9 reasons newspapers are suddenly asking print subscribers to pay for full Web access

After years of searching for a workable paid digital content model, a wave of small and mid-sized newspapers have all hit on the same solution: Ask print subscribers to pay just a little more to get full website access.

The deal incorporates a key feature of the much-watched New York Times metered model, which rolled out in March. Users get a certain number of article views for free — then they are asked to pay a monthly subscription fee for unlimited use.

However, the New York Times gives print subscribers who register free access to its website as well as to tablet and smart phone versions. The key difference in the emerging consensus model for smaller papers is to add a minimal charge, typically $1 to $2.50 a month, for unlimited access to the website.

Lee Enterprises announced this week that six of its Montana and Wyoming papers would begin charging for digital in this fashion. At Poynter Online, we had the impression that this was a rare, if not unique, strategy.

Quite the contrary, said Brad Dennison, vice president of Interactive for GateHouse Media, by email. His company has been converting several of its 90 dailies per week to this payment system and will have 50 done by the middle of this month. He is also fielding two or three calls a week, Dennison told me in a phone interview, from newspapers or companies contemplating the change.

I also spoke by phone with Steve Brill and Gordon Crovitz, co-founders of Journalism Online and its Press + payment system, which allows many permutations of payment systems. They confirmed that the rate of adoption has snowballed in recent months and that 90 percent of their clients, like GateHouse and Lee, have added the twist of asking print subscribers to pay.

GateHouse CEO Michael Reed (also current chairman of the Newspaper Association of America) told me in a phone interview that the industry made a mistake 10 years ago when the free, ad-supported Web model became the norm.

“We believe that there is value in our local news reports,” Reed said, “and subscribers have been paying for it for 100 years.” Prevailing practice, he continued, “was as if you had a successful ice cream store and opened another one down the street giving away ice cream for free.”

Digital users are also getting some added value since they can access the report from wherever they happen to be, Reed said. But the puzzle has been how to reverse the practice, gradually and with minimal damage to audience and advertising.

That’s where a host of details fell into place with early adopters like Morris Communications’ Augusta Chronicle, which began to test asking print subscribers to pay separately for digital late last year and early in 2011.

Dennison ticked off a number of reasons the new model makes sense. Brill and Crovitz added several more.

The principle of the thing. First and foremost, Dennison said, the pay system is “an investment in getting the consumer used to paying for our content online.” The low price makes that initiation comparatively painless.

Print customers are more likely to pay. Counter-intuitively, loyal readers — who use both the print paper and the website — are the best prospects. They constitute about 60 to 65 percent of those accepting the offer to pay for more access, Dennison said.

Online-only readers are less likely to sign up, perhaps partly because of a higher monthly charge and partly because of a readiness to find other digital sources.

The metered model recognizes that users who come from search to a single article or those who visit three to 10 times a month are unlikely to pay (or register). Also a micro-payment system to try to monetize that traffic would be cumbersome.

Skating to where the puck is going to be. “There is a lot changing right before our eyes right now,” Dennison said. Specifically, Apple’s change of policy several months ago now allows news organizations to offer iPad subscriptions.

As soon as this fall, Dennison predicted, many publishers will be able to offer mix-and-match packages giving the user added options for smart phone and tablet subscriptions.

Heavy work is going on right now at many companies to create what Dennison called “content differentiation” — that is separate features and selling points for products on each platform.

All the more reason, then, to break in a payment system sooner rather than later and get customers used to a series of up-charges the more versions they take.

If “uniques” decline, so what? The main objection to paid online has always been that traffic would fall drastically and advertising revenues would follow.

First of all, trials are showing that traffic does not decline all that much if at all. At some places, there has been an initial dip, then a bounce back.

Dennison agreed with my suggestion that this follows a longtime print dynamic. Aggrieved readers object strongly to something in the paper (say the Los Angeles Times 2003 election eve exposé of Arnold Schwarzenegger’s groping habits). Many call to cancel their subscriptions. After a few months they find themselves missing the report and reinstate it.

