Can Pay Walls Work in Small Markets?

By: Jennifer Saba A small cluster of newspapers in Northwestern Pennsylvania, halfway between Erie and Pittsburgh, in 1997 started a Web site ? a basic operation that published some stories culled from their print editions to go along with obits and classifieds. Twelve years later, a lifetime in Internet years, they decided it was time for an overhaul ? and while they were at it, they concluded it was best to affix a price tag to that content.

That's what happened on Nov. 1, 2009 when the Derrick Publishing Co., which owns and operates a string of newspapers including The Derrick and The News-Herald, both six days a week, re-launched TheDerrick.com.

"We are somewhat unique in our geography. We don't have any markets close to us that come in and gather news in our market," says Ned Cowart, publisher of Derrick Publishing, a family-owned company (the Boyles) since 1871. "We knew we were the local source of information. We decided, with that sort of a base, let's go with a paid model."

After considering several vendors to handle the site hosting ? including Saxotech and SCS, which in this case proved cost-prohibitive ? Derrick turned to Our-Hometown.

Our-Hometown uploads the stories and advertising from the two papers to the site, once the papers ship in PDFs. Now, readers can get access to the entire print edition.

When the official unveiling of the new Derrick.com occurred on Oct. 1, it was still free. "Our response was overwhelmingly positive, people were thrilled they got the entire paper [online]," says Cowart. That is, until the site announced it would start charging for access come Nov. 1, catching readers by surprise. "We got a significant amount of resistance," Cowart recalls, saying he explained to people that the entire paper has value. "The next week we had already received enough subscribers and subscription revenue to pay for one year of hosting for Our-Hometown."

So far, Derrick.com has more than 1,300 subscribers, 60% online-only. According to Cowart, less than 1% of the existing print customer base migrated to an online-only sub. A yearly subscription to the print edition is $130. An online-only subscription costs $69. A bundled subscription is the cost of print plus an annual $12 for access to the Web site. The circulation of the newspapers is about 23,000. Monthly traffic prior to the pay wall was 78,000 unique visitors in October, generating some 2.9 million page views. In November, the site had 57,000 unique visitors with 1.4 million page views. (The homepage is still free to visitors.)

Cowart says he didn't give home-delivery subscribers free access online because the site possesses its own value. Plus, many residents turn into snowbirds in the winter. "I knew that if resistance was absolutely off the wall, I could always back down," he says of the strategy to start charging.

Before other publishers start seeing dollar signs, it's worth mentioning that Derrick.com had zero in the way of advertising or revenue prior to the redesign other than classifieds that were automatically upsold to the Web site. That makes online sub revenue gravy. Adding a pay wall with no ad revenue makes the move considerably less risky.

Cowart says Derrick.com plans to break news online, including covering sports events at the 19 high schools in the area with an eye on streaming video. The plan is to also to start getting serious about online advertising.