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April 09 2013

12:25

May 27 2011

18:00

Checking in with the Newport Daily News: Two years after a digital paywall, print is still king

Newport Daily News logo

The Newport (R.I.) Daily News might have been ahead of its time in offering the Frank Rich discount: The newspaper charges a hefty premium for digital-only access in hopes of boosting print subscriptions.

Two years have passed since the Daily News introduced a three-tiered paywall. At the time, executive editor Sheila Mullowney described the move not as a push toward digital, but as the opposite: a “print-newspaper-first strategy.”

That remains the case today.

“The print product is the thing really driving us at this point,” William Lucey, the Daily News’ publisher, told me. “As far the Internet goes, it really has not amounted to a hill of beans yet from a financial point of view.”

That sentiment is borne out in the Columbia Journalism School’s recent report on the business of digital journalism, which digs into the data:

The paper’s site, newportdailynews.com, gets around 80,000 visitors a month. Especially with online ad rates “dropping 20 percent a year,” that’s not enough to sustain the operation, which includes a newsroom of 22 people, Lucey says. Indeed, online ad revenue accounts for only 2 to 3 percent of total advertising for the paper.

After the change was put into effect, “our single-copy sales went up about 300 a day” — a bit less than 10 percent of overall single-copy sales. As the economy improves, “print is coming back. February [2011] was up 35 percent over last year” in ad sales.

As the Daily News has tweaked its price, it has preserved the print-first ethos. Earlier this year, the paper dropped its print+digital subscription price from $245 a year to $157 — a dollar more than the print-only price. A digital-only subscription, on the other hand, costs $345 a year.

The A.H. Belo-owned Providence Journal, the Daily News’ larger rival, has since announced its own paywall, expected to launch in the second half of 2011. Readers of that paper will have to pay for “original and proprietary content.”

It will be interesting to see whether the ProJo’s wall affects the Daily News. Last month I posed a far-flung hypothetical: Would readers pay for news if there were no free alternatives? In Slovakia, nine media companies are experimenting with a unified paywall — pay once for access to all — in an effort to reset years consumer assumptions about free content.

Rhode Island would seem to be (to an extent) a Slovakian analog in the United States. It’s a small, relatively uncompetitive, relatively isolated media market. Take Aquidneck Island (which is officially named, confusingly, Rhode Island), home to the 12,000-circulation Daily News. There’s some competition, sure: An ad-supported blog called Newport Now launched three months after the News’ paywall rose. And a year later, AOL’s Patch made its made its foray into Rhode Island with sites in Newport, Portsmouth, and Middletown — the whole of Aquidneck.

Still, once the ProJo paywall launches, we’ll have an interesting case study: If the only two papers covering Aquidneck are charging for access (and the ProJo hardly covers it like it used to) will citizens be more inclined to pay for online news?

The other question might be: Will that matter? In a piece examining “the uncertain future” of Rhode Island’s journalism scene, media critic David Scharfenberg described the dearth of social networking initiatives, inter-outlet collaboration, and other badges of innovation among the state’s media outlets. “What’s troubling about the Rhode Island mediascape,” he wrote, “is how slowly the players have moved to embrace this project — in an era when speed is nothing less than a matter of survival.”

But it could be that survival is a matter of sticking to roots, not branching out. If you view small newspaper publishing as a business, which it is, there’s still money in print. And it’s not as if the web has suddenly created a global audience for local news about Woonsocket, R.I. (No offense to Woonsocket, “a city on the move!”) Paywall or no paywall, the Daily News’ financial worth may lie in atoms, not bits.

And little Aquidneck Island not alone in that. “There still is value in print, no doubt about that,” the general manager of The Columbia (Mo.) Daily Tribune, has said. ”We shouldn’t be apologetic about it, we shouldn’t be embarrassed by it.”

