Monday, August 30, 2010

Local news rivals doom publisher pay walls

The local news sites being developed by Yahoo, AOL, Huffington Post and a growing number of other online players will dash the hopes of most newspaper publishers of charging for access to their online content.

While newspaper executives have agonized for the better part of two years about whether and how to charge for their costly-to-produce content, every indication is that the portals, local broadcasters and other media companies have no intention of asking anyone to pay for access to the increasingly ambitious local sites they are building.

With a fast-proliferating number of respectable local sites giving away news to build traffic for their ad-supported ventures, newspapers simply won’t be able to charge for access – especially when their own stories are likely to become freely available within minutes at any number of competing sites.

The local news land rush gained a formidable entrant last week when it became clear that Yahoo is getting ready to launch a major local news site in San Francisco. As reported first here and here, Yahoo spent some $90 million to acquire Associated Content to begin filling its local sites with tons of inexpensively produced content.

Yahoo joins such up-and-running efforts as AOL’s Patch.Com, MSNBC’s Everyblock.Com, Huffington Post (example: HuffPost-New York), and the ever-more-elaborate local sites operated by television and radio broadcasters (example: NBC Philadelphia).

This is not to mention the hundreds of local sites operated by individuals (West Seattle Blog), funded by philanthropists (MinnPost) and backed by venture dollars (Outside.In). In the San Francisco area alone, the Graduate School of Journalism at the University of California at Berkeley has identified more than 250 local sites.

Even the juiciest scoop published by a paper in print or online will not remain exclusive for long. It will take only minutes for a heads-up local news venture to match any story appearing in the local newspaper. The “QuickRead” technique developed by the Huffington Post is but one example of the how easily content can be cribbed:

A Denver Post story about accusations of racial profiling by police was featured prominently yesterday on the HuffPost’s Denver page. A click on the story led to a one-paragraph summary of the article and a link to the original piece (see screen grab below). For many readers, the HuffPost summary would be sufficient, thus depriving the Post of the traffic it otherwise might have earned.

Beyond matching newspaper stories, AOL and Yahoo intend to leverage citizen journalists to fill their sites with inexpensively produced original content. In its initial email effort to recruit writers in San Francisco, Associated Content promised $10 for the first article.

Armies of low-paid writers Patch-ing together copy like this yarn about a federal raid on the office of a Connecticut foot doctor likely will provide enough free local content in many major markets to satisfy all but the most voracious and discerning news consumers.

With newspaper advertising revenues this year on track to come in at less than half the record $49.4 billion achieved in 2005, publishers have been toying with the idea for quite some time of charging for access to their websites.

Given that all but the most parsimonious newspaper pays more than $10 per story, you can’t blame publishers for wanting to recover the costs of creating content by charging for the online news that most of them have been giving away for free for 1½ decades.

However, the few brave publishers who have tried to charge for content have met with less than encouraging results.

Newsday famously got only 35 takers when it initially imposed a fee to visit its site (but it did not care, because it still provides free access to subscribers of the newspaper and the Internet service provided by its owner, Cablevision Systems).

The Valley Morning Star in Harlingen, TX, lost nearly half of its web traffic when it started charging for content in July, 2009, according to statistics published at Quantcast.Com. Although the paper resumed free web access in April of this year, its traffic only recently recovered.

Combine consistently demonstrated consumer resistance to pay with a plethora of plausible free alternatives and there can be little doubt that charging for day-to-day news coverage – even sparkling local coverage – is not likely to be a fruitful path for most general-interest newspapers.

Instead of putting cycles into exercises like charging for access to obituaries, publishers need to focus their marketing power, content-creating resources and ad-selling capabilities on developing unique print, web and mobile products that will be valued by consumers and advertisers alike.

For anyone other than publishers of mission-critical business or government news like the Wall Street Journal and possibly the New York Times, pay walls will not fly. It is time for everyone else to move on to more productive pursuits.

22 Comments:

Blogger Howard Owens said...

