The Paywall Is Just the Beginning: Why Variety's Decline Matters

The decline of Variety magazine and its subsequent sale is further proof of the thin tightrope the media and publishing industries are walking today. The iconic magazine looked by all accounts to be doing the right thing: investing online and moving its content behind a paywall.

And "Paywall 1.0" was, by all accounts, a success. Just two years ago the industry was wringing their hands, concerned that people won't pay for content. But for the most part, those companies that did -- The New York Times, Wall Street Journal, Financial Times, and News International -- did not die. They thrived. The New York Times and International Tribute recently revealed that it had over 500,000 subscribers, up 12 percent over a period earlier this year. On Monday, the Wall Street Journal reported that newspaper stocks are up 50 to 80 percent this past year, and paywalls are credited with a lot of their improvement in valuation.

But it's not all roses. As Variety demonstrates, a simple paywall is not sufficient. That's because it never really was about just the paywall. What the newspaper industry needed to do was realise that their readers were their real customers, not the advertisers, and that the only long-term way out of their business model funk was to build and monetise relationships with their readers.

For example, those newspapers that thrived understood that different audiences had different needs, and they designed offerings and bundles that gave their audiences choice. But many initial paywall systems do not allow content and pricing segmentation to reach different audiences. Or, those newspapers that decided to exclusively sell through Apple's Appstore realised that not knowing who their individual subscribers are limits their ability to monetize the relationship.

The industry needs to seek a renewed interest in the customer relationship. They need paywalls, yes, but ones that include cross content bundling, span all devices and channels your customers are on, support sophisticated pricing/packaging and revenue diversification, and must be centered around monetizing and maximizing the customer relationship. Once they embrace a flexible, customer-centric business model, we'll see the media and publishing industries thrive in new and lasting ways.

We've moving to a second era of paywalls. Call it Paywall 2.0. And the publications that adapt to it will continue to thrive, while others will be left in the dustbin of history, just like Variety.