(This case study, the first of an occasional series, was underwritten by a grant from the Stibo Foundation. Poynter affiliate Bill Mitchell did the reporting for the article in 2012, and it has been updated and edited by Media Business Analyst Rick Edmonds, who is general editor of the project.)
Most discussion about online paywalls has focused on the big guys, and more recently, on big chains. The New York Times boasts of dramatic results from the wall it erected in March 2011 and its subsequent success selling all-digital subscriptions and print + digital bundles. Gannett is the largest of the many chains that have followed suit and seen growth in circulation revenues, up in 2012 industry-wide for the first time in years.
More and more smaller and mid-sized news organizations are investigating ways to charge for content online, but it is a more daunting task for small papers, especially independents.
What follows is a close look at the experience so far of one such organization — the family owned The Rutland Times Herald and related Vermont companies. The Herald is the oldest continuously published family-owned newspaper produced under the same name in the same city. (I’m no relation to the Mitchell family that has owned the Herald since 1947.)
The Rutland Times Herald and its sister paper Barre-Montpelier Times Argus have added six figures in annual online subscription revenue while losing less than 9 percent of digital advertising.
The basic metrics
Here are some key figures from the Herald and the Times Argus, which are jointly owned:
- 18,050: Combined Sunday print circulation
- 1,815: Combined Sunday digital editions
- 16,145: Combined daily print circulation
- 1,833: Combined daily digital editions
- 9,802: Users registered for access to www.rutlandherald.com or www.timesargus.com (includes print subscribers who register for free, day pass users, digital upgrades and digital-only access)
- 1,640: Average number of logins per day
- 721: Users subscribed to e-Edition
- 502: Average number of daily visitors to e-Edition & mobile edition
- 31/35: Average page views per visitor to e-Edition / mobile edition
- 16/25: Average number of minutes on site per visit to e-Edition / mobile edition
How the paywall conversation began
A paywall done right can result in relatively little (if any) loss in advertising revenue and significant increase in digital circulation revenue. Maximizing digital revenue requires striking the right balance between reach (for advertising) and revenue (charged for access to content). A metered approach enables publishers to tweak the dials for each to address local circumstances.
In the fall of 2010, the Rutland Herald and Times Argus were producing online ad revenue in the low six figures. The sites were generating 3.8 to 4.4 million page views a month, and 18 million impressions from banner ads and other, smaller slots set aside for advertising messages on each page delivered.
The Herald company was getting paid for only about 10 million of those 18 million slots, though, with the remainder filled by house ads or other non revenue-producing messages. The Herald was not alone among newspapers publishing a whole lot of house ads, as documented in this study by the Pew Research Center’s Project for Excellence in Journalism.
Furthermore, the excess inventory meant the company could afford to lose nearly half its Web traffic with no impact on revenue. The restricted impressions also created scarcity, which pushed out the much lower revenue Google Ads impressions for retail ads. That’s how it did happen.
The scarcity did, however, result in some difficulty fulfilling very specifically targeted ad buys (many agencies/buyers work in 100k impression chunks, which can be hard to deliver when it’s targeted by a zip code). One answer the Herald came up with was to up ad positions by 20 percent in a redesign, which added a proportional number of impressions.
The challenge: That excess inventory framed the revenue challenge for president and publisher R. John Mitchell: The papers needed some new revenue streams in addition to online advertising.
Charged with addressing this challenge was Mitchell’s son, online manager/state editor Rob Mitchell, who is the source of the information provided in this case study.
The Rutland Herald and the Times Argus are the leading sources of local news and information in their communities. The state of Vermont is small enough that there is also competition on a statewide basis for news and advertising.
There are three network television affiliates covering Vermont — the CBS affiliate is locally-owned and by far the most competitive statewide, and there are NBC and ABC affiliates that are owned by chains. They compete from the Plattsburgh, NY DMA. There are roughly 38 weekly or bi-weekly newspapers statewide, with about 8-10 in direct competition for news and advertising with the Herald/Times Argus dailies on any given day.
There are eight daily newspapers in Vermont, with varying degrees of overlap in coverage areas and advertising competition. In the last two years all but one of them have gone to a paywall or have previously limited the amount of news they share on their website. In addition to Vermont Public Radio (VPR), there are more than two dozen commercial radio stations, but most of them do not have a robust online presence. VPR does, however.
There is also a nonprofit online news site, vtdigger.org, which reports on statewide policy and political issues. Another competitor for local eyeballs is a startup called Front Porch Forum, which is a town-by-town community bulletin board that sends out a daily email summary of community notices and sells text-based advertising in these emails.
As a result, Mitchell tells Poynter his papers are in constant competition online for such statewide news as coverage of the legislature and the governor. A reader can partially replace the papers’ statewide coverage with free online sources but not always with the same depth or breadth. The papers face some competition for coverage of local boards and/or local sports, and that is evolving because of online-only competition. The local competition is more serious at the pancake breakfast fundraiser level or the youth sports team level, Mitchell says.
He says social media is helping the papers strengthen their role as a definitive source for accurate news. And he points to several events that he says “demonstrated our value in providing well-sourced reporting and calm, accurate narrative in the face of disaster, tragedy and controversy, including a drug-related death, the devastation of a tropical storm, a community revitalization effort and the firing of a popular principal.”
