Sunday, April 05, 2009

Publishers zero in on charging for online news

The way to charge for digitally delivered content is a prime topic on the minds of the newspaper publishers meeting in San Diego this week to contemplate the future of their badly battered industry.

Even if charging for online or mobile content is not publicly discussed at the annual meeting of the Newspaper Association of America, participants have confirmed that significant private talks on the subject are taking place among several of the chief executives convened at the Manchester Grand Hyatt Hotel.

The under-the-radar discussions include a sit-down among several CEOs – held quite separately from the convention under the guidance of a lawyer to ensure the talks don’t stray into inappropriate territory – that would be similar to a confab where many of the same leaders discussed the industry’s challenges in January, 2007. Despite the deterioration of the newspaper business in the intervening time, no similar session has been held since then.

In addition to discussing whether and how to charge for the expensively produced content that today is available for free at most newspaper websites, publishers familiar with the agenda for the private session said other topics were:

:: How to recover some of the classified advertising business that has been usurped by Craig’s List and others.

:: Whether to demand payment from aggregators who now freely link to content from their sites.

:: How newspapers might get a greater share of the $10.8 billion in search revenues that represented 46% of all U.S. online advertising revenues in 2008.

Publishers are focusing on charging for at least some of their now-free interactive content because they are desperate for new revenues to replace some of the $11.6 billion in ad sales that have vanished since 2005.

Advertising sales, which produce the vast majority of industry revenues, plunged 16.7% in 2008 to $37.8 billion. That is a 23% drop from the record $49.4 billion in sales achieved by the industry as recently as 2005. The deterioration this year appears to be continuing, if not accelerating, in the scariest economic environment since the 1930s.

Publishers also seem to be recognizing, albeit perhaps belatedly, that further cost-cutting in their newsrooms will degrade the thing that differentiates them the most from all other web competitors: Authoritative and original local content.

At the same time, drastically slumping banner ad rates – they fell by some 50% in the last year – have made it clear that there is no point in generating traffic by giving away free content if you are filling a substantial portion of your online inventory with ads netting as little as $1 per thousand views.

Although publishers may not rush home from San Diego to declare that they are going to start charging for online content, there are few among them who already have not ordered intensive internal studies of the business models and implications associated with implementing a pay strategy.

After comparing notes in San Diego, the executives may come to recognize that the number of publishers willing to charge for at least a portion of their online content is approaching sufficient critical mass that they may be able to pull it off.

32 Comments:

Anonymous Anonymous said...

No, they will not be able to "pull it off."

'the executives may come to recognize that the number of publishers willing to charge for at least a portion of their online content is approaching sufficient critical mass that they may be able to pull it off.'

9:06 PM  
OpenID lostfortcollins.com said...

I wouldn't mind paying for my news again ... but I wouldn't want to pay for all the different sources.

I wish they could put something together like cable television where I pay for access to all the news sources, and let someone else work out how to divvy up the cash.

9:31 PM  
Blogger Benjamin Lukoff said...

Great comment. How about some details of why not?

9:35 PM  
Blogger Laurel Papworth said...

One of the challenges for publishers is that they don't create community - usually just blogs with comments - so they can't see a way forward.
:: How to recover some of the classified advertising business that has been usurped by Craig’s List and others
taking just this point and just one set of classifieds (secondhand) - most newspaper execs don't realise that SH classifieds got screwed because of eBay. eBay solved the issues of Trust (escrow & paypal payments) and Reputation (buying a car from a stranger is no longer a danger). If you look at recruitment, consider guru.com or eLance - both also solve security of payment - escrow payments and reputation - see a job portfolio online and testimonials only from those that hired the contractor.

Until newspapers take on the big questions like these (secure payments, profile identity and trust, reputation management, leadership and behavioural rewards) and solve them, they don't perform the job required - to value add while creating and distributing content to the communities. No wonder they are being disintermediated.

And if they charge aggregators who link to them, then I hope that we start charging back. We meaning those of us on Twitter who break news to journos, and we the bloggers who's blog posts get hijacked under "fair use" and we the Facebook users who have photos appearing on newspapers because we didn't know enough to make them private. I don't want it to come to that, but there seems to be a basic lack of understanding that news anywhere is now everywhere. And yes, editors are starting to call bloggers to write subject matter articles - they, after all, come with a built in audience.

I always enjoy your mutterings, Alan :)

12:39 AM  
Blogger W Rand said...

Slapping fees on existing sites without investing in new, web-only, unique content seems like a fools errand.

6:10 AM  
Anonymous Brian Costello said...

I've been thinking about this a lot as well. The problem is that it's always hard to move from "free" (or ad supported) to "pay me." Consumers now have a taste for the "free" content and it'll be hard to reign them in -- especially for large multi-venue metro news of old. There's certainly a model out there somewhere for specialized information, there always has been. But suddenly charging for the news I get today, well, likely that will fail at the large metro level.

