The Expert View: No. 6

Analysis by Rusty Coats, MORI Research: It bears repeating that in most cases, the reader doesn't pay for his or her WSJ.com subscription -- an employer does. If your publication is the type that can be expensed at your company -- Knight Ridder's SiliconValley.com is one example, which could be expensed by IT professionals -- then you're halfway home. If you're a local newspaper, it's another story. Bundling online subscriptions with print subscriptions is smart only if the online publication adds value to the print subscription; a repurposed newspaper with syndicated horoscopes and movie times doesn't bring anything new to the party. Losing print subscribers to your own website is much better than losing print subscribers to Yahoo!, which this model encourages. Most online newspapers are not in the top 10 sites local online users browse; making the case that your website is the sole cause of eroding print readership -- rather than enormous social and technological changes -- shows an almost childlike view of self-importance. If local users prefer reading the online version over the print version, their canceled subscription isn't a financial decision, it's a matter of personal preference -- what works best for them and their life. Keeping that reader with your brand should be the priority, not punishing him for spurning a media that doesn't appeal. That said, registering users always should be a cautionary first step before erecting a toll booth. E-mail Rusty

Examples: WSJ.com, GazetteOnline.com, PostBulletin.com, Variety.com

Description: Sites using this model typically offer a very limited amount of content for free, putting most of their wares behind a subscription wall. (Existing print subscribers either get website access for free, or for a discounted rate over what non-print subscribers pay.) While they also accept advertising, only those sites with substantial paid subscriber numbers (such as The Wall Street Journal's site) stand much of a chance of attracting significant numbers of advertisers. In some cases, newspaper publishers adopting this model view it as a means to prevent the Web from "cannibalizing" the print edition. Others view their subscription websites as a new line of business that will add to the overall corporate bottom line.

While not yet in common use, this business model is gaining in popularity among publishers. Variety.com, the website of the Variety entertainment-industry news magazine, has found some success, with 59,000 subscribers paying $59 a year. According a report from late last year by Borrell & Associates, at least a dozen U.S. newspapers had erected tollgates on their websites -- but a survey indicated that some 350 were thinking about doing the same. Of those local papers that did adopt this model, however, none have yet gained significant paid-subscriber numbers; they ranged from 0.2% to 2.6% of print circulation, even after two years of charging.

History: On the Web, this model for news sites dates back to the San Jose Mercury News's Mercury Center. In 1995, it erected a subscription wall for much of its content, leaving headlines and blurbs as free access. This didn't last long, though, and in 1997 it returned to a free-content model. Slate.com, the Microsoft-owned web-zine, had an identical experience in the mid 1990s. More recently, a small number of newspapers have switched to the paid-subscription model -- a trend, but not an overwhelming one. It's more common among vertical/industry news sites.

Pros:

• If you're confident in the value of your online content, know that significant numbers of website visitors are likely to pony up subscription fees, and don't have close competitors who offer similar content for free, then this can be a wise choice -- as The Wall Street Journal discovered. At the end of 2001, WSJ.com had 624,000 paying subscribers, a number substantial enough that the site can attract significant advertising revenues as well.

• This model also can work for vertical websites, such as Variety.com, which has content that industry professionals want and need -- and are willing to pay for, in print as well as online. (Its online subscribers are split evenly between online-only accounts and print accounts that access the website.)

• This can make sense if you're in a scenario in which print readership is declining and it's determined that a publication's free website is hastening the fall.

• This model can be a way for local newspaper websites to get money from out-of-market readers who don't have access to the print edition.

Cons:

• This model is typically dangerous for smaller publications' websites. It's especially dangerous in a competitive market (particularly if a major competitor uses the free-content model). You could end up with an embarrassingly small number of subscribers.

• Among smaller newspaper sites employing this model, subscriber numbers and online revenues have been modest -- typically not enough to turn a profit.

• If transitioning from free model to paid model, expect major traffic loss, which will undermine efforts to earn advertising revenue.

• Transition to this model from free could decimate existing advertising base.

• On the other hand, subscriptions may not account for substantial revenue. Variety.com last year saw about one-fourth of its revenue come from subscriptions, and the rest from advertising. This demonstrates how important advertising can be, so don't let a subscription strategy destroy your biggest revenue source.