December 03 2010

19:00

INMA Transformation of Media Summit: Bundling, or how and when to get readers to pay for content

It was early in the morning when John Paton, CEO of of the Journal Register Company, had a curious statement for the assembled audience at the INMA Transformation of Media Summit Thursday here in Cambridge.

“For god’s sake, stop listening to newspaper people,” Paton told the audience. The audience filled with newspaper people.

He went on to say “we” have had 15 years to figure out the Internet and “we’re no good at this, folks. We’re no good at all.” His solution? Listening to the digital folks, as well as the audience, to find solutions to help better connect with readers and jumpstart declining revenues.

Awkward in a room of news executives from the U.S. and around the globe? Perhaps. But the theme of the first day of the INMA conference (in which the Nieman Foundation had a small hosting hand) was based around the idea of “extracting new value from content,” and the talks were wide ranging in their discussions of experimentation with business models, monetizing existing content, and reaching out to new audiences. While the theme of day one was pulling new value out of content, the discussion seemed to come back frequently to the idea of bundled subscriptions, offering content across new platforms as a vehicle to gain an audience and potentially generate new revenue.

It’s something Paton is familiar with, telling the audience that the Journal Register’s digital revenue went from “negligible” less than a year ago to 11 percent of ad revenue in November. Paton credited it to developing new revenue streams online in areas like videos, expanding from 13 revenue streams to 60.

In one of the more lively (and funny) conversations of the day, media columnists Peter Kafka of All Things Digital, and David Carr of The New York Times, found themselves in the position of talking about their respective parent companies plans for paid content — the Times’ plan for a metered site next month and News Corp.’s iPad product, The Daily.

“The web is the problem, because we all jointly agreed — and there are exceptions in this room and elsewhere — that the price of our content is nothing,” Carr said.

While both NYTimes.com and WSJ.com have a future in paid content (and also, in the case of WSJ.com, a past), both Kafka and Carr said readers should still have a level of free access, be it metered or as “samples.” Carr said he believes the future is customized tiers of subscriptions, where readers can choose between a mix of mobile devices, print, news alerts, the web, and a super-reader level “where Frank Rich will come to your house and have coffee with you,” he joked.

Kafka suggested one way forward is similar to what All Things Digital does with its series of conferences and events, a type of access that goes beyond stories and an alternate revenue stream to subscriptions and advertising.

Speaking more strictly about online content, Klas Uden, vice president of circulation marketing for Dow Jones, said “it’s not just about charging for content, but providing valuable content and understand what consumer needs are.” Uden was a member of a panel on what works and doesn’t in paid content. Uden said some of the strength of The Wall Street Journal’s model came from combining print and digital subscriptions early on, which changed customer behavior to expect paying for content but also to receive content across different platforms. Now, as the Journal expands its mobile and tablet apps, Uden said 50 percent of Wall Street Journal’s digital revenue growth comes from new devices.

Andrée Gosselin O’Meara, director of business development for The Globe and Mail in Toronto, described a similar situation, as the Globe’s biggest areas of growth are in mobile apps. The Globe and Mail offers a Kindle edition, Kobobooks edition, Globe2go app, and traditional iPhone and iPad apps; in October they served 20.5 million pageviews across all mobile devices (14 percent of all digital page views). Within 24 months, they expect to have more pageviews on mobile than on the website, she said. Gosselin O’Meara said the idea of being “device agnostic” is the key to success in gaining new readers, and potentially, subscribers.

“If people want to read their newspaper on a very basic device like the e-reader in black and white with out any picture, let them,” she said. “Let the customer choose. Let them read you however they like.”

September 23 2010

15:00

The Newsonomics of Apple’s “digital circulation” share

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

So the newspaper business is now figuring out how to deal with a new middleman, Apple. The last decade has been about moaning and groaning about The Google, how it has become the mass medium, leaving newspapers in the niche, and how it has gotten the big share of digital ad revenue as an aggregator while news creators have gotten the short end of the hockey stick. The new decade looks like it’s bringing up a suite of similar questions, with Apple first in focus (and maybe Facebook coming next).