Also, as Ken Doctor and other analysts have been arguing for several years now, at small and mid-sized papers and even some metros, a change of 10 to 20 percent in traffic, up or down, is not likely to affect ad rates or volume.

In fact, registering and identifying the loyal print-plus readers may create a new opportunity for targeted or other premium advertising. Analyst Frédéric Filloux argued in one of his Monday Note essays this June that “experience shows advertisers are now paying roughly 30 percent more for readers reached behind a paywall.”

Readers get the time they need to adapt. Augusta began allowing as many as 100 free article views per month. As the system of charges has settled in, the threshold has been steadily lowered to 15, probably headed to 10.

A nice little revenue stream. Brill and Crovitz added that asking print subscribers to pay increases the new subscription revenue. That is not a huge difference-maker financially, but these days every little bit helps. Put another way, putting in a paywall and exempting print subscribers leaves available money on the table.

With the much lower monthly rate, there is still a reward for print subscribers for their support of the mother ship — and thus an incentive to subscribe or continue subscribing.

Conversion rates for heavy online-only users improve too. An unexpected result of varied test offers at several papers, Brill said, is that online-only readers seem to feel the new charge is fairer if print subscribers are asked to pay something. Otherwise they may feel they are being soaked and resist the offer.

Flexibility further down the road. Crovitz added that establishing multi-platform subscriptions will make it easier if newspapers should some day decide to eliminate a day or two of print editions, or in a more extreme scenario produce a printed newspaper only on Sunday.

To all those reasons the plan is proving out, I would add one more. Even for a dollar or two a month, print subscribers who accept the digital offer will count as additional paid circulation. A single person or household would be counted twice for getting separate versions of the paper. Audit Bureau of Circulations spokesperson Kammi Altig told me, it’s “just like if you paid to receive two copies of the print paper, you would count twice.”

So newspapers which go this route will have a better paid circulation story at a time when the industry’s image of decline has become a problem. (ABC, Altig wrote, will introduce a supplementary metric with its March 2012 reports, of unique subscribers, factoring out the double counting).

Skeptics like me have described the industry’s grappling with the paid content issue over the last several years as a lot of talk and hardly any action.

The turnaround this year has indeed been extraordinarily quick. Crovitz recalled that a year ago Press + “was still focused on our first launch,” which came in September 2010. Now a dozen or two in a week are not uncommon, he and Brill said, mostly newspapers but some broadcast and freestanding sites too. (And competing vendors offering similar payment systems would add to those overall numbers for the industry.)

The pair hope to nail down a few more high-profile takers over the next month and will reveal the total number of adopters after Labor Day, they said.

While metros have been slow to embrace paid online in part because of potential competition on breaking news from strong television sites, that may change Brill said. “We have launched one in Montreal and another in Omaha,” he said, with more on the way.

Among the prominent holdouts to date are Gannett and McClatchy  papers and the Washington Post. Gannett sites collectively and the Post each have high enough traffic that reductions would result in a meaningful loss of ad revenue.

I would look for metros to adopt varied approaches, if they do choose to go paid. For them it will not be “one-size-fits-all.”

Brill, Crovitz and Dennison all said that the high-profile New York Times launch was a partial catalyst for the shift to paid. GateHouse could use the metered model principle, Dennison said, “without paying $40 million to develop it (internally as the Times did).”

But the Times’s news operations are on a scale and its news products offered at a high price that doesn’t transfer especially well to a typical paper. The more important factor was the success (and some instructive failures) from early adopters.

“Like a lot of people, we did not necessarily want to be on the bleeding edge,” Dennison said, but he and fellow Internet execs “talk among ourselves a lot.”

From those conversations, average papers, with an assist from the persistent salesmanship of Brill and Crovitz, hammered out a paid content solution that seems to work for most just fine.

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  • Anonymous

    I read Rick’s previous piece on ‘Why news readers might want to pay for content’ and even offered some help with data and cases studies, but apparently I was late.

