The San Francisco Chronicle announced last weekend that it is now charging a monthly $12 subscription fee for those seeking to read the paper’s “columnists and premium stories” online. Responses on the sfgate.com comment line have been overwhelmingly negative, confirming a lesson I learned from personal experience long ago: most people will not pay for a service they are accustomed to getting for free. The Chronicle’s action particularly makes little sense because it is not providing “must read” news unavailable elsewhere. In January I described the “impending demise of San Francisco newspapers” and the new subscription fee appears to be a last ditch effort for the Chronicle’s paper edition to survive. But this move will primarily reduce the paper’s readership and policy influence, while not stemming its millions of dollars in annual losses.

The Hearst Corporation has made a number of bad moves addressing the challenge of the Internet, and adding a paywall to its popular sfgate.com site (the paywall gives access to a new site, SFChronicle.com) is only the latest. As much as online readers enjoy the thoughts of Willie Brown and other Chronicle columnists, very few will pay $12 a month for the privilege.

The most obvious reason people won’t pay is the sheer volume of free news online, in addition to stories distributed through Twitter and Facebook. And with the lucrative 18-34 demographic completely unaccustomed to paying for news content, few will pay the Chronicle’s surcharge.

The Wall Street Journal has an online paywall, which is why I and millions of others never read it. The New York Times charges non-subscribers for reading full stories after they have read ten per month, but the Chronicle is not a “must read” national news source like the Times, whose own fee plan likely does not materially improve its bottom line.

The Psychology of Price

The biggest problem with the new paywall is that it requires people to pay for something they are accustomed to getting for free. My own experience shows this does not work.

From 1980-1991, the Tenderloin Housing Clinic, which I head, ran a citywide eviction defense center that was the forerunner of the current Eviction Defense Collaborative (EDC). Unlike the EDC, we had no city money to cover the costs of our services, which, by delaying evictions for months saved most tenants in excess of $1000 dollars.

Despite the value of our services, when we were forced to implement a mandatory fee to help cover our costs we found that most tenants only paid the minimum $30 “sliding scale” fee. Accustomed to a free service, people refused to pay more.

The same psychology applies to people’s refusal to pay for Internet news content and their preference for “free” music sites like Spotify over buying CD’s; while the music industry has found ways like ITunes to get serious online revenue, newspapers have not.

Declining Policy Influence

Historically, newspaper publishers accepted losing money in exchange for policy influence. But if the Hearst Corporation is willing to continue losing tens of millions of dollars at the Chronicle in order to shape Bay Area policies, a paywall is a strange approach.

The Chronicle’s greatest influence comes from “breaking” a local story that then forces politicians to act. A classic example is the “homeless in Golden Gate Park” story that caused Mayor Willie Brown to launch helicopter surveillance of the park. Or, more recently, the “expose” of problem street behavior on Haight Street that led to the passage of a citywide ballot measure.

These stories have typically come from columnists now behind the paywall. They will now be read, talked about or retweeted less, resulting in a print product of less value to advertisers.

According to the Chronicle, “the in-depth articles, columnists and photos that have made The Chronicle San Francisco's newspaper for generations have a new digital home with the debut of SFChronicle.com.” This is another way of saying that the paper’s popular sfgate.com site will be left with articles not worth reading, resulting in a plunge of advertising revenue and readership at that site.

Instead of investing in quality journalism, the Chronicle is trying yet another gimmick to survive in the Internet age. If the paper provided must read stories, appealed to the region’s ethnic diversity, and offered top-flight arts and entertainment coverage, this paywall strategy would not be necessary.

Randy Shaw is Editor of BeyondChron