The Bloomberg Paywall Does Not Make Sense

In recent years, hundreds of publications have started putting up some version of an online paywall. Nearly all newspapers now have them; many magazines are following suit, including, most recently, Vanity Fair, where $20 per year will buy you “more breaking news, more in-depth reporting,” and—of course—a VF tote bag. In an age where the Google-Facebook duopoly is hoovering up the lion’s share of digital ad revenue, online publications need subscription money to survive and to pay their employees. At heart, the value proposition is simple: Pay us so that we can afford to continue to provide you with the journalism that the country needs.

Now, however, Bloomberg is putting up a paywall, despite the fact that it can’t make the same claim. Bloomberg’s journalists are paid out of the billions of dollars that its company’s financial terminal business earns every year, at $20,000 per terminal per year. Bloomberg LP could shutter the entire website tomorrow, and its journalists and journalism would continue on the terminals; it’s certainly not facing an existential threat.

What’s more, Bloomberg’s eponymous owner, Michael Bloomberg, one of the world’s richest men, has never worried about the cost of journalism in the past. When he bought Businessweek in 2009, he was warned that the magazine would be a “millstone” that would lose him upward of $25 million per year. His legendary response: “Do I look like a guy worried about losing $25 million?”

So why is the paywall going up? Partly because it can. Paywalls are so common nowadays that Bloomberg was effectively leaving money on the table by not having one. Like the good capitalists that they are, Bloomberg’s executives have decided to pick this low-hanging fruit. As a business decision, it’s a no-brainer.

But there’s something else going on here too, related to the way Bloomberg LP is structured. Alongside its incredibly lucrative terminal business, Bloomberg has a much smaller media business, which, as far as anybody can tell, has never made money. It was never really supposed to: Bloomberg Media, which includes the website Businessweek and a ludicrously expensive TV station, was designed to garner audience and influence for the brand, which would help Bloomberg’s journalists get scoops and ultimately drive terminal sales. The website was the most visible part of that strategy, but the financial black hole was always Bloomberg TV, a Mike Bloomberg pet project whose aggregate losses make Businessweek’s look like spare change lost down the back of the sofa.

With terminal sales flatlining, that strategy starts looking less compelling, and the media business starts having to justify its own existence. The man who was so nonchalant about losing $25 million a year is also, after all, the man who, six years later, wondered aloud whether Bloomberg needed a website at all. Certainly the people trying to sell terminals have never been huge fans of the idea that their $20,000-a-year news service is available for free on the internet, and in recent months, increasing amounts of Bloomberg content have become available only to terminal subscribers.

By implementing a paywall, Bloomberg Media CEO Justin Smith can try to stop his unit from losing money by asking the broad world of internet consumers to pay $420 a year, or roughly 2 percent of the cost of a terminal subscription. But the fact is that the news those consumers are paying for is not the news that racks up hundreds of millions of dollars in expenses every year for Bloomberg Media. The paywall kicks in when you read 10 articles a month by journalists who are paid by the terminal business. The expenses, on the other hand, are concentrated within Bloomberg’s broadcast operations, and especially its misbegotten TV station.

Which is why, ultimately, the Bloomberg paywall feels much less justifiable than just about any other paywall. You’re not paying for the news you’re reading; instead, you’re paying for the television content you’re almost certainly not watching. Bloomberg LP might have some strategic interest in the television station, or it might serve some vanity purpose for Mike Bloomberg personally. But it feels wrong to ask for the TV station’s losses to be borne by readers of the website, very few of whom have any interest in its content, and all of whom have much less ability to pay for those losses than Mike Bloomberg does.

Besides, for anyone other than Mike Bloomberg, money is a zero-sum game: If you spend it one place, that means you have less of it to spend somewhere else. If you’re going to spend $420 a year on news, there are much more deserving places to spend it than Bloomberg. Paywalls are here to stay, and that’s almost certainly a good thing for the economics of the news industry as a whole. But a good paywall should pay for the journalism that its subscribers are reading, not for a broadcast folly that almost nobody watches.