Getting Money from Readers Who Won’t Pay for Online News

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By: Steve Outing

I can’t help but feel that an inappropriate number of newspaper executives are stepping boldly into the past with the misguided belief that they must apply old models to a new digital media world, since no new business models have emerged yet to save industry profits as they have been.

I’m surprised and disheartened that talk about charging for news content on newspaper Web sites continues to rage, with announcements by some publishers of their intent to start charging online readers, and publishing veterans like Steven Brill starting to build systems to charge for news content online that will be marketed to newspaper and magazine publishers.

In short: Charging on the Web won’t work for general-news publishers, and there are better alternatives. This column is about one of them. But first, let’s dispense with the paid-wall arguments for news content online.

Singleton’s folly?
MediaNews Group of Denver, which owns more than 50 daily newspapers around the U.S., recently had a high-level executive strategy meeting and came out with a plan to start charging for some content. This interview with Chairman Dean Singleton by Westword writer Michael Roberts does a nice job of explaining the strategy. In short, MediaNews Group papers will begin to hold back some or most of their local reporting, meaning that only print subscribers and paying subscribers to an “e-edition” (i.e., a digital-replica edition viewed on a computer where the look and presentation is similar to print but with digital bells and whistles) will be able to read the stories. Some niche content also will be developed and sold on the Web.

The idea for the MNG papers’ Web sites is that non-paying users won’t see as much locally produced reporting, but there will still be lots of other content. Singleton explained to Roberts: “Locally produced news copy that comes off the free site will be replaced with other content. A lot of it will be user-generated content. A lot of it will be new features. Our strategy depends on having a very exciting, free Web site. It just doesn’t depend on giving away all of our local news.”

That seems to reflect the current thinking of a growing number of newspaper executives. To paraphrase: “We believe that our local reporting has high value, it costs us a lot to produce it, so we will retrain the audience that they must pay for it.”

Here are reasons, in my view, why this strategy won’t work:

* Removing MNG papers’ best content from the Googlesphere means they become less relevant and more invisible in the global online news conversation: Far fewer links from search engines, blogs, Twitter posts, social network mentions (e.g., Facebook users sharing articles they like with their personal network), Diggs, and personal e-mail and text messages. By putting that content behind a wall, the benefits of the link economy are lost, since sharing an interesting article with others is impossible or made more difficult.

* Newspapers’ local content is not as important as it once was, or as newspaper executives still believe it to be. The demise of some newspapers (Rocky Mountain News, Tucson (Ariz.) Citizen, Seattle Post-Intelligencer, for example) and the degraded quality of many others due to severe cuts and layoffs has opened up opportunities for a wave of fledgling replacement news providers, both for- and non-profit. Generally they are small and/or target niches, but they’re getting better and some are growing to represent a looming threat to local newspapers by offering up similar or the same coverage for free.

* Singleton’s strategy is fine for older readers who will continue paying for the print edition; those tempted to save money and use the papers’ Web sites will instead (in theory) buy subscriptions to the e-edition. But while that may stem the loss of older readers, it’s unlikely to get younger readers — who’ve enjoyed a decade a half of free Web news content — to suddenly start paying. They’ll simply find alternatives.

* The move to hide locally produced content behind a pay wall gives new hope to other competitors, including local TV stations. If the biggest newspaper in town is going to shoot itself in the foot, it gives a savvy TV outlet’s executives the chance to grab the dominant spot by creating a free news and community Web site that goes well beyond today’s typical local-TV sites. It could even use the laid-off newspaper journalists in its market — a talent pool looking for something else to do — to accomplish this, probably at bargain rates.

* MNG’s free sites, if they must rely too much on user-generated content, are highly unlikely to retain the old newspaper sites’ large readership. Ergo, online users decline and advertising revenues follow accordingly.

