14 May 2019 12:32:12 IST

A management and technology professional with 17 years of experience at Big-4 business consulting firms, and seven years of experience in high-technology manufacturing, Rajkamal Rao is a results-driven strategy expert. A US citizen with OCI (Overseas Citizen of India) privileges that allow him to live and work in India, he divides his time between the two countries. Rao heads Rao Advisors, a firm that counsels students aspiring to study in the United States on ways to maximise their return on investment. He lives with his wife and son in Texas. Rao has been a columnist for from the year the website was launched, in 2015, and writes regularly for BusinessLine as well. Twitter: @rajkamalrao

Why newspapers in the West struggle to stay afloat

More and more publishers realise there ain’t nothing for free and are now putting in hard paywalls

During the dot com boom, the internet began bringing hundreds of newspapers and magazines from around the world to the desktops of millions of new readers. This was a seminal development in the publishing industry because readership had been previously limited to the number of physical copies sold, plus any pass-on readers who might borrow someone else’s paid copy.

But online publishing came with a feature that has been extremely hard for the publishing industry to shake off: an expectation that content is free, and would always remain free. Undeterred by the various dot com companies which went bust during the first five years of the internet boom, publishing companies continued to embrace an unproven business model. By giving away their most-valuable product for free, the hope was that online advertising would be sufficient to pay for costs associated with news gathering, editing and publishing. After all, the theory went, with the cash saved from shutting down printing presses and delivery vans, operational costs would shrink and the new readers’ clicks would more than compensate.

Things have not exactly worked out that way. Display ads eat up bandwidth and slow the load process driving away fickle, impatient customers, perhaps forever. Persistent readers who want the best of both worlds — no ads but free content — simply install powerful adblock extensions on their browsers. Media companies can’t earn click revenue when there’s nothing to click on.

Trying hard

For the last 8-10 years, venerable magazines and newspapers have been struggling. Some, like Life , never made the transition to online publishing and quietly shut down. Others, like Newsweek , Computerworld and Information Week shed their print operations altogether in favor of an online-only presence. Some, like the Guardian , went to readers with a plea: if you want high-quality journalism, please donate to keep us alive.

Others, like the Daily Mail , invested so heavily in their online journalism that 500-plus stories are cycled out each day, with detailed descriptions of events and high-quality photographs. The hope here is that by constantly feeding the beast with new stories, and aggressively promoting them via free social media, reader interest would remain high and online advertising would be sufficient to keep the site afloat.

Still others simply sold their interests to deep-pocketed individuals. The Washington Post , of the Bob Woodward and Carl Bernstein investigative-journalism fame, had to be rescued privately by Jeff Bezos, the world’s richest man, who bought the paper for $250 million as a trophy asset. The Los Angeles Times and the San Diego Tribune were sold to Patrick Soon-Shiong, a biotech billionaire, for $500 million.

The paywall game

There have been rare success stories too. Two big newspapers made risky bets to charge a subscription fee, and these have paid off. The Wall Street Journal first redesigned its print editions to become smaller in size — to save on physical paper costs — but aggressively pushed a ‘hard paywall’ for its online site. Customers pay a fee of $16 a month for unlimited digital access. This kind of pay-or-else strategy was unheard of in the industry in 2010, but credit the Journal for championing it. Soon after, the Times (of London) also implemented a hard paywall.

The New York Times hesitated to implement a hard paywall, instead going with a softer version. For over 150 years, its readership has been largely retain and loyal, and celebrates the high quality of journalism for which it is known: “All the news that’s fit to print.” The Times has little in common with the corporate clientele and business customers who have subscriptions to the Wall Street Journal .

When the Times paywall was initially implemented, 20 articles a month were offered free. A reader determined not to pay could employ different browsers to exploit the firewall. With four major browsers on the market — Firefox, Chrome, Edge and Explorer — not to mention Safari for Apple devices, nearly 100 articles were available for free. This was not really a paywall at all.

Over time, the Times tightened the paywall to 10 free articles a month, and then, 5. If you had to consume more of Times’s content, the message was clear: You had to pay a subscription of nearly $20 a month.

Determined users who felt an ideological entitlement to consuming Times articles for free discovered a trick. By using Chrome’s Incognito mode (private browsing in Firefox), these radicalists discovered that they could continue to access Times content for free. The architecture of the Times paywall was at fault here. The Times would deposit a cookie on each desktop which accessed its site, to keep count of the number of free articles read on the device. Once the limit was reached, the Times would nudge the customer to sign up for a trial subscription.

In the Incognito mode, browsers do not store cookies. The Times server could never tell if a reader was accessing its server because the cookie count was always zero. Unable to monitor use, the Times dutifully continued to serve up articles to Incognito mode users worldwide.

In April 2019, the Times figured out a way to detect that a user was indeed employing the Incognito mode. Its sister publication, the Boston Globe , had already perfected the technique. “You’re in private mode”, the site began to announce. It was then reprogrammed to ask the user to log in as a subscriber or with a free New York Times account. Once the user logged in, the Times could begin counting the number of free articles consumed on the server end. It began to lock the site out unless the user bought a subscription.

For four million Americans, breakfast and morning coffee without the New York Times is unthinkable. These four million pay $20 a month for the privilege. The subscription model has been so successful that the Times now earns revenues of nearly $800 million each year, neutralising the loss of print subscriptions and advertisement revenue. It also sells online ads but these ads are icing on the cake. The Times is certainly not as dependent upon online ads as most of the rest of the world’s publishing industry is. With revenues stable, and consumers demanding high-quality journalism, the Times has begun to invest heavily in its newsroom. Last year, the company added 120 newsroom employees, bringing the total number of journalists at to 1,600 — the largest count in its history.

Today, there are at least 150 publications globally which operate robust, hard paywalls, some of which have been household names for decades, including Barron's , Bloomberg , The Economist , Encyclopedia Britannica , The Financial Times , Harvard Business Review , MIT Technology Review , New York Magazine , San Francisco Chronicle , The Australian Financial Review , The Globe and Mail , The Japan Times , The New Yorker , Vanity Fair and Wired .

The internet era is singularly unique. In that, everything happens at warp speed. Yet, it has taken the large publishing houses nearly 25 years to perfect a business model wherein readers again pay for content, albeit grudgingly, just like they used to do before the launch of the first Netscape browser in 1995. It goes to show how incredibly difficult it is to withdraw a benefit once it is offered and becomes internalised by the citizenry as a habit.

Politicians should take note. It’s little wonder that government benefits can never be curtailed. Ever.