How about smaller papers? Perhaps, but many of the free weekly papers now offer that information, and even local cable news and radio stations put up pretty good local content online for free as well (in addition to bloggers).

I think some papers will have limited success in the payment model, and most with fail if they attempt to have Google stop indexing their pages. Most newspaper folks don't seem to get the difference.

The sad fact is that we are in a transition from a print world, to an online world and the revenue metrics don't align (i.e. online CPM's can't replace what is charged in print). The additional sad fact is that no one has really figured out what the new model will be - I think we are still in the very early stages of a media revolution -- lot's of ideas, but nothing is solid yet (other than the continued decline of the daily printed newspaper)

6:38 AM  
Anonymous Anonymous said...

Publishers who believe they can charge for news vastly overrate the value of what they produce.

6:45 AM  
Anonymous Peter Kay said...

All the focus is on the content side. Wonder if the newspapers' sales forces should be innovating/partnering with craigslist to add a better level of findability/trust to open classifieds.

8:27 AM  
Anonymous Anonymous said...

I see a lot of wishful thinking going on. Mr. Mutter would be more credible if he waited until there were real hope that a pay model has been identified before he takes a side. Now we no longer find him convincing that a pay model will work.

At our paper, I find the most promise from an electronic version - not quite the web - that is super fast and easy to use, intuitive, highly searchable and browsable in a visual way, both advertising that appeared in print and news content. But how to combine it with the web site? That may be a value-added addition we could charge for. It's hard to know how best to position it, though, so that it complements rather than drowns out the web site and the print edition.

8:59 AM  
Anonymous Anonymous said...

Targeted advertising is the answer. That's the real value we can sell.

9:02 AM  
Anonymous Anonymous said...

Charging for content that consumers are accustomed to getting for free? That horse has left the barn, I'm afraid. And the lawyer will be there presumably to ensure that no conspiracy of collusion occurs, since news sites in competitive markets would have to simultaneously begin charging or else consumers would forego the pay sites for the free ones.

10:01 AM  
Anonymous Beth Lawton, NAA said...

Alan (and others),
Late on Friday, NAA released a spreadsheet exploring the financial impact of various newspaper paid-content scenarios. The scenarios range from an entirely free newspaper Web site to an entirely paid newspaper Web site, and the spreadsheet assesses the impact on online ad revenue, subscriber revenue and more. We did this in a partnership with Mignon Media and used information from our own surveys plus Borrell Associates, AdPerfect and Centro. Mignon Media's blog is at www.mediacafe.blogspot.com. Webinar on the numbers is April 15 at 3 p.m.

10:17 AM  
Blogger J.A. Ginsburg said...

I grew up with the Chicago Tribune and Sun-Times. Although the latter never quite recovered from the Murdoch / Conrad Black years, it still managed to have a certain upstart grit. Now, with an eviscerated newsroom, not so much. Meanwhile, the Tribune has become news anorexic under Sam Zell. I seriously doubt I'll renew my long-standing subscription because there's so little news left in it. They can charge whatever they'd like in whatever format they'd like: I am still not buying if it doesn't improve. A part of me wonders whether they're trying to run it into the ground to make it easier to justify pulling the plug?

Aggregators drive traffic to newspaper sites. They can also help keep interest in a story alive by linking to older, relevant material. As bad as the stats are for papers, I bet they'd be even worse without aggregators.

As much as I personally enjoy reading a physical newspaper, the old business model simply doesn't make sense any more. I think the newspaper will survive but in a much altered form. It is a mass medium that can be read in privacy. It doesn't depend on an electronic device to access - no outlets or batteries required. It won't go obsolete a la floppy disks and out of date software.

Years ago, I curated an exhibit about the evolution of the modern newspaper as a graphic medium. Ironically, I used a rare rag edition run of Tribunes as the case study. There was so much innovation and excitement over a new medium to deliver news.

And isn't that the business? Delivering news, not newsprint?

(For anyone interested, here's a link to the news art show backgrounder: http://tinyurl.com/6bvm2x)

1:40 PM  
Anonymous T Heller said...

Hopeful news, indeed, Alan!

You won't be charging for access, though, will you? Say it ain't so, Joe....

Some good comments above by Laurel and one of those Anonymouses...

6:11 PM  
Anonymous ChuckL said...

interesting post on why advertising will fail on the internet
http://www.techcrunch.com/2009/03/22/why-advertising-is-failing-on-the-internet/

6:20 PM  
Anonymous Anonymous said...

Hey, the American auto industry should try this too! Get the Detroit CEOs in a room together to figure out the way out of their mess! Those guys are smart, right? If they can drive their companies into the ditch, they can drive out.