Two choices at NYTimes.com
Another big player making noises about charging for news content is the New York Times Co. Executive editor Bill Keller said last week that NYTimes.com is considering two principal options to pry money out of online readers’ pockets in order to supplement ad revenues:

1. A “metering” system that would track how much a visitor to NYTimes.com is viewing online, then when a threshold is reached (a set number of page-views or words read) the site would ask for payment, probably in the form of a monthly subscription. I’ll easily shoot that down: NYTimes.com has spent years building up Web traffic and trying to get people to spend more time on the site per visit. To institute a system that penalizes heavy users and puts up a barrier that most readers won’t pay to cross is — I’ll be kind — counterproductive. Keller: NYTimes.com currently makes “a lot, a lot of money” from advertising, and it would be folly to mess with that.

2. A “membership” program that would keep NYTimes.com content free as it is now, but offer as yet unspecified other benefits for paying members. Being a paying member would put you in a “New York Times community” that included various benefits. (This one I will not shoot down, because it’s the model I want to promote in this column.)

The soft approach to getting readers to pay online
Let me say at this point that I am not a “content must be free” advocate. Newspapers can develop new, niche content and get some people to pay for it online; that can be a nice little extra revenue stream, though of course there’s the expense of creating new content for smaller niche audiences — at a time when most newsrooms have been cut back. But newspapers’ existing content is better off being free on the Web, as Keller has implied, so as not to kill the opportunity of growing online advertising and the benefits of ubiquitous distribution of news content to reach the widest possible audience — and thus have greater institutional influence on society.

Other platforms lend themselves better to payment by readers for content access than the Web. We see that in the modest number of people who pay for newspaper subscriptions on Amazon’s Kindle e-reader device. It’s too early to assess how that’s going, and for now Amazon is keeping a 70% chunk of subscriber fees — so it’s not especially lucrative to newspaper publishers. As e-readers evolve and more competing, and better, devices appear on the market, e-reader paid newspaper subscriptions may develop into a serious revenue stream.

News on mobile phones is not yet set in terms of a model, though there are possible scenarios in which publishers could pull money from phone users by leveraging the simplicity of having purchases billed directly to your phone account, or using an outside transaction provider (say, Amazon.com, Apple’s iTunes, or a streamlined Paypal for mobile). Special mobile news apps could carry a (reasonably cheap) monthly fee, though frugal readers could instead use the phone’s Web browser or RSS reader to view news for free. But if the special mobile app were to include additional goodies — say, exclusive access to mobile-phone discount coupons from newspaper advertisers — and a better reading experience, getting phone users to pay for news is conceivable.

Yet another model is to sell a custom news phone app rather than give it away. USA Today, for instance, offers a free downloadable news app for the iPhone, which offers a superior reading interface than USA Today’s mobile Web site, and access to content is free using the app. Meanwhile, People Magazine has its own iPhone app called “People Celebrity News Tracker,” but charges $1.99 for you to download it. Content is updated regularly with “instant” celebrity news and alerts from People.com, including lots of photos. There’s no monthly fee for the content on the People app, which is supported by advertising, but the one-time extra $1.99 purchase price can create another nice revenue stream, especially for a publisher with a large audience.

So, count me as a “WEB content must be free” advocate (with the caveat that some special, niche, unique content can succeed on the web with a pricetag).

What’s the solution?
Here’s my prescription for newspapers, as an alternative to the (suicidal, in my opinion) paid-web-content treatment plans proposed by the likes of Dean Singleton, Steven Brill, Walter Isaacson, Alan Mutter and others:

1. Stick with the core idea of multiple revenue streams for online and mobile. Especially on the Web, newspapers cannot count on advertising alone. Don’t think that charging for content online after 15 years of not doing so (and killing experiments that tried to get readers to pay) will be the magic bullet that aligns with advertising to make your digital publishing efforts profitable enough. Think of new revenue streams like paid iPhone/mobile phone applications. Participate in innovative initiatives like the up-and-coming Kachingle, a voluntary web content-payment program that allows an online user to set up one automatic monthly donation and spread the money around to Web sites and blogs that the user likes most and wants to support financially. Experiment with paid editions for e-readers like the Kindle, and paid e-editions for PCs that are similar to the print reading experience and appeal to older readers. (The latter is a good strategy for a newspaper that’s cut its publishing schedule to non-daily, or scrapping print-edition delivery to distant towns.) Grab the next revenue opportunity that someone dreams up and looks smart. And the next.

