With a paywall strategy two things happen.
Firstly a large number of people stop using the paywalled websites. For example it's been reported in Wired's article, How The New York Times Paywall Is Working, that the New York Times, which has successfully increased online revenue using a paywall, has seen their visitors fall by more than 60% - and note that some (if not most) of their remaining visitors are not paying, therefore can only see a few articles each month.
That's with a two-tiered model, with some free content still available. If a single-tier model is used, such as by the London Times, visits can drop 90% or more.
Secondly, the reach of paywalled articles falls dramatically. Content behind paywalls cannot be easily shared via social media or email with people who do not pay for the content, reducing the 'readership' even more than the 'circulation'.
So regardless of whether paywalls work for the proprietor, raising their online revenue, they can gut readership and circulation - the reach that is important to media and PR professionals.
So let's consider the numbers based on the Sydney Morning Herald, for example.
As of their report for January - March 2012, as covered in Mumbrella, Fairfax reports that the Sydney Morning Herald receives 2,889,000 unique visitors per month and that they visit 158,656,000 pages - or an average of 55 pages per unique visitor.
Let's say that the Sydney Morning Herald introduces its paywall, on a two-tier model that allows people 20 free articles per month. Let's also assume that they are as successful as the New York Times and only shed 60% of their audience (note they're likely to shed more initially and 'win' some of it back over time, but we'll keep this simple).
Immediately we see a fall in unique visitors to 1,155,600. However page views drop far further than you'd expect as not all their remaining visitors will pay. So assuming that 50% of their remaining visitors pay and maintain a 55 page average, while the others only view 20 pages per month (the unpaid maximum), page views drop to 43,287,200 per month.
That's about a quarter of the pageviews before the paywall was introduced.
(Of course, if the fall in unique users is much greater, as may particularly be the case in the short term and was the case for the New York Times, these numbers could be much worse.)
Now assume this is happening, as planned, across Fairfax's Sydney Morning Herald, The Age and the Canberra Times, as well as across The Australian and News Ltd's other state-based mastheads.
Essentially all of Australia's major online metro news publications.
And what happens?
Suddenly all those media releases crafted and distributed to mainstream media are reaching a small fraction of the audience they reached in the pre-paywall days.
Your media release, which you could reliably claim to a Minister's office was reaching a large number of Australians, is no longer as effective by a long, long, long way.
Equally your advertising in 'mainstream' online news outlets reaches a lot less people. Hopefully this will reduce the cost as well - although historically as traditional media audiences have shrunk, advertising costs have grown.
So what should government agencies do to preserve their reach in a media landscape where the majority of Australians have abandoned traditional media in favour of free, but more niche, news sites?
Extend their social media presence and their own media channels (such as blogs) of course.
While paywalls may help traditional media players better monetise their online mastheads, they will not help organisations that need reach.
As a government agency, if you have information you MUST get out to Australians, the introduction of paywalls means you will need alternatives to traditional media channels for distribution.
So it's worth ensuring now that you have the skills, experience, procedures and governance in place to switch to a social media focused information distribution strategy to ensure that you preserve your reach while traditional media battens down their hatches to preserve their revenues.