Compare and contrast this post with what you did on the newspaper's original sin.

Charging for content was no more viable today than it was in 1996.

To any discerning Web observer in 1996, it was clear that the barrier to entry for Web publishing was quite low and that it was a market where any number of players might enter.

This has been a consistent part of my own critique of paid content models for the past few years.

You go on to write, "publishers need to focus their marketing power, content-creating resources and ad-selling capabilities on developing unique print, web and mobile products that will be valued by consumers and advertisers alike."

But this fails to address the very real current issue of trading print dollars for online dimes. And if dollars become dimes online, they become pennies in mobile.

Newspaper online advertising modules pretty much suck, and targeted advertising is being over sold as a possible revenue savior.

The only way newspapers can make the transition to online is to radically cut costs. We're talking 80 to 90 percent cuts in personnel. An online news business needs to be built from the ground up, not have a legacy news module imposed on it.

This is why I continue to believe the newspapers original sin wasn't a failure to charge for content, but a failure to create completely separate online companies.

6:55 AM  
Blogger rplothow said...

Alan:

At last, I finally get it. You're using hyperbole mixed with satire to get our attention. Clever, very clever.

Roger Plothow
Editor and Publisher
Post Register
Idaho Falls, ID
(Pay site since 2001)

8:21 AM  
Blogger Steve Buttry said...

Good post, Alan. While I agree with Howard that charging for content could not work (and it actually was tried by lots of newspaper sites) in the mid-1990s, I welcome your current analysis of the paywall folly.

Since Howard brought up last year's exchange on Original Sin (not a theological discussion and perhaps one we overdid), here are Alan's take http://bit.ly/2Wp64e, mine http://bit.ly/wUzwq and Howard's: http://bit.ly/iUuJZ.

10:34 AM  
Blogger mgjr said...

Amen brother. The transition is very difficult. Print dollars still dwarf on-line and the expertise for making more money online is in short supply. See HuffPO, AOL, etc... Customers just put a higher value on print than online. Until the mind set can be changed, if it can, Publishers will still have to focus on maximizing those dollars. It's hard to get a Sales Rep to focus on online sales when their commissions are much higher for print. I believe there is a way to overcome this hump, but it requires a leap of faith as there aren't very many success stories to build a model from.

1:00 PM  
Blogger Quippd said...

I am involved in a startup that does something similar to what Huffington Post does currently - the quoting of content, either paywalled or not.

My site http://quippd.com introduces an interesting wrinkle, however, by allowing our audience to edit the post.

Similar to sites like Wikipedia, where the article grows progressively more interesting and useful as more people edit it and add more information, this may be a new step in citizen journalism -- instead of simply having journalists create derivative content, we can also link to quality content and serve to curate it.

1:04 PM  
Blogger Mark Josephson said...

Nice post Alan. I agree that putting up a wall only keeps people out. The information will get out there and walls won't keep it in. In fact, in many local markets there is too darn much content of highly varied quality and relevance.

Howard is right in his comment too. The cost structure is so vastly different in online that the vast majority of online-only local media companies just can't exist under the "traditional" cost structure.

Smart local media companies are making themselves more valuable by helping organize all the local info and exercising some editorial control over what to present. Aggregation (the new biz dev) + Curation (editorial voice and control) + leveraging local advertising relationships is the future.

(Full disclosure, we at Outside.in help companies like CNN, MediaGeneral, Tribune, McClatchy, NYT and more do this.)

1:12 PM  
Blogger Mark Josephson said...

Alan, you're right.

The walls people set up to keep the people out will not keep the information in.

Howard's right too. The cost structure of the online-only local web biz is just so radically different and any "traditional" model is going to be too expensive. Batavia is a great example of the new lower cost model.

Add to that the proliferation of "content" (everything from local bloggers, to tweets to checkins, to stars on reviews) and in many markets there is already more than enough content.

Smart local media companies are focused on remaking themselves into the arbiter of what's important and putting themselves in the middle of the ecosystem between the local advertisers, with whom they have long-standing relationships, and the local content creators who yearn for traffic and revenue.