I'm sure those newspaper CEOs in San Diego have all the answers the peons at their companies, and the consultants and pundits they ignore are too dumb to know. I just wonder why the CEOs have waited till now to put their brains together and show us the way.

6:42 PM  
Anonymous Steve Ross said...

READ MY LIPS. Craigslist did not steal classified revenue from newspapers.

Classified revenue for dailies, allowing for inflation, was higher in 2007 than in 1994. Per-subscriber, it was MUCH higher. Craigslist takes from pennysavers. Newspapers basically did not invest in the systems that would have allowed them to capture NEW ad revenue streams. But they did not lose the old streams.

If the NAA, which actually gathers the data that proves my point, can't get this right, it is worthless.

Newspaper companies need to invest in data-heavy local info -- schools, crime, maps, real estate, government budgets, upcoming infrastructure improvements, flood maps, insurance variations and on and on -- that it can charge for, and use for more in-depth news features that it may also charge for.

The whole industry, however, has told investors it is doomed. So where will the money come from?

And the permanent secular changes already obvious -- reurbanization, fiber-borne ultra-broadband, confluence of media streams -- changes that have enormous potential for changing the game in newspapers' favor? I see some glimmers of understanding, but very little.

My magazine will likely have 1000 people at its annual broadband summit in Dallas at the end of April (www.bbpmag.com). If previous years are any guide, it will be well covered, but not by any newspapers or wire services

7:23 PM  
Anonymous Tom Johnson said...

You wrote: "How to recover some of the classified advertising business that has been usurped by Craig’s List and others."

I know about the "others," (Vehix, MSL, various jobs sites), but can anyone show me data that demonstrates that Craig's List has taken PAYING classifieds from newspapers and to what degree? If so, is it the same nationwide? It appears that CL is built upon the ads of people and very small businesses that had not been advertising because they could not afford newspaper prices.

7:45 PM  
Anonymous Anonymous said...

It must have been interesting to have been in the room listening to the discussion on how to get a greater share of search revenues. How about shut down offline operations tomorrow and use any returns to buy Google stock? It's laughable that this was even on the agenda for discussion.

9:40 PM  
Anonymous Ed Strapagiel said...

Here we go again. Newspapers already have a way of charging for content. It’s called a “subscription”. The trouble is that the industry’s concept of a “subscription” is limited to depositing a printed newspaper in the general vicinity of your driveway every morning. There is not even a suspicion of a vague hint of “membership” or “community” or (dare we say it?) “social network”.

The core issue however is newspapers’ silo thinking and inability to take a bigger view. It’s not just about online, or even just about print. Worse still, it’s not about print “OR” online. It’s about “pronline” and levering the power of the package. Considered in isolation, “how do we charge for online content?” doesn’t have a right answer, because it’s the wrong question.

6:52 AM  
Blogger Candice said...

I find this topic so interesting because one of the papers that I work with is extremely rigid with their advertising prices. I pay outrageous dollar amounts for advertising in this particular paper; I pay upfront and they still won't budge. When I hear things like this, I wonder if more papers gave a little, would the circumstances be different.

8:04 AM  
Anonymous Greg Andrew said...

I don't know what would have happened ten years ago if newspapers had tried charging for their content online, but the reality is that most users have been trained not to pay for news and the quality and content of most newspapers has been so watered down over the past 8 years that many people feel that they already live without their old newspaper, even if they continue to read the shell that's left.

In the 1990s, I proposed a system where one company would control access to thousands of web sites and sell that access for under $5 to most isps, which would have users choose which 5 sites they wanted to support; that may have been impractical, but it's still better than anything else I've ever heard.

8:15 AM  
Blogger yael said...

Ad click troughs are going down and the revenues with them.at the same time video views are growing steadily and with them the click trough rates which are now at the average of 1.7% in comparison to 0.2% on banners. Publishers shouldn't leave this revenue stream yet again fall only into the web giants control. if they do they will have to cope again with the question of how to get a greater share of the video revenues pretty soon. Allocate power to video producing and gain first and foremost what differentiates them most from all other web competitors: Authoritative and original local content.at the same time gain 3 revenue streams at once:
1. video adds revenues
2. video revenues generated from fully owned content "traveling" the web
3. monetize the items by selling them to third parties.

10:51 AM  
Blogger Gabriel Sama said...

One thing is that newspapers want to charge for they content -- hey, theyre free to try -- and something very different is that the audience is willing to pay for it. Shouldnt they check first to see if somebody wants to pay for what they do?

2:57 PM  
Anonymous Anonymous said...

I give my weekly paper away for free (targeted delivery) and charge for online content. The last four years have been the best we've ever experienced.

And Candice, FYI, not all papers are inflexible. We provide a cash discount for prepayment.