He adds: “We have also pursued two public records cases involving police misdeeds to the Supreme Court of Vermont in the last three years, and may have to take one of them back this year. All this is what we’ve always considered our role, but it’s growing ever more important because of the speed with which rumors can gain traction.”
The Herald experimented with using a simple WordPress blog called Vermont Today designed for quick hit updates and breaking news. It has evolved into more of a driver of social media traffic, while the papers break hard news on their main websites.
Mitchell explains: “There are a few others in different categories like art and sports; we’re building these out slowly, but they are meant to fill the need that people expressed when we put up the paywall — the need for us to continue as a community voice, as a place where anyone can have a forum to speak, that is free. So it’s in a sense a parallel but complementary system.”
Here’s Mitchell’s take on the money issues:
Our company as a whole has seen a negative trend in revenue since 2007. We have cut expenses by 38% in that time span, but have seen revenue fall by roughly equal amounts with most of that coming in the hard recession years of 2007-2009, and holding stable since late 2010. In late 2008, classified revenue began a free-fall and has never come back. It now accounts for around 10% of monthly revenue on average.
Circulation revenue is more or less steady, although it’s become a higher percentage of our overall revenues. We increased our single copy price in Jan. 2009, but aside from that have not increased delivery rates in eight years. Circ revenue is about 40% of total revenue, while online-only circ revenue is just under 3% of total revenue, but growing.
The first two and a half years of the paywall produced digital-first circulation revenue in the mid six figures. Most of the way through the third year, we are on pace for annual digital circ revenue to grow 11 percent. Between the first and second year it grew 19 percent..
We have, on average, 4,211 distinct logins a month between the two papers over the last year. Each subscriber – not day pass or library users — can add up to three more email logins to their account – as if they were a family of 4 sharing the subscription. The logins come from a mix of options our readers have:
1. Digital-only subscription: Includes e-Edition, website access, business journals access. In February 2013 we introduced a $1 upsell for the same access to the sister paper to comply with new audit rules. Most popular options are the 52-week purchase at $2.99 a week and then the 8-week purchase at $3.49 a week. Between the 2 papers we have 914 of these.
2. Digital upgrade: For print subscribers, we offer an e-Edition upgrade at $2 extra a month. We have 132 of those.
3. Day Pass: We offer a day pass for $.99, packs of 5, 10 or 20 day passes at a discount.
4. Library program: We work with 31 school and public libraries on a use program that operates similarly to a day pass. Logins for that library are restricted to a specific IP address and paid for either by donations or a library subscription, which is very affordable. We are working on expanding this to locations beyond our traditional coverage area.
5. Free online access: We offer all print subscribers access to our web sites through a registration process. This is free, does NOT include the e-Edition, but it connects us with more online users, enables us to pull further demographic data, and so forth.
Retail advertising revenue has declined, mostly due to the closure of large retailers in our market zone, and a shrinking share of the overall advertising pie because of online competition. Our particular challenge in this area has been to build options for smaller local advertisers that are affordable but also effective — in short, compete with Google AdWords and their like — and build content that can support ads that the big guys want, too, like video for pre-roll ads.
Print retail advertising plus online banner advertising has remained steady over the last two years, and is now at about 45% of overall revenue. Online / digital advertising currently makes up about 5% of retail ad revenue – more than three years ago, but still a small share.
So as an overall trend, our hardest hit has been from loss of classifieds, with a distant second print circulation revenue, and then retail. We also sustained a $7 million loss, only partly covered by insurance, due to a flood in May 2011, which set us back but also accounts for much of our expense reduction — we had to outsource our printing and lay off 40 employees who had been involved in the press and distribution operations.
(Thankfully several of them were able to move to our contract printer to work). However, we still have a larger-than-standard newsroom for newspapers our size. By comparison, the local Gannett daily has a circulation one-third larger than ours, but a newsroom one-third smaller.
Mitchell and his team decided to introduce a paywall and selected Clickshare, a 15 year-old newspaper technology company based in Amherst, Mass. as the vendor to build it.
In October 2010, the papers launched a so-called “hard wall,” requiring a subscription to access most content with the exception of breaking news, obituaries and news or opinion that was available free elsewhere. They eased users into the new arrangement in stages that began with a two-week free trial that required registration but no payment.
The trial did not require confirmation of email addresses or any payment information, which led to a large percentage of fake emails being used as login names, until the trial was shut down after 80 days. After the trial ended, each registration required a credit card to be entered.
The paywall also coincided with the release of an e-Paper, or e-Edition, a Flash-based and interactive digital replica of the print newspapers and the Business Journals (the company owns four monthly business Journals that publish in Vermont and part of New Hampshire).
The e-Edition was designed to give subscribers something extra in return for the paywall, to meet the demand for this version of the paper, and to allow for transitioning remote rural subscribers from print delivery to online-only. The e-Edition was also a step toward a tablet/mobile version of the papers, but at the point of setup, Mitchell reports, adding: “These things were still relatively in flux and we had not settled on the tablet/mobile strategy.” The papers did introduce an HTML e-Edition for tablets and mobile devices in March of 2012.
The costs: Mitchell said Clickshare charged a set up fee of $1,500 plus $997 to synch the paywall system to the papers’ database of print subscribers. Each additional site (the Times Argus site, for example) cost an additional $997. Read more