(Full disclosure: we at Outside.in do exactly that for companies like CNN, MediaGeneral, NYT, NY Post, Dow Jones Local, Tribune, McClatchy, Lee, Scripps and more....)

1:19 PM  
Blogger Eric said...

I think it comes down to whether consumers are willing to spend money to read quality reporting and insightful analysis, and not simply regurgitated press releases.
Newspapers, for the most part, offer a breadth of knowledge that most blogs and Internet start-ups can't match.
Websites like Patch.com are not charging for content because their content isn't worth paying for.

2:02 PM  
Blogger Toby Murdock said...

Howard is right on:

"The only way newspapers can make the transition to online is to radically cut costs"

Of course all of the expenses around print production and distribution have to go. But that's still not enough to get to the radical 80-90% cuts that Howard mentions.

Alan writes:

"publishers need to focus their marketing power, content-creating resources"

That's the key. Older media still has huge brand marketing and thus content-creating advantages. Anyone in their markets still way identifies the old media brands as the source of their local news, not Patch, Associated Content, etc.

Old Media needs to get on that now, and use their brand to attract and develop new lower-cost (and even potentially great-depth and higher-quality) content sources and processes using some of the new tools now becoming available.

3:39 PM  
Blogger Reg Chua said...

Alan, I suspect there are some very focused sites/organizations that can charge for content beyond the WSJ or NYT (full disclosure, the South China Morning Post, www.scmp.com, where I work, is a paid site) - but I agree that pay walls will at best only contribute a fraction of news generation costs.

At the same time, it's pretty clear that online advertising isn't going to generate the kinds of revenues media companies need.

So I think it's critical that we look at the not only the type of content we produce - and especially going beyond the notion of story as the basis unit of news - as well as the broader question of how to extend the shelf-life of that content, ala Politifact.

This are ideas I'm trying to explore on my (Re)Structuring Journalism blog. (http://structureofnews.wordpress.com/)

5:29 PM  
Blogger Howard Owens said...

Eric has his head in the sand.

There are plenty of online-only sites creating quality content.

Toby, I'd argue that The Batavian brand (not even three years old) now, in our market, rivals the 100-year-old Batavia Daily News brand. We're very strong in our market. Brand isn't enough to win in the online space.

5:53 PM  
Blogger editor said...

All you folks always seem to be thinking about urban papers. I'm focused on rural news, small towns. My 2-1/2 y/o CountyNewsLIVE.com (daily) in Hermann, Missouri is about to cross the 10,000 UV per month mark WHILE we are about to sell out 250th paywall subscription. I don't believe in the Web 2.0 model for journalism. I just got back to the newsroom from our semi-monthly City Hall meeting. No citizens. Two paid reporters. Getting someone to file a credible report on tonight's meeting for $10 is a ridiculous thought. Jeff Noedel, Small town online daily news publisher with growth in both subscriptions AND free readership.

6:10 PM  
Blogger fred said...

You are absolutely right, a pay wall will not work. I think much of the problem is finding the right advertising model for online. TV did not really take off as a cash cow until the 30 second spot. I am not sure online has found the right way to link advertiser with consumer in a way that vales that relationship as much as print or broadcast has done. Until then, we will be stuck with dimes or pennies for dollars as someone above said.

Fred S.
newslook.com

6:27 PM  
Blogger Howard Owens said...

Editor wrote: "All you folks always seem to be thinking about urban papers."

My site is based in a city with 16K people and surrounded by corn fields and cow pastures.

Ask my competitor if they can charge for news online.

This month, we're getting close to 70K unique visitors. And we're profitable.

7:28 PM  
Blogger rbarnett said...

I agree that except for a very few properties, people will not pay for their news online. However, I believe we found a way to get people to stay on news web sites and view display and particularly audio ads for long periods of time.

Our company has developed a very compelling, immediate and rich news content and delivery service in which audio ads can be embedded as an income generator.