Just when newspaper companies thought they’d seen a big, new opportunity to establish strong new reader revenue lines on the tablet, their dreams have hit the pause button. Apple says it wants 30 percent of that emerging reader revenue — including ongoing digital subscription streams — telling publishers that they, like everyone else, have to go through the App Store to do the transaction, giving Apple its due cut. Publishers are now figuring outhow to respond, and as they do, let’s look, briefly, at four sets of numbers that tell us why this Apple/newspaper company tiff matters so much. Within those four sets, we can see the emerging newsonomics of tablet reader revenue.

  • Let’s start with a global number: $34 billion. That’s the amount of circulation revenue — almost all of it print-based — that newspaper companies around the world took in last year, according to research I do annually for Outsell. That number is about 34 percent of total newspaper company revenue, which came in at $99.8 billion. So if it is newspapers’ strategy to transition paying readers to digital devices, charging them along the way, some part of that $34 billion will move to tablets, ereaders, iPads, Streaks, and whatever the next generation of devices are called. If Apple snapped its fingers and transformed the print industry tomorrow, its 30-percent take would be $10.2 billion. That’s a fantastical number, of course: No fingers can be snapped, not all print readers will transition, pricing will change, and so on. But we can see globally how much money may be in play over time.
  • Let’s move to a real-life example, The Wall Street Journal’s $17.29 monthly iPad subscription rate. It’s reportedly sold well, though we don’t have good numbers on it. It’s the major standalone, separately priced news app, and that got it a lot of attention when it was announced. While we can debate the merits of standalone iPad pricing vs. bundling the price with print/web/smartphone access, the pricing itself is of interest. The Journal understands that some readers will abandon print for the iPad. When they do, the Journal doesn’t want to exchange print circulation dollars for iPad pennies. An annual iPad subscription costs $207.48. That compares to $249 for the print edition, although the Journal’s been doing a lot of heavy discounting of its flagship paper. The Journal’s iPad pricing, which itself can be discounted over time as print is, is intended to ease that circulation revenue transition. At $208 a year, Apple would presumably take $62. Overall, the Journal counts more than 2 million in circulation, with more than 400,000 of those online-only and Kindle subs. Pricing will change over time, but just take those 400,000. If they all wanted tablet access, that could amount to $24.8 million a year for Apple.
  • Let’s move on to the New York Times, the company that is going “paid” early next year, and has the best chance of any U.S. general (non-financial) newspaper to pull it off. For the first six months of the year, the Times itself (not the other newspapers the company owns) took in $346 million in circulation revenue. Currently, its web content is free. Let’s say that it prices in a similar fashion to the Journal, keeping about the same amount of revenue as it goes digital and that 10 percent of its sales are on an Apple tablet a couple of years from now. That would mean about $35 million in iPad circulation revenue for a half a year, or $70 million for a full year. Apple’s take of that: $21 million.
  • Finally, let’s look at Apple and the music industry. Today, Apple’s iTunes pulls in about 28 percent of all music sales in the U.S., or seven-tenths of the total 40 percent of U.S. music sales that are now digital. It took Apple seven years to get there, from a dead start. Of course, the music and news businesses are completely different, right? We can name the differences, but let’s concentrate on the main thing they have in common: Many consumers love digital delivery. So that migration — from analog medium (CD, newspaper) to a suitable, finally-it’s-arrived digital device (iPod, iPhone, tablet) — may be another guide that’s useful.

Those 40 percent (of total U.S. music sales) and 28 percent (Apple’s share of overall music sales) numbers are ones to note. If they held true for news reading, then by 2017, we can be assured of one thing: Apple’s share of news “circulation” revenue would be mind-bending.

September 16 2010

17:30

The still-evolving Newsonomics of digital transition

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

It seems like a simple enough question. If newspaper companies could make the switch to digital publishing, how much would they save in costs?

