Newsday’s not-so-bold pay gambit
At first glance, Newsday appears to be making a bold move by becoming the biggest newspaper to date to start charging for most of its content on the web after giving it away for free for years. But the move isn’t really that brave.
The newspaper is hedging its bets by taking advantage of its unique position as a division of the predominant cable television provider on Long Island by continuing to give free access to the newspaper website to those who not only subscribe to the print edition but also use the cable service to access the Internet.
This neat trick is beyond the capabilities of most other publishers, who generally don’t own the cable systems in the markets they serve. Other newspapers should take this into account in the event they are inclined to emulate the Newsday experiment. On the other hand, this idea may provide a good reason for enterprising publishers to take the manager of the local cable system to lunch.
As reported here in one of the last free articles at Newsday, the paper plans to start charging users $5 a week for access to its website unless they subscribe to the print edition of the newspaper or access the Net through the cable service provided by its parent, Cablevision Systems.
The combined reach of its newspaper and cable TV businesses means Cablevision already penetrates 75% of the homes in the service area, according to Newsday. It will be interesting to see if this initiative helps Cablevision rope in many stragglers.
posted by Newsosaur at 8:03 AM
11 Comments:
Their plan makes no sense. The people most likely to subscribe to their local content don't have to, since they mostly have cable. Those others who read only limited parts of the paper are never going to pay that much (if anything) for almost entirely easily replicable non-local content. I'm in this latter category - live in NYC, not Long Island, but read one or two Newsday columnists. I can't fathom someone like me subscribing as they envision.
The other part that makes no sense is the pricing. $5 a week is what they charge for the print subscription as well - is there anyone who thinks that price point parity will hold online? Please. Plus the effective hard copy subscription rate looks like it is about 40% less right now due to a gift card deal they are running.
This is going to be a tremendous failure in its current form. My guess would be that they intend to eventually charge the cable customers a fee right on their cable bill for the paper unless they opt out, but in the meantime it is hard to see this bringing in much if any net new revenue.
Their plan is exactly what I expected it to be, and it has a real shot at being successful. Newsday.com will earn its keep by giving Cablevision a new way to differentiate their telecommincations services service from Verizon's. Most of Newsday.com's important readers - the local ones advertising wants to reach - will still get Newsday.com for free as a result of Cablevision/Newsday's dominance on the island, Few will buy subscriptions to the web site, but that doesn't really matter. This is about keeping Cablevision subscribers from switching to Fios.
I wonder what their online advertisers think of this plan?
One spill over from this decision will be the loss of Internet revenues as page-views collapse to the subscribing core of readers. We do not know how much this will cost the paper, but it strikes me it will not be insignificant.
The effort to connect the cable network to the newspaper is interesting. Another chain that could implement this strategy is Cox, which could connect what is left of their newspapers to the cable empire.
The more interesting experiment, IMO, is the NYT, blasting ahead with expanded local in major metro areas starting with the Bay area and Chicago. They say they are only trying to solidify their existing circulation in these areas, but I do not believe that. I think they are adopting a British model where newspapers rely more on mass circulation nationwide than ads. Look at the NYT's quarterly report, and you see they got more revenue from circulation than ads.
"The largest segment of the company reached a watershed moment, collecting more from readers than from advertisers, in an industry where advertising traditionally outweighed circulation in revenue by at least three to one. At the company's New York Times Media Group, which includes The Times and The International Herald Tribune, circulation revenue reached $175.2 million in the third quarter, while ad revenue dropped to $164.5 million," the NYT says.
The emerging fight is between USA Today, the WSJ and the NYT for national dominance. The NYT is already aggressively moving into hotel circulation, taking away from USA Today's established niche.
So we have two new business models emerging: the cable-newspaper linkups, and the national circulation models. At last, the newspaper industry seems to be moving with some new ideas.
‘Sell News Online’: Three Words that Do Not Go Together http://cli.gs/7y1Dy
and
New Business Models for Newspapers: Let the old one R.I.P. http://cli.gs/dmMBy
may interest you!
Nice to see the NYT providing local news in SF and Chicago. Why not supplement the two lonely people it has covering Albany, or put someone back in Trenton?
BTW, FiOS take rate in overbuilds is about 30%, and no one who gets it, gives it up. The churn rate is under 1.5%, which is basically the rate at which people move.
I assume that what Newsday is doing is having users with a print subscription or cable account use some type of account or user id to sign on to allow access for free. By doing this, the benefit is that they will know who is signed on and be able to use the demographics of those who are signed on to provide relevant advertising and offer the advertisers a better value knowing who the readers are and thereby increase Newsday's revenue. Seems like the proper direction.
MTM
They better have really good content you can't get anywhere else.
One analyst described this as a zero-sum game. Cablevision and Newsday have essentially determined, with this move, the absolute maximum they will ever have for audience. Perhaps such information is valuable.
The immediate gain for the newspaper is an infusion of cash. That cash flow may hold steady if no means is provided for Optimum users to opt out. But the amount of cash in question is unlikely to balance the ongoing erosion of print advertising. Thus, zero-sum game there at best.
Maybe this buys some time, not a bad thing. With proper transparency, it may also provide some useful lessons about paywalls -- though Newsday has some unique dynamics (owned by cable company with subscription-base on an island). But the bottom-line rationale for this, as well as many of Murdoch's moves toward paywalls, is that it just doesn't seem right for people to get something for free. While I may agree with that in principle, it doesn't seem like much of a business plan.
I don't see an infusion of cash for Newsday. I see another reason for people to choose Comcast for Cable. Since people on Comcast won't have to pay, they will continue to visit the Web site. Others most likely won't pay $5 a week. Hardly any, I would expect.
So the paper will lose page views, will probably lose ad revenue and may garner a tiny amount of subscriber cash.
Comcast may make some cash from new subscribers.
Doesn't sound like a win-win to me. It may be a deal where Newsday loses, Comcast wins a little.
I can't wait to see how much money Newsday doesn't earn off this.
"I can't wait to see how much money Newsday doesn't earn off this."
I presume your tongue is firmly in cheek with that comment. (How to ascertain a negative?)
I do agree, though, that it helps Comcast sign up customers. "And if you sign up with us, you get free local news from Newsday." Their competitors won't be able to make that offer.
This hook-up makes sense in the bigger picture, in that relatively speaking Comcast is swimming in cash while newspapers aren't. That Newsday signed up is a measure of desperation to break out of a box.
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