Does Local Media Add Enough Value to Justify a Paywall?

Journal Register and Media News Group One hidden storyline in the Journal Register Company’s bankruptcy filing is the role paywalls will play in the company’s next turnaround attempt. John Paton, the CEO of Digital First Media (JRC’s parent company), stated in 2011 his belief that the market value of journalism is “about zero.” Paradoxically, Paton is in the paywall business, controlling “more newspaper paywalls than just about any other executive,” according to the Columbia Journalism Review.

Paywalls guarding valuable content can work, provided that the content is (a) exclusive and time-sensitive, dampening the value of aggregation; (b) expensive to deliver, as in the case of live video content; or (c) easy to track in the event of theft. Most local media content falls into categories (a) and (c), as it’s easy enough to track infringers of reporting from a single local source.

Is there enough demand for local content, however, to justify a media company’s expense in creating a paywall? Digital advertising can sustain companies with national content coverage, but almost certainly cannot sustain a siloed local media outlet as it transitions from publishing in a tradition format (print, TV, radio) to digital publication. So, local can’t make money on display ads alone. The only way local media can make a profit is either by: (a) going national in coverage and making money on nationally-based digital ad sales; or (b) using a shared technology solution for paywalls. The JRC’s effort at approach (b) hasn’t worked because the demand didn’t exist for exclusive, timely local content. Despite its bankruptcy, the JRC (and its parent, Digital First Media) is in the lead in technological innovation for local media companies, so their effort is likely the best of what a paywall will bring.

The inevitable conclusion? Paywalls only work with either: (a) truly exclusive, coveted, time-sensitive content of a national demand (WSJ, Financial Times); or (b) live content that’s difficult to deliver (video streams of like sports games). Otherwise, the winning approach is display ads, free content, and when the chips are down, a national content approach.