    I commend Journalism Online for selling their subs plans so well. On the other hand, however, the success of Press+ and the various sorts of paywalls and nagwalls might backfire. For one, the cost of developing and implementing even a partially effective paywall, like the one by the NYT is, we hear, astronomical — from $25 to maybe $40M! How many publications can afford such investments?

    More importantly, subs are in my opinion a step backwards, given the online trends and users preferences. In the short term, they can generate some much needed revenue and help build loyalty, but how many readers will be able to afford multiple subs? What is going to happen when there are (too) many great publications with paywalls?

    Based on our experience (gained building Znak it!), readers want “two-click-easy” on-demand payments and immediate access to paid content. They want to be able to surf the net and are willing to pay but would appreciate platform agnostic solutions that work “automatically” in the background. And, there are such solutions, of course. There is the technology and infrastructures to allow Web users not only pay “as-you-go,” effortlessly, but do it “annonymousley,” without any additional registration or tracking cookies. More, the platform agnostic system do not cost the publisher anything to set up; they work as SaaS, and because they are designed to process billions of access transactions, they are very cost effective. Publishers can retain 90% and more of the generated revenue, as I said, with no up-front investment or operating costs.

    Given the flexibility and economic value of such solutions, I am convinced that the future of digital content monetization is with platform agnostic, on-demand payments, not with expensive paywalls that limit users choices and Web experience. If someone plans to invest millions in another paywall and launch it in a year or so, it might be a total waste of money.

  • Pete Wrigley

    I disagree with your logic. First it assumes blogs don’t have to be credible to survive, they do. It also assumes all newspapers are always credible, which they aren’t. See the corrections page. See the missed stories on corruption (oh that’s right, they’re not there).

    Smart reporters are leaving newspapers to become niche bloggers, where they can actually get a fair wage for their high-quality work. The market is much better at determining value than a union contract or a 70-year-old publisher.

    Producing news is expensive, I agree. Which is precisely the reason newspapers are failing or will fail unless they develop a new model. They can’t compete with low overhead and convenience of online media fast enough.

    The blogs I read make money because they’re doing something better than everyone else, have credibility and a wealth of expertise. But that’s all beside the point. The market doesn’t care about whether someone is freeloading. Where one source dies a new one will spring up, and the market demands quality and credibility. It will get it eventually.

  • Pete Wrigley

    I disagree with your logic. First it assumes blogs don’t have to be credible to survive, they do. It also assumes all newspapers are always credible, which they aren’t. See the corrections page. See the missed stories on corruption (oh that’s right, they’re not there).

    Smart reporters are leaving newspapers to become niche bloggers, where they can actually get a fair wage for their high-quality work. The market is much better at determining value than a union contract or a 70-year-old publisher.

    Producing news is expensive, I agree. Which is precisely the reason newspapers are failing or will fail unless they develop a new model. They can’t compete with low overhead and convenience of online media fast enough.

    The blogs I read make money because they’re doing something better than everyone else, have credibility and a wealth of expertise. But that’s all beside the point. The market doesn’t care about whether someone is freeloading. Where one source dies a new one will spring up, and the market demands quality and credibility. It will get it eventually.

  • Pete Wrigley

    Just because they have something in common doesn’t mean they have everything in common. There are more than a few problems with this logic, that “people will get used to paying for things online.” First of all, they already pay for things they value online. But many more people don’t and won’t. For every person like me who pays for music or a newspaper online, there are likely 1000 who grab it for free. Netflix is a wonderful service. It’s a value-added product. I pay 7.99/month for streaming HD movies and TV shows on my widescreen TV and on my mobile phone. I hit a button, and watch a movie. I don’t need cable or to drive to a store. Same with HuluPlus. But these still aren’t proven models. And more importantly, they’re the ones killing the old industry! People are leaving cable (read Newspapers) for HuluPlus/Netflix (read free and valuable news sources).

  • Anonymous

    “Information wants to be free” is rightly a reference to free speech and communication, not to the costs of producing news–or the attendant price of accessing it. Producing news and information is not free–it’s very expensive.