It's a unique, customizable, local and live police & fire scanner that has a Tivo feature to go back in time, great for answering the question, "Why did that fire engine race down my street 5 minutes ago?" Also great for news reporting. See www.aikenstandard.com/crime/ to see one of our players.

Reporters can also post their own audio blogs with the service.

Go to Rangecast.com for more info and further demos or contact me at rich@scannermaster.com if interested.

My apologies for the sales pitch of our technology but it's hard to get the word out these days and I felt it was relevant to the discussion.

9:31 PM  
Blogger -30- said...

Someone a zillion comments back mentioned brand. Most sizable metro papers have stellar brand recognition, to the tune of 90%. Most companies would kill for that.

Ironically however, this seems to be somewhat of a curse because when you the big go-to operation, even lousy work will generate sizable traffic numbers. And lousy work is cheaper to produce so therefore it quickly becomes the norm (see: "good enough").

I like to hope (perhaps a naive hope) that as these larger-scale online sites move into cities and really take a bite out of the established media it wakes up the sleeping giants and the gloves finally come off (or they just get throttled in their sleep).

editor: You make a great point, the dynamics are wholly different for the rural mediascape and the media pundits often overlook that. But please don't rest on your laurels. Out where I live we recently got 3G coverage and most areas finally have broadband. That wasn't the case only a year ago. I expect the changing nature of connectivity "out in the sticks" will profoundly impact the rural media, whether they want it to or not.

11:57 PM  
Blogger Ramblin' Man said...

I agree with "editor" that this discussion is about larger, urban papers. It will be awhile before AOL, Yahoo or HuffingtonPost try to hire local content in a community of 10,000 people.

The situation we're headed for is ripe for credibility problems for all of us as citizen journalists weave their personal opinions and agendas into their reports or flat-out make up a story to get the payment.

But some of the most professional newspapers also have suffered credibility issue, and many more suffer quality issues because so many copyeditors have been laid off that newspapers are full of typos and other misprints.

It all comes down to money. These national sites can afford to pay for reports, but if the ad dollars don't follow, they won't stick it out. Unfortunately, they may be able to afford to stick with it longer than the newspaper.

7:19 AM  
Blogger richard reisman said...

the winning play is not charging for digital content, it is denying exclusive content to all but print subscribers. an example would be high school sports. or for a paper like the LA Times, its entertainment coverage.

10:38 AM  
Blogger Bruce Wood said...

Sorry Alan, I'm not buying it. If airlines can charge for checking your bags, if satellite radio can charge for music, if cable can charge for TV, then newspapers can charge for unique local news after re-educating the consumer.

If newspapers could hire someone to write professional stories for $10 don't you think they would have done that by now? And if one paragraph of the story stolen by the aggregator is enough, then put the entire story behind a paid wall.

Most newspaper web sites can't generate the big audience numbers necessary to make any real money online. The paid wall model for local, unique stories is just getting started. Talking about doing it and actually doing it are two different things. It's about time newspaper web sites stopped talking about it and actually did it in earnest.

11:06 AM  
Blogger mary said...

There are plenty of online-only sites creating quality content.

12:40 AM  
Blogger Bruce Wood said...

Yes, Mary, you're correct. But they're not professionally written for $10 per story are they?

6:46 PM  
Blogger Palmer Brown said...

@Bruce Wood said, "Sorry Alan, I'm not buying it. If airlines can charge for checking your bags, if satellite radio can charge for music, if cable can charge for TV, then newspapers can charge for unique local news after re-educating the consumer."

Profitable Airline Leader (Soutwest) - bags fly free. Satellite Radio - losing listeners to free Internet radio. Cable TV - see Satellite Radio.

Unique 'local' news is not as valuable as many publishers/editors/journalists would like to think... MAYBE 2 - 2.5% of any give market would pay for it online. The greatest challenge publishers face is news apathy where the 35 and unders simply do NOT care and never will at the level their parents did.

2:07 PM  

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