Providers of news are focused on increasing digital revenues to replace income lost because newspapers, news magazines, and news broadcasters have experienced declines in audiences and advertising. Data in the Reuters Institute Digital News Report reveal consumers have increasing experience making payments and suggest their willingness and expectation to pay for news in digital forms is also rising.

The data indicate, on average, 10% of people have paid for news in some digital form – about one-third higher than last year. This growth rate is heightened because of the relatively low base from which it started, but it is clear that there is significant growth in consumers who have paid for digital news in countries such as the UK, Germany, and US.

The changing attitude towards payment is occurring because it is no longer a novelty and consumers are expecting more news providers to require payments in the future. Even among those who have never before made digital news purchases, willingness to pay for news in the future averages 14% overall and rises to 19% among heavy news consumers.

The primary reason that consumers expect to pay for digital news in the future is declining availability of quality free news. This finding is seen in the UK data where 23 per cent of respondents cite it as the reason for expecting to pay, triple the amount for any other reason.

These data support the view that future digital news readers will be more committed to news and represent a smaller cross-section of the community than was previously served by print media in decades past. Digital news thus appears to becoming a product aimed at a niche audiences rather than a widely used consumer product. This is supported by the fact that an average of 48% of respondents reported they have never paid for a newspaper and thus large portions of that group are unlikely to suddenly decide to start paying for digital news. That figure is particularly pronounced in Denmark, France, and the US.

Of those who have paid for newspapers, two important patterns emerge: (1) payments are made at newsstands or shops and (2) home delivery or home delivery plus a digital subscription are involved. The high retailer purchases seen in Italy, Spain, UK, and Brazil indicate high single-copy sales methods; whereas the high print/digital subscriptions and home delivery found in Japan, Germany Denmark, and US indicate habitual subscription-based acquisition. These findings suggest that the predominant pricing methods for digital news purchases will also vary among nations, as publishers adjust to consumer payment preferences.

There are some general lessons to be learned from news organisations’ pay experiences and professional and academic research to this point:

1. Commoditised news does not create economic value because providing the same or similar news to that of others provides no reasons for anyone to pay for it.
2. Willingness to pay is a matter of tradition and consumer expectation and platforms with better payment interfaces tend to have better payment take-up.
3. Consumer payments are becoming more important revenue sources on apps for mobile and tablets than for general online payments.
4. The presence of quality, free competitors affects willingness to pay. If quality digital news is provided free by newspapers or broadcasters in a market, there is reduced demand for paid news services.
5. Larger legacy news players have advantages when seeking digital payments because brand matters and only a few large players in each market currently are currently able to produce sufficient numbers of consumers to monetise digital activity well.

Experience also teaches lessons about the effects of instituting pay systems and reveals that rigid paywalls reduce website traffic between 85 and 95%. The Times, for example, lost 91% of its traffic when it instituted its system. This can be an acceptable business outcome if more income is gained from consumers than advertising revenue is lost due to reduced traffic. As consumer payments become the dominant revenue source, maximising audience is no longer the primary business driver; maximising income is.

Where metered paywalls – systems that allow readers to access some articles before requiring payment – have been implemented, the decline in traffic has typically been between 5 and 15%, thus making it possible to effectively generate both sales income and traffic-driven advertising income.

Cooperative pay systems are beginning to work for digital news providers in some locations; especially for small and mid-sized companies, because they create economies of scale, spread costs, and create easy access by new consumers. Two notable developments in joint pay systems have been Press+ in North America and Piano Media in Europe, which are now providing services to nearly 1,000 publications. Firms such as these provide the conditional access systems, payment infrastructure, subscription and single-payment management, and data analytics to publishers, making it easier for them to implement pay systems.

Public-affairs magazines are also finding it easier to get the public to pay than newspapers, especially on tablets, because digital payments for magazines are becoming the norm and they offer news analysis and commentary in ways general news sources do not.

Research is showing that users of digital services are now expecting to receive more than offline content when they use digital services. They expect to be in control of the experience, with the ability to make choices and influence consumption. In addition, they expect more and different types of content than are available in print, such as access to background information, more connections to original materials, more video, audio, and graphics, and better usability tools. Financial publications, such as the Wall Street Journal and the Financial Times, are serving this later aspect better than general news providers by providing various stock trackers, research reports, calculators, and investment analysis tools.

Developments in paid news have significant strategic implications for news providers. It is increasingly necessary to focus on customer needs. Because digital news is more competitive than print news, its business is about serving customers better than other providers, not just about the revenue needs of the company. If news providers get the first aspect right, the second part will be a natural outcome.

Today, a number of large players are generating 15–25% of their total revenue from digital media. In addition, the sizes of audiences being served are increasing 5 to 10 times because the digital platforms are attracting users who did not read the print news products. Some mid-sized players are also starting to harvest benefits.

These benefits are developing because the public is starting to make clear how it wants to use digital media and news organisations are learning how to align their content and pricing practices to this new environment.

Consequently, news providers are pursuing different strategies with regard to payments. Some (such as the San Francisco Chronicle) are pursuing freemium models, with some general and promotional content offered free and better or premium content behind the paywall; others a metered model, which allows limited access to a few articles as a marketing and ad revenue-generating strategy to irregular users. The majority of papers employing the metered system have set the limit for free access to 10–15 stories monthly. Others (such as The Times) employ ‘hard’ paywalls with payment required for all content.

For those newspapers and magazines that haven’t yet begun charging, the key questions are when will they implement digital pay systems, what content will they charge for, on what platforms, under what circumstances, how, and at what price. Some may continue to pursue a free access policy for a time in order to build digital audiences (such as the Guardian), but at some point most will switch to some sort of pay system to remain economically viable.

News organisations are increasingly offering separate pricing for print, web, tablet, and phone-based news, with many types of bundles for the services. Digital payments are scalable, allowing news providers to provide a variety of sales options including single articles, one-day access, weekly access, or monthly, quarterly, or annual subscriptions at different price points. Consequently, news providers will need to determine which option, combination of options, or bundling of platforms will be best for their various digital operations.

The most visible cases of publishers generating significant digital sales – such as the New York Times – must be viewed as exceptional, however. They tend to be leading national news providers in countries with large populations where digital sales become viable even if they only attract a small percentage of consumers or from countries that have a language (usually English) that can be read widely by international consumers. Digital products offered by Bild in Germany are thus likely to attract more paying consumers than VG in Norway and the Washington Post is likely to attract more international consumers than Kronen Zeitung in Austria. This does not preclude publishers in other nations, or smaller news providers, from pursuing opportunities and obtaining advantages from digital sales, however, but they will need to pursue tailored digital strategies with different expectations.

Paywalls alone are not to be expected to replace all the advertising revenue that news organisations are losing in the digital transformation process and user payments will be just one of a widening array of revenue streams: e-commerce, events, syndication, digital services, and income from non-media subsidiary enterprises. Although employing a range of revenue streams is new for many in the industry, it was common for news providers in the nineteenth and early twentieth centuries before advertising revenue grew so large that they were able to reduce other revenue-generating activities.

The data indicate improving prospects for digital news payments, but news providers will need to be realistic about financial expectations. The digital world will not yield income at the levels of the 1990s, but revenues and profits do exist. As the digital revenues rise – at different rates on various platforms – many print news providers will be increasingly pressured to shed the assets and cost centres that support print production and switch to digital-only production that is more readily supported by the rising revenue streams.