Ryan Chittum makes the case for online subscriptions:
Digital subscriptions are an incremental source of revenue at a time when newspapers are bleeding to death and digital ads are bringing in four bucks a CPM. They won’t succeed everywhere, particularly at newspapers that have gutted their newsrooms, and they’re not enough on their own to assure we have robust news coverage. But it’s money on the table that newspapers can’t reject hoping for some nebulous future "free" innovation, which not one of 1,500 American newspapers has yet to find in some 17 years of the Web era.
He also makes a key distinction between a paywall and a meter, which allows a substantial amount of content to remain free and determined by individual readers: "a meter model preserves almost all traffic—and thus, ad revenue— by allowing casual readers to visit 10 or 20 times a month while charging core readers for access." Steve Buttry has more:
The alternative to paywalls is not reliance on CPM ads. As I replied to an anonymous CJR commenter claiming to be a Times staffer, I have blogged about plentiful new ideas for revenue that newspapers have not sufficiently tried yet. And others, such as Jeff Jarvis and Steve Outing have suggested plans such as a reverse meter or membership that I think have notably greater potential than paywalls.
I wish I was half as confident about the potential of paywalls as the evangelists over at the Columbia Journalism Review, but I’m not. I think paywalls might well prove a disaster for The Washington Post, and for many others. I don’t envy my bosses their jobs.
[I]t has also become clear that digital advertising dollars will never offset what newspapers are losing in print advertising—which is why papers want to be less dependent on ad revenue. Advertising, which is high-margin, has historically contributed around 80% of American newspapers’ revenues, far more than in most other countries. This is changing, mostly because advertising has slid so far. In the third quarter the New York Times earned more than 55% of its revenues from circulation, compared with only 29% in 2001. Newspaper bosses say they are moving their papers to a model where they get half their revenues from advertising and half from circulation.
Some parallels from history:
Gordon Borrell of Borrell Associates, a consultancy, thinks that newspapers are in a similar situation to radio in the 1950s. When television became popular, many advertisers fled, much as they did from print after the internet arrived. But within several years some returned to radio and ad revenues stabilised at a lower level [chart].
Hamilton Nolan offers a reality check, noting that "paywalls will work for content that is worth paying for" but also "the fact that readers like you is not enough to support an online paywall; readers must need you." And he believes many will never be able to adapt:
Examples of media outlets than cannot support paywalls: mediocre or shitty newspapers that have decimated their newsrooms, shitty magazines with little quality content, sites full of mostly opinions and listicles and other entertaining but easily reproduced things of that nature, most blogs.
But Nolan adds that new media are better positioned than legacy media:
For media outlets that grew up online, this dynamic should not be a huge problem. Those outlets have always supported themselves with online ad revenue; they grow in response to the money they make. The problem comes for media outlets that either A) matured in print form, and swelled to huge and bloated proportions, and then, when print collapsed, found themselves trying to somehow stuff that huge, bloated operation into a sleek online casing; or B) media outlets that were founded with a big pile of money from investors, and grew bloated on that, rather than on revenue they actually earned; and when that money dried up, they found that they had all these people they needed to pay, but no real revenue.
(Chart from Mark Perry)