    There is perhaps no “scarcity” of information,” but there is a scarcity of authenticated, well-reported, trust-worthy, vetted (and original) information. Where are the “free bloggers” getting their information? If they are doing their own reporting, are they volunteering their time? How viable is that? If they are recycling from others, then they are freeloading off of someone else’s work. I don’t know about you, but when I buy the Boston Globe at the store, I pay $1.00 (or $1.50 outside of metro Boston). Can advertising run an entire economy?

  • Pete Wrigley

    The ice cream store metaphor is handy but far from analogous to the newspaper industry.

    What Mr. Dennison implies is newspapers have been in the business of selling content to readers. No. They have never been. If I’m buying “the news” then why are there ads in the paper? Content wants to be free. What some people are willing to pay for online is value (i.e. convenience, usability, something they can’t get/or isn’t yet available anywhere else).

    This metered pay strategy is a guess. I’m not surprised Mr. Dennison mentions no goals, targets, etc. within the strategy. Who in real business ever heard of a strategy of “getting people used” to paying for something. And bottled water is different. You need it to live and there’s a scarcity of it. Where there’s a scarcity of information (i.e. one created by a newspaper creating a paywall) a new source will spring up in time and at a lower cost. 

    Newspapers have a hopeful business model online. They hope new competition doesn’t undercut them again, like Craigslist. They hope new free blogs don’t spring up locally to actually do real investigative journalism again.

    The fact remains, the newspaper industry doesn’t have a sustainable online business model. You can gauge the success of the current model by looking at GateHouse Media’s stock price. Last I checked it was holding steady at 12 cents/share.

  • Pete Wrigley

    The ice cream store metaphor is handy but far from analogous to the newspaper industry.

    What Mr. Dennison implies is newspapers have been in the business of selling content to readers. No. They have never been. If I’m buying “the news” then why are there ads in the paper? Content wants to be free. What some people are willing to pay for online is value (i.e. convenience, usability, something they can’t get/or isn’t yet available anywhere else).

    This metered pay strategy is a guess. I’m not surprised Mr. Dennison mentions no goals, targets, etc. within the strategy. Who in real business ever heard of a strategy of “getting people used” to paying for something. And bottled water is different. You need it to live and there’s a scarcity of it. Where there’s a scarcity of information (i.e. one created by a newspaper creating a paywall) a new source will spring up in time and at a lower cost. 

    Newspapers have a hopeful business model online. They hope new competition doesn’t undercut them again, like Craigslist. They hope new free blogs don’t spring up locally to actually do real investigative journalism again.

    The fact remains, the newspaper industry doesn’t have a sustainable online business model. You can gauge the success of the current model by looking at GateHouse Media’s stock price. Last I checked it was holding steady at 12 cents/share.

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  • Anonymous

    David Cole:  Thanks for the comment and the mentions in your excellent newsletter (News Inc.).  You are certainly right that Press + promoted this option — a good match to their system and one they had tested in trials early on.  I didn’t try to get into relative costs in this post.  I’m guessing Press + may cost a little more but justifies that with greater flexiblity.  A good story for either of us is how the digital era has raised the importance of vendors.  Each of those promising revenue streams comes with a decision about who to partner with. 

  • http://www.newsinc.net/ David M. Cole

    Rick: Great piece. But I think you underplayed the notion that Brill/Crovitz recommend that their clients require print subscribers to pay extra for a digital subscription. If I were a smaller publisher and the guys I was doing business with said, “Here’s the way you should do it,” I’d probably take their advice.

  • Anonymous

    Kentford:

    I don’t disagree.  Newspaper ads are generally welcomed by readers and effective, especially for retailers (hence those huge insert packets every Sunda)y.  Tablets may replicate that, but I don’t think that news and advertising match up so well on the web or smart phones — and that has been a problem.  I’m among those who think that print papers are very much alive and will stay so for at least five to 10 years (though the continuing ad revenue declines are concerning).

    But none of that was the topic of this particular post, which was running a little long as is.

