By: Steve Outing
Because the online publishing environment changes so rapidly, yesterday’s brilliant business plans can become today’s bird cage liner. That would seem to be the case with Prodigy’s partnerships with several U.S. newspapers to create “Custom Choice” surcharged online newspaper services on the Prodigy platform. A year ago, Prodigy was the favored partner of U.S. newspaper publishers. Today, most of the Prodigy newspapers are making the transition to World Wide Web-based publishing — and some of them may do it without Prodigy’s help.
Last week, the Los Angeles Times announced that its 11-month-old TimesLink service on Prodigy will make the transition to a Web service in the coming months. Citing the economies of publishing on the Web, LAT announced that it would be trimming the TimesLink staff in half, to 22. Publishing online on Prodigy has required using the NAPLPS language to create online pages, which requires more manpower than the simpler HTML format used to create Web pages. (Prodigy is making the transition to HTML, but continues to publish content in NAPLPS in the interim. Content creation tools from Prodigy can take content formatted in NAPLPS and automatically output it to HTML equivalent.)
A “Custom Choice” newspaper is a service on the Prodigy network that charges newspaper customers $4.95 per month on top of regular Prodigy monthly fees. Customers also can subscribe to the online newspaper service only — not the rest of Prodigy’s content — for $6.95 a month. Newspapers trying this approach have had limited success in attracting paying customers: TimesLink has more than 20,000 subscribers, as does the Atlanta Constitution-Journal’s Access Atlanta service. Others in smaller markets have fared less well. Newsday (Long Island, New York) has about 8,500 customers on Newsday Direct, and the Tampa Tribune’s Tampa Bay Online service in Florida has about 6,500.
What the TimesLink action demonstrates is that this strategy doesn’t work. Newspapers can’t attract enough eyeballs to these services to satisfy advertisers for whom 20,000 is not a significant number. So, several of Prodigy’s partner newspapers are dropping the premium subscription fees, opening up access to all Prodigy subscribers, and building complementary Web services. The Web, obviously, promises more traffic if a publisher can get his service noticed in the flood of content on the Internet.
Los Angeles Times vice president of new business development Chip Perry says his company is reviewing the relationship with Prodigy right now. “There are going to be some changes, but we’re not sure yet exactly how it will turn out.” What will come out of this review is a LAT service on a Web server; it may be Prodigy’s server or the project may be outsourced to another company. The model, while not confirmed yet, likely will include much free material with charges for premium content (archives, classified ads, special reports, etc.), and primary support coming from advertising. (This seems to be the favored online publishing model today.)
LAT probably will still be a content provider to Prodigy, but any Prodigy subscriber will be able to view LAT content without paying extra fees, Perry says. LAT would share online usage fees for time that subscribers spend in the LAT area of Prodigy in this scenario — similar to the revenue arrangement offered to publishers by America Online.
Perry says the move to abandon Prodigy’s “P1” service and create an offering in the Web environment has nothing to do with the recent arrival at parent Times Mirror of CEO Mark Willes, who spent his first weeks at the company trimming and pruning. (Willes is not known as a fan of electronic ventures by newspapers.) The Web strategy allows the online operation to become more efficient, and the 22 people trimmed from the TimesLink staff will be relocated to other departments, where some of them will be freed up to work with new electronic publishing projects, Perry says. A few of those people may take buyouts from the company.
Other newspapers who have partnered with Prodigy also are changing their strategies. Newsday’s service is likewise dropping its premium surcharge and opening Newsday Direct to all Prodigy members. Tampa Bay Online is working on implementing a similar strategy. Both those papers expect to continue a collaboration with Prodigy as they build Web services.
At Newsday, another Times Mirror paper, management remains committed to Prodigy for now, and its staff — which numbers under 20 — is not being cut back, according to online director Fred Tuccillo. He says Newsday is happy to be in a revenue-producing environment where customers are used to paying for content. The problem has been that the “custom choice” surcharges have prevented many people from viewing the service and thus limited advertising opportunities. Tuccillo is hopeful that opening up Newsday Direct to all Prodigy members without additional fees will give the service a much-needed boost. With 100,000 Prodigy households in Newsday’s market, Tuccillo is optimistic that this new strategy will bring some impressive numbers. Later, the service will be accessible to all Web users, with an as-yet-to-be-determined payment model (most likely pay per view for premium content, plus advertising).
At the Tampa Tribune, deputy managing editor for electronic publishingCarl Crothers says the “Custom Choice” model “was probably right for its time.” Tampa Bay Online at $4.95 extra per month was like the “Movie Channel” on a cable network. “But it turned out not to be the best way to offer the service, so we’re going to try something new,” he says. TBO, launched in August 1994, is not yet profitable; Crothers expects to be at least halfway to breaking even by mid 1996. “But we didn’t intend to break even in the first 2 years.” Ad sales at TBO have been improving though it’s “still not big bucks,” Crothers says. Clients include Circuit City, a grocery store, car dealer, travel agent, auto broker and a university.
Free Web content influences publisher strategies
The moves by Prodigy’s partner newspapers are clearly motivated in large part by the popularity of the World Wide Web. When there’s so much free information on the Web — now accessible with Prodigy’s Web browser — why would a Prodigy member pay $4.95 a month extra to view a single online newspaper service? So the move away from a premium subscription model was inevitable. (Those newspapers publishing on the AT&T Interchange platform may face the same problem as Prodigy’s newspaper partners.)
The next step for these publishers beyond opening up to all Prodigy customers is expanding their services to the general Web population. This gets tricky, because that audience is not used to — yet — paying for information. Jeff Moore, a consultant who used to be the newspaper guru for Prodigy, says he doubts any publisher is going to make money on the Web for a while precisely because they will have to give away their content. He predicts that publishers will slowly begin to charge for more and more and give away less and less.
If there’s one single point that these developments make, it’s that newspapers still don’t know how to make a buck online. Prodigy’s partner newspapers do realize that it’s eyeballs that matter to advertisers, and that’s what the “Custom Choices” subscription model didn’t provide. In a Web-dominated online environment, that model no longer has a chance.
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This column is written by Steve Outing and underwritten by Editor & Publisher magazine. Tips, letters and feedback can be sent to Steve at firstname.lastname@example.org