Newspapers have been Big Iron companies, operating on a industrial manufacturing cost basis, as the information revolution has developed all around then. They’ve participated, triumphed here and there, yet seen their business model effectively cut in half, as first the classified business cratered and then other ad lines shrank.

Surely, as newspaper companies go digital-first, multi-platform and tablet-ready, there’s a financial path from here to there. Surely we can see how the old costs of physical production, printing and truck-based distribution can be winnowed, replaced by hyper-efficient digital creation and distribution.

I’ve been plumbing around in those numbers for a couple of weeks, and I can report back that the print-to-digital transition is at best a work in progress. Sometimes it seems more like an exercise in the pseudoscience of numerology. There are all kinds of intriguing numbers — but they just don’t add up yet.

The numbers we know, though, tell stories, and offer pointers.

Take this one: 4.1 percent. That’s what Warren Webster, president of AOL’s newly expanding Patch, recently told me it costs his company to match the content production of a “like-sized newspaper.” Meaning that Patch can produce the same volume of content (quality, pro and con, in the eye of the beholder) for 1/25 the cost of the old Big Iron newspaper company, given its centralized technology and finance and zero investment in presses and local office space. (Staffers work out of their homes.)

That’s an astounding number, which even if tripled, gives a legacy publisher or editor pause.

Yet the second sentiment coming out of that publisher’s or editor’s mouth is this: Tell me exactly how is Patch going to make enough just to be profitable, even if it only pays one very full-time reporter, plus freelance, per community.

For Dave Hunke, publisher of USA Today, which has just announced a major restructuring to get itself “ready for the next quarter-century,” such cost questions are very much on his mind. Yet asked how much cost could be cut out of the legacy enterprise if it went wholly digital, he pauses, laughs and says, “That’s honestly one of the few questions we haven’t looked at. You could have a reasonable number if you had a business model around the digital business.”

Hunke’s point is a big one. You can have a business model that supports a wholly digital news enterprise — it just won’t be a very big one. Take SeattlePI.com, supporting about 20 editorial staff and flirting with profitability. For Hunke, the question is how you keep a big news staff and a big news footprint as you transition. That’s the still-looming question for metro newspapers, who see the many startups forming around, under, and near them. And, at this point in the digital evolution, there’s simply nowhere near the money necessary to pay for big newsrooms.

Still, the question of digital transition economics is one that’s on many minds.

If you could flip that print to digital switch, what might it mean in numbers?

Start with 60 percent. That’s the rough percentage of costs that might come out of an enterprise, as print production, printing, circulation and distribution expenses, along with those jobs, were eliminated. The 40 percent or so remaining? Figure about 20 percent of costs are newsroom, and 10-15 percent are ad sales. Add in a reduced (from print heyday) number of finance, HR, marketing and management jobs. As one publisher told me: “There are still way too many managers around, managing lots fewer people and lots less money.”

That 40 percent or so number gives a notion, though, of where this is all headed, though it’s only a marker. Hunke announced a 9-percent staff reduction with the restructuring, and, of course, everyone wanted to know where those cuts were coming from — production, circulation, advertising or elsewhere. He says he couldn’t say because he doesn’t yet know.

“Nothing’s a clean cut,” he says. He makes the point — one familiar to many publishers — that he’s leading a digital transition, but one that includes maintaining (and maybe growing) a print product along the way. His multi-platform, segmented audience approach means that job descriptions themselves are in flux. That, of course, makes budgeting even more difficult in the transition.

The notion of continued care and feeding of the print product — Hunke, correctly I believe, sees it as a niche product for a certain group of readers — is key. Remember that daily newspapers still depend on print for 85-percent-plus of their revenue. My sense is that the tablet will accelerate a print-to-digital transition — especially for baby-boomer readers — and that hastening will favor newspaper companies that manage products, costs, and revenues smartly.

There’s no template, though, and no formulae that anyone can share. The transition road is too dark and bumpy at this point, without map or GPS.

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