.

2. Provide distinguishable content or services

The uniqueness of the offering is another crucial aspect when charging for news [53]. This uniqueness can apply to the kind of content, such as is the case with The Financial Times, but can also consist of membership to a unique community, which is more what The Guardian and The Correspondent are offering. Uniqueness might not be indispensable, but it has a strong influence on the mind of news users as an explaining factor of being worth to pay. The case of Financial Times also clearly pictures this aspect. Being the first to apply “metered model” of paywalls [54] they interact with particular communities interested in specific information and guaranteed quality. In this case, specific and determined content helps in creating a loyal audience of readers willing to pay for subscriptions. In the context of differentiation, the specific deals (e.g. possibility of one subscription covering the supply of news in different devices) should also be considered wishing to keep the loyal users interested and attract the new heavy readers of digital news [55].

3. Be careful when betting all your horses on reader revenues

As a one-size-fits-all pay model does not exist, it is crucial to evaluate the application of a payment model case by case. The example of a hard paywall illustrates this well: this pay model might work only for major and already profitable news websites. It is hence also important to keep in mind that for most players, pay models are still primarily a way to supplement existing advertising or other revenues [56]. Admittedly, news users might slowly get accustomed to the idea to pay for digital news, reader revenue is far from covering the working of journalism in its own. It will be especially important to monitor their effectiveness in the long run, as new payment models like Blendle and Texture surface on the horizon and ever new applications, platforms and other technological innovations keep on entering the news ecosystem. The current successful examples of reader revenues should be held against the light of a worldwide market that is still based on free access news and comprised of readers that consider free alternatives when easily available.

4. Be creative and combine revenue streams effectively

Wishing to attain the maximal financial profit, online news business models should be subjected to constant evaluation and reconsideration. In this case, it is essential to look at the future alternatives and improved models of the tools already in use. Keep up with the rhythm of innovation and always seek to fully play out the strength of digital news. Be creative in exploring hybrid revenue streams or applying new technologies allowing a better understanding of the digital processes and audiences.


Final Notes: getting value for money

The all-time questions of financial sustainability of journalism are highly reflected in the business of online news too. In this context, pay models were already successfully used in a variety of digital news websites. However, the complexity of digitization and an often non-transparent evaluation of pay models makes it difficult to consider them a sole and maybe even a principal sources of revenue, except for a few exceptions.

More precisely, pay models’ succes is quite unpredictable as their success is highly dependent on different factors. Pay models’ efficiency is strongly related to the approval of the users and news organisations’ ability to communicate to them in a constructive rather than oppositional way. Moreover, possible inequality issues grounded on financial interests might occur. In this case, economic profit might appear as the essential goal of journalism in this sense commodifying it. However, a more positive perspective implies that pay models are aimed at the general amelioration of journalism functioning and provide opportunities for significant journalistic initiatives. The use of pay models relates to the idea of audience inclusion in journalism and in this way, contributes to primary ideals of the discipline.

Although the potential usefulness of pay models is proved by plentiful success stories, there are many factors playing in single cases differently. The need to find an appropriate model, to be transparent and seek for the best possible relationship with one’s audience is significantly important in applying pay models in digital journalism.

The use of hybrid models including other technologies and improved types of the current pay models should be considered in future digital news business structure. Although the current pay models in digital news have not completely taken shape, the need for consideration of possible improvements is evident. However, in general, the innovation in the business of journalism is going into the right direction and the idea of paying for digital news is slowly permeating consumer attitudes. Keeping an eye on these evolutions is highly recommendable for editors and journalists that sustainability for their work.