Last Friday I wrote about Newspage, a service of Individual Inc. that is an example of what I believe to be an excellent business/revenue model for online newspaper services on the World Wide Web. It's a tiered system where some content is offered free to attract traffic; some premium content is accessible only if you pay a modest monthly subscription charge; and some content is available only on a pay per view schedule. Applied to a newspaper Web service and executed intelligently, I believe this model can work.
I want to give some room to an opposing view, by fellow publishing industry consultant and publisher Rosalind Resnick. In the September 15 issue of her Interactive Publishing Alert newsletter, Resnick comments on Web publishers charging subscription fees:
"My fear is that, like the farmer who killed the goose that laid the golden egg, online publishers who try to extract extra revenue from their publications by charging for subscriptions will end up losing both their readers and their advertising dollars. ...
"Step back and think about it for a minute: It's one thing for a handful of Internet publishers to charge for subscriptions, but what if everybody started doing it? Would consumers who balk at paying more than their cable bill for online services really pay $100 a month to subscribe to two dozen publications when there are tens of thousands of Web sites that they can surf for free? ... "Daily newspapers and other general-interest publications are likely to face an uphill battle getting their readers to pay for information that they cannot hold in their hands and read at the breakfast table."
Resnick points to publications like the Wall Street Journal as likely to succeed in pulling in subscription dollars online; likewise some niche publishers, like herself, will succeed. But general interest newspapers? Resnick thinks not.
I stand by my earlier comments that a subscription-fee strategy like the one exemplified by Newspage can work for an online newspaper service if applied judiciously. Imperative is offering enough free content to make it worthwhile for non-paying visitors to want to come back again and again.
An example of that can be classified ads, which can be tiered as in the Newspage model. Consider this strategy: 1) Non-paying visitors are allowed to browse through ads, just as they would view ads in the printed newspaper. 2) Subscribers who pay a low monthly fee for the premium service would further have the ability to use the service's search function to find specific ads. 3) For a premium pay-per-use fee, free or paying subscribers would be able to use an advanced "agent" feature that allowed them to specify what they were looking for (say, garage sales in the western part of the city) and have the system mail matching ads to their email address for a specified period of time. (You might charge 25-50 cents a day for this service, for example.)
(By the way, see AdOne's AdHound service for an example of the classified ad "agent" concept in action.)
The strategy above can be applied to many facets of your online offerings. The key is to do nothing that will turn non-paying visitors away. If you lose the free visitors, you'll lose your advertisers, who care more than anything about number of eyeballs exposed to their message.
Where I differ with Resnick, if I'm reading her view correctly, is that I do not believe it is in publishers' best interest to give away all their content and allow advertising to fully support an online newspaper operation. For one thing, I believe that not charging for premium content -- with an emphasis on premium, because it better be good if you expect people to pay -- is passing over potential revenues that are there for the taking. Secondly, you are cheapening the core product by giving it all away free online. If your news coverage is valuable enough to charge 25 or 50 cents when presented in print, then it's worth something online as well; giving it away online could have a detrimental effect on your readers' perception of the value of your news coverage.
The key to succeeding is striking a delicate balance between what you give away free to attract sufficient traffic to satisfy advertisers, and what you deem worthy of a subscription charge.
(I feel I must mention my and Editor & Publisher's strategy with this column and Web site, since it might appear to refute my own comments above. Obviously, you are reading this column for free; it and the other features of E&P Interactive soon will be supported by sponsorship money. This is a short-term strategy, and eventually new components of E&P Interactive will be added to the site that might have a subscription or pay per use charge associated. Ad money is likely to remain the core revenue producer long term, however. This column likely will remain free to readers on the Web, but we may charge a fee for those who prefer to have it delivered by email or fax.)
The Email Bag
My comments on the Newspage business model also brought this letter from consultant Richard Shockey of the Nuntius Corp.:
"You forgot to mention one thing. Sure the pricing model (of Newspage) is interesting ... but the service has no real search engine. Navigation through the system is terrible.
"For instance, I want all articles on Knight-Ridder between these dates. Individual can't deliver. Its fax service fell flat on its face years ago.