Today, most newspapers in USA have either instituted a paywall (typically some variant of the metered model) or are considering one actively. Hey, even Buffett the legendary investor recommends paywalls stating “…you shouldn’t be giving away a product you’re trying to sell. That’s key to the future of the newspaper”.

However, one of Buffett’s investee companies, The Washington Post Co has thus far been content to stay away from any kind of paywalls. This, even as its peers The New York Times, Los Angeles Times have instituted paywalls.

Why has the Post not instituted a paywall? Is the strategy right?

An insight into the Post’s reasoning for the no-paywall strategy came during an interview with the Post’s owner Don Graham recently.

With approx 500,000 print circulation, 1.4 monthly unique visitors a month in Washington DC, but 20m unique visitors a month globally, (Comscore June 12), the Post punches well above its weight, chiefly on account of its dominant presence in the capital city. Its free website has certainly helped it grow its online presence and audience (even more so now that it is one of the few major US newspapers without any paywall).

According to Graham, a paywall in the case of Washington Post will impact its significant external readership and influence, without correspondingly resulting in any jump in its print copies.

For a NYT or  a WSJ given that a sizeable number of its online readers are in its circulation penumbra, a paywall or online subscription (which is typically also bundled with a print subscription) can help in growing its print copies. But for the Post, there is no easy way to bundle a print subscription with an online subscription, given that its online readership and print readership are largely exclusive – as much as 94% of its online readership is outside Washington DC where it exclusively circulates its print edition.

Thus instituting an online paywall or bundling print and online subscription is never going to lead to an uptick in its print copies, as the NYT saw with its Sunday copies.

Mathew Ingram, in his excellent piece in Gigaom, which in many ways inspired this article makes an interesting comparison with The Guardian, which has a similar outsized international footprint, and which is also free.

Another example, or one which would soon be in the outsized online footprint category, would be the Daily Mail, the world’s biggest online newspaper site (Comscore June12) and another free site.

Basis these examples, we can generalize to create a Paywall Principle. Perhaps one of many, so let us call this Principle # 1.

Paywall Principle # 1 : You can get by without a paywall, relying on monetizing your large online readership through advertising OR you should not institute a paywall IF you meet the following conditions

1. More than 2/3rds of your online readership is outside your circulation penumbra

2. You operate in a global political / financial centre like London, Washington, NY (any others, guys?) ensuring that your presence in this urban hub will give you access to news that the rest of the world is keen to know about or you publish from a country which typically sends out a number of migrants abroad – India, Philippines, China etc

Going by the above, we could identify a few newspapers that have the potential to join The Post, Guardian and the Daily Mail.

# 1 NY Daily News – fits criterion B, but not A (yet!) though it has the 9th largest newspaper site in the World. What is intriguing is the plan to create a yank equivalent of Daily Mail, a high on celebrity quotient site called Daily News America.

#2 The Times of India, or The Hindu – fits B and has the scope to approach A as well. However both will need to work strongly on making their content appeal to a global audience.

There is scope for the Times to parlay its iconic brand status and a surprisingly more salacious online presence (unlike its print avatar) into another Daily Mail. The Hindu, perhaps a more Guardian-like avatar.

I would be keen to have your thoughts! And do let me know if you can think of any other Paywall Principles!

Supportings

Newspapers Monthly Uniques % of monthly uniques outside circulation penumbra Annual Digital Ad Rev
Daily Mail 44,110,000 64%* $25m or £16m (fy12)
The Times of India 16,676,000 36% (sep11)# Estimated under $10m (fy12)
The Washington Post 20,070,000 94% (as per website)** Not easily available
The New York Times 38,110,000 30% (Apr-Oct11 avg) $175 – 187mn ***
The Hindu 3,473,570 34% (sep11)# Not easily available
The Guardian 30,180,000 55% **** $23m / £14.7m (fy12))

Circulation penumbra for Washington Post is Washington, DC. For all others it is the country of publication as these are national papers (yes, even The Hindu).

* ABCe / Omniture, see http://www.mailconnected.com/mail-online

# see http://www.comscore.com/Press_Events/Press_Releases/2011/11/Non-Resident_Visitation_to_Top_Local_Sites_in_India

** Scarborough Research 2011 http://advertising.washingtonpost.com/index.php/audience/page/audience_profiles/

*** NYT digital ad rev calculation as follows

“Digital advertising revenues at the News Media Group increased 10.0 percent to $233.5 million from $212.2 million. “ (http://www.nytco.com/pdf/4Q_2011Earnings.pdf)

Overall advertising revenues (Print + Digital) of News Media Group were $1,116mn (2011 full year) which were split amongst NYT 68% and New England + Regional 32%. I presume the online ad revenue will be a bit more tilted in favour of NYT thanks to the large online audience nationally and internationally. Let us assume 75 – 80% in NYT’s favour = 75% of $233.5mn = $175mn and 80% of $233.5mn = $187mn.

**** as per UK ABCe audit http://www.guardian.co.uk/advertising/display-audience-guardian-traffic-users