2. In concert with your advertisers, develop a “membership program” that’s enticing enough to get a lot of people to pay a monthly or annual fee. Whether they’re paid members or not, they’ll be able to read your news content online for free, but members will get special benefits. It’s the carrot approach, not the stick one.

I hope that Bill Keller and the New York Times Co. decide on this route and lead the way. Done right, a “New York Times Membership” program could bring in a significant amount of money without damaging Web site traffic, content reach or online ad revenues.

The key to succeeding with this model will be offering real value to “members.” Editors and publishers don’t like to hear this, but online their news content is a commodity easily substituted by other brands (with matching or ?good-enough? similar content) willing to give it away. So don’t try to get people to pay for the news on the Web; persuade them to buy a membership because of the great stuff that comes with it — including the prestige of visibly supporting local journalism. And if you’re thinking at the level of a National Public Radio station pledge drive where donors get mugs, T-shirts and DVDs, you’re thinking way too small. Think selling value to the member, not trinkets to acknowledge a contribution.

Here are a few ideas for what to offer to a newspaper’s paid members:

* Once-a-month lecture with free admission for members. (Others pay, so with a good speaker line-up it’s another revenue source.)

* Seminar series featuring staff journalists and community leaders and celebrities; free to members.

* Access to “exclusive” forums or discussion areas on the Web site that are closely monitored and in which staff journalists regularly participate. For example, a transportation forum would attract people interested in the topic, and who would be willing to pay for membership in order to interact with the newspaper’s transportation writer and guest experts. Limiting access to paying members, keeping discussion-topic areas narrow enough, and assigning staff to oversee the online conversation should make for more useful and informative online discussions than are typically found on newspaper Web sites today.

* Free downloadable mobile phone apps that others must pay for. (See the example of People.com above.)

* OK, maybe a free newspaper.com-branded coffee mug and a coupon for a free Starbucks coffee when you first join!

You get the idea. I could come up with 100 more ideas to make people want to pay $10 a month to be a member. But I’ll leave you with one final idea, which I believe holds the greatest promise:

* Every newspaper member gets exclusive discounts from a large group of participating newspaper advertisers. Rather than the anachronistic printed coupon books that have been around for decades and are sold for fund-raisers (in Colorado these are called Gold C Books and sell for $10), allow members to use their mobile phones to show retailers, restaurants, etc. their discount coupons after entering their password. This eliminates the problem of leaving the coupon or coupon book at home, since most of us carry our cell phones everywhere. A special app for smartphones could identify nearby discount deals based on your current location, or be browsed or searched.

* Advertisers should be persuaded to take part in the member discount program as part of their overall ad deal with the newspaper and its digital services, so there’s a wide variety of discounts and deals to be had.

* Consider deals with groups of restaurants, or ski areas. A paying newspaper member can get one free meal (when another is purchased) once per month at a selection of participating restaurants, or one free ski lift ticket per month. If our hypothetical newspaper membership is only $10 a month, it’s a no-brainer that you buy a membership if you like to eat out or ski.

I think this can work in a big way, if a newspaper sets its sights high enough and develops a modern, aggressive, attractive membership benefit package.

Of course, I’ve likely offended the news purists who believe that it’s the news reporting that’s valuable and it deserves to be paid for and not given away free. Well, I’m sorry, but on the Web — with 15 years of free news already in the bag — the reality is that it’s not worth much coming from most non-niche daily newspapers. So learn to sell something else to support the journalism.

Meantime, you can probably make a few bucks charging directly for news on other platforms. The Web? Forget about it.

E-mail Steve Outing at steveouting@gmail.com. To comment to E&P, e-mail us at gmitchell@editorandpublisher.com.

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