Jan 31, 2013 · 8 minutes

On the surface, Andrew Sullivan’s bold move to sell subscriptions to a new, independent version of his blog, The Dish, seems to have paid off. In the four weeks since putting out a call for subscriptions to the site at a cost of $19.99 a year, Sullivan has brought in $489,000, which is just over half of what he estimates he needs to sustain the five-writer, two-intern company for its first year.

But there is reason to be skeptical that Sullivan’s ad-free, "freemium" model will work in the long term. Most of the money Sullivan raised so far came in the first three days, with almost $300,000 on the first day alone. Just a few days out from the blog’s February 4 re-launch, subscription revenue has slowed to less than a trickle.

If Sullivan’s plan is ultimately going to prevail, he will need to find a way to get more of his audience to pay up, and to do so more regularly. If his rate for converting unique visitors to paid subscribers is the same as the New York Times’ – about 1 percent – then revenue from readers alone simply won’t be enough. And if he is serious about not having ads on the site, then he may well have to bump up the price of admission, perhaps to the detriment of overall subscriber numbers.

Sullivan, who has sunk “a couple hundred grand” of his own money into the new company, is in pursuit of a kind of utopia for the independent journalist: a wholly reader-supported model. He won’t be beholden to any commercial interests. He won’t need salespeople, and he won’t have to answer to any corporate overlords. There’ll be no need for the imprimatur of the Daily Beast, where his site will continue to be hosted until Monday, or the Atlantic, where he previously published the blog. His brand will stand on its own two feet. He wants to run the show, and to do so he has to keep his operation small and nimble while turning to his readers for help. It’s like NPR without the tote bags or government support. But it remains to be seen whether or not he can get anyone outside of his most dedicated following to pony up twenty bucks a year.

He is betting that Web publishing dynamics have reached a point where a “leaky meter” approach is not just tenable but potentially profitable. Sullivan seems inspired by the New York Times, which asks readers to pay for digital subscriptions even though all its stories are available online for free, provided a reader doesn’t read more than 10 stories per month. That way articles from the Dish can be shared freely on social media and remain part of the online conversation. At the same time, those who derive the most value from Sullivan's work are the ones who pay.

Sullivan’s experiment has attracted media interest for one good reason: a lot of people want to know if it’s going to fly. The Washington Post, Slate, The Atlantic are among the most recent of the big publishers to consider similar freemium models. While the idea of cold, hard paywalls is nothing new, the prospect of friendlier leaky meters at least appears to hold some promise.

Thanks in part to Apple and its App Store, along with the likes of Netflix and Spotify, people are getting more used to paying for online media. To take an extreme example, New York Times tech blogger Nick Bilton recently noted that in 2012 he spent $2,403 on digital media, including ebooks, music, movies, TV shows, apps, games, and magazines. The average American household, by comparison, spent $2,572 on all forms of entertainment, not just digital, in 2011.

Sullivan points to paid-content success stories that he says have encouraged him to take the leaky meter route. First, there was Radiohead, which asked fans to pay whatever they liked for its “In Rainbows” album. Then there was Louis CK, who made more than $1 million by asking fans to pay $5 for digital video of a comedy special sold directly from his website. And then there’s the Times, which has found surprising success with its own porous paywalls. One analyst estimated that digital subscriptions netted the Times $91 million last year, accounting for 12 percent of all the newspaper’s subscription sales.

These, however, are fringe examples; just the cream of the crop. We haven’t, for instance, heard of the financial results of Louis CK’s peers, Jim Gaffigan and Aziz Ansari, both of whom have also gone the direct-to-audience approach with their own comedy specials. Those specials went out nine and 10 months ago respectively. And while people are quick to point out the success of the New York Times’ digital subscriptions, there’s no guarantee that a smaller paper with a more localized audience would enjoy similar results.

About a year ago, Sullivan and his two Dish partners, Patrick Appel and Chris Bodenner, came to the conclusion that online advertising was not going to be enough to sustain the site. They considered three options: renew the contract with the Daily Beast; throw in the towel completely; or go to back to being independent, but with a premium model. “It really was a conversation in which the logic of the argument just led us to this conclusion,” Sullivan says of the decision. “It wasn’t a brilliant idea of mine that I persuaded everyone to go along with.”

For some years, Sullivan thought that advertising would do for online journalism what it had always done for print journalism. “There was a period of time a couple of years ago when that seemed possible,” he says. “But it sure doesn’t seem that way now.”

Sullivan and company felt that the Dish involved a small enough team of staffers and a big enough readership to make some sort of paid model work. While it serves 1.5 million unique visitors a month, its operational costs are low. “We felt that at that scale, if we couldn’t make this work, then who could?” But there was also a “throw caution to the wind” element to the decision. “I was told I should be dead 10 years ago,” says Sullivan, who is HIV-positive, “so why the fuck not give it a whirl?” And anyway, as he eloquently puts it, he’s in it for the freedom and “because it’s just fucking interesting.”

urlA key factor in cementing his decision to go with the leaky meter model was his discovery of Tinypass, a New York-based startup that provides software that offers publishers the ability to charge for online content in a number of different ways. Prior to Sullivan, little-known Tinypass’ most high-profile customer was the filmmaker Larry Clark, who is using the service to sell day passes for his latest movie, “Marfa Girl,” via his website.

Sullivan has found Tinypass useful for his purposes, but he also thinks its existence makes the leaky meter model duplicable. Of the approximately 17,000 subscribers who paid for Dish subscriptions, he says, only about 45 reported glitches. “Tinypass’s model is very clean and effective,” Sullivan says. “It’s not a beta product, and anybody can do it. Anybody can go to Tinypass and get that technology and ask readers anywhere for money.”

Tinypass co-founder David Restrepo, perhaps not surprisingly, believes Sullivan is onto a good thing. Give people an easy way to pay for content online, he says, and they will open their wallets. “If you ask someone in a survey ‘Would you be willing to pay for something that would otherwise be free?’, you pretty much know what the answer will be,” Restrepo says. “It really took someone like the New York Times to stick their neck out.”

The Times has benefited from playing a percentage game on the sheer volume of traffic brought by the Internet. Nieman Journalism Lab’s Ken Doctor has noted that only about 1 percent of the New York Times’ unique visitors sign up for digital access-only subscriptions. That seems like a tiny number, he says, but it’s not. “Fly-by traffic, supplied by Google and now Facebook, supplies so much traffic that about 3 percent of most newspaper sites’ unique visitors equal their paid print circulations,” Doctor writes. Add up the digital dollars from those subscribers and they fast become significant. Meanwhile, if Sullivan’s claim that The Dish gets 1.5 million unique visitors a month is true, then its 17,000 or so paying subscribers also account for just over 1 percent of total readership. If the New York Times, with its tremendous exposure and marketing resources, hasn’t been able to lift its subscriber base much above the 1 percent mark, it seems fair to assume that such a goal would be a stern challenge for Sullivan’s fledgling company.

At this point, there’s not much we can draw from Sullivan’s experiment. It is too early to get excited about the fact that he has pulled in half a million dollars in less than a month. The experiment is not even out of diapers, let alone in its infancy. It might turn out that Sullivan is one of only a few media figures with a reputation and following big enough to be able to demand any sort of payment from readers at all. Also, there’s every chance that the new Dish will bring in no more meaningful subscription revenue until next year. And even then, because paying for a subscription to support a favorite writer might not seem like such a novel or thrilling idea, the income might not reach the same heights.

Then what? Sullivan either figures out another revenue stream or will be forced to lay off staff. In that way he's just like any other big media outfit.

[Main image illustrated by Hallie Bateman]