5:51 PM  
Anonymous Anonymous said...

10 percent of any group will pay for a product that is good and reasonably priced. It's a fact of sales and advertising. Newspapers have critical mass eyeballs now. They'll get 10 percent of the overall currently free clickers to pay for it. Most big newspapers have over a million unique visitors a month now - critical mass. They will get 100,000 or more of them to pay a few bucks a month for valuable content.
Mark my words.

9:24 AM  
Anonymous Tyler said...

I think services like Kachingle are the way to go when it comes to paying for online content. I haven't seen a better idea proposed.

http://www.onthemedia.org/transcripts/2009/02/20/04

"Let's say I go to a blog and I go, oh, my God, this is great. I just love it. All I do is click on the Kachingle medallion which that blog has installed, and I say, this is a blog I love. And then every time I come back to that blog, Kachingle keeps track of that, and at the end of the month it takes my voluntary contribution and distributes it fairly across any kind of content or even service that I've visited that much."

11:53 AM  
Blogger Jeff Mignon said...

@ Anonymous (10%). Le Monde is one of the largest online newspapers in France. They have around 3 M UV and 45,000 paid subscribers for the online paid zone. Does not make 10% to me.

12:23 PM  
Blogger Patrick ONeill said...

Imagine a business model employed reporters and photographers and editors and a small staff that posted their product on the web - along with ads.

But did not employ paper mills and presses and printers and delivery fleets and newsboys.

Such a business could be profitable - newsPAPERS just have, as yet, not been able to transition to a digital world.

3:32 PM  
Blogger Ric Cox (Ric14@aol.com) said...

Among the suggestions I have made in an open letter to Chicago Tribune owner Sam Zell are these:

* Announce that you will soon charge for online access. Despite strong consumer resistance, it is inevitable that newspapers will eventually charge for online access. Lead the charge of the right brigade. Other major dailies will follow in a flash.

Prepare your readers as if you were General Eisenhower planning D-Day. Create a marketing campaign that makes Obama’s pale in comparison. For starters, enlist local celebrities to rattle the tin cup for you in online videos. Award a prize to the one who raises the most money. The star of the first one: you!

* Begin by encouraging visitors to pay voluntarily. To overcome your understandable reluctance to charge for content, start by creating the ability on ChicagoTribune.com for me to voluntarily pay for an online subscription with a credit card. See how that works. Shame the skinflints. Beg, if you must. Appeal to their civic virtue and pride.

What disturbs me is that you haven’t even bothered to ask us to pay! Given all the free content online, and the failure of a few valiant, but half-hearted efforts to get online readers to pay, I understand your trepidation. But you must believe in your product--and improve it. Readership of news is growing. Charge for content or die.

* Make it cool to contribute. Offer anyone who contributes $25 or more a free pass for one year after the Tribune begins charging for access. For every year after the first year, those founding contributors will receive a 10% discount on a subscription. Publish the name (and dollar amount) of each contributor. Showcase them in their own video testimonials.

Require payment. When you get the nerve, require payment for most content. Offer two online subscriptions: one with ads, for $49 (one-third of your print subscription fee). One without ads, for $79. For the two-thirds of your visitors who do not live in Chicago offer a discounted subscription. Test $19 and $9 a year.

* Be creative. Instead of selling cookies to raise money, the Girl Scouts can collect commissions for selling your online subs. Figure out a clever way to market your paid content as bottled water that competes successfully with free water (content). Be pure, trusted, prestigious, convenient, whatever makes your product unique and worth paying for. Find ways to feed people's innate curiosity as effectively as Starbucks feeds their need for status and caffeine.

For additional ideas, you can read the entire letter at http://saveourtribune.blogspot.com/2009/04/moochers-offer-to-tribune-owner-zell.html

11:37 PM  
Blogger O! said...

Martin Langeveld introduced the concept of a low-cost news wiki here: http://newsafternewspapers.blogspot.com/search/label/wiki

And www.VillageVoyage.com is set to launch later this month, putting the concept into practice. Does anyone really think this will work?

7:39 AM  
Blogger Laurel Papworth said...

How important are subs vs advertising? I mean, it seems to me that readers are the long tail of payment (lots of little bits) but advertisers make the world go round? Even if you could talk readers into paying for online news they can mostly get elsewhere for free, can papers survive with continued massive drops in displays and classifieds etc?

Of all the revenue streams for social sites (assuming they are at least moving in that direction) advertising pays the poorest, and premiums a close second to bottom. Moving to a "pay-for" is nigh on impossible - I've had to do it, and no matter what way you spin it, or how cool the Founders Club is, you lose a LOT of subs and therefore advertisers. Freemium fares much better, but only if the premium part introduces much more benefit than they were getting with the purely free service.

8:33 AM  

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