  • Anonymous

    I just paid $ 23.86 for an iPhone and my girlfriend loves her Dell laptop that we got for $ 38.76 there arriving tomorrow by UPS I will never pay such expensive retail prices in stores again. Especially when I also sold a 42 inch LED TV to my boss for $ 665 which only cost me $ 62,81 to buy. Here is the website we use to get it all from, GrabPenny.com

  • http://www.facebook.com/people/David-Brauchli/692267758 David Brauchli

    Rick, thanks for that very interesting article. 

    As in the US, European publishers are flummoxed by loss of revenue and yet are hesitant to introduce a pay-wall because of loss of audience and ad revenue.  We have started a company called Piano Media in Bratislava, Slovakia to address this.

    What we have done in Slovakia is gotten nine major publishers to go behind a pay-wall simultaneously and then we offer their services (40 different types) to the internet population for a basic monthly subscription, €2.90. Newspapers aren’t putting everything behind the wall, they leave general news out. More specific content though, is behind the wall where people can only read it by paying. Discussion forums have been restricted as well, which has cleaned them up. And if you’re a subscriber and you are surfing on a free part of a newspaper, the ads have been cleaned off so you get a better reading experience. 

    We’ve also invented what we call a “chronological meter” which divides revenue between participants in the system by the amount of time digital readers spend on their sites. That kills off the micro-payments mentality, get a click and get paid. Digital readers actually have to spend time on a site in order for the publisher to get reimbursed. 

    We launched the system in May this year. We’ve really gotten a lot of interest from other European publishers who are as eager as those in the US are for a solution to their declining revenue. We will be expanding to another country by the end of 2011. 

  • http://contentcurrents.com Content Currents

    The timing of this trend coincides with increased consumer payment for all types of digital content – music (Spotify, Pandora), video (Hulu Plus, Netflix Streaming), and mobile and tablet apps. Perhaps payment for these services is resetting consumer expectations for payment of local news online. 

  • Anonymous

    Expand your focus, folks. What else is in newspapers besides “news.” Advertising, of course. Local businesses know that advertising in a good, local newspaper works great. While ink on paper that must be delivered to people isn’t a cheap way to do things, it gets results. That is why newspapers aren’t rushing to scrap their presses, stop buying tons of paper and paying for distribution. This is going to become an even more compelling detail in a few years when all businesses are trying to “push” digital advertising to all of the computers and mobile devices out there. That flood of digital junk will be blocked or channeled to the “junk” box without ever being seen. And the local paper will be delivered to those who invite it into their homes carrying advertising that those people want to read, right along with all of the local news.   

  • Anonymous

    Excellent question, Jay.  My guess would be a little of all four.  Some web natives may go for a print digital combo as they get older.  Others may want a report served on the devices they use the most — say a smart phone — and buy a la carte.  But, at the same time, the newspaper organization’s report will not be something everyone feels they need to have as in the old days, many people, but not everyone.  Also, the organizations aspire to underwrite the news by selling non-users products like deal of the day or mobile coupons. 

  • http://www.facebook.com/profile.php?id=648697651 Mark Webber

    The Laredo Morning Times has had a pay wall for about three years. Behind the wall are the full stories that ran in the daily paper as well as a pdf file of all the pages as they appear in the print edition. Since people have to sign in to read and comment on the stories, this has cleaned up the comments.

    Breaking news is available on the home page for no charge.

  • http://www.facebook.com/profile.php?id=648697651 Mark Webber

    The Laredo Morning Times has had a pay wall for about three years. Behind the wall are the full stories that ran in the daily paper as well as a pdf file of all the pages as they appear in the print edition. Since people have to sign in to read and comment on the stories, this has cleaned up the comments. Breaking news is available on the home page for no charge.

  • http://twitter.com/jayrosen_nyu Jay Rosen

    If this is the emerging consensus (and I do not doubt your report, Rick) is the theory about the next generation of news users, the born on the web generations, that… a.) they will become print subscribers, b.) they will become digital subscribers, c.) they will never become subscribers, so why worry about it? or d.) we aren’t talking about them or thinking about them because we don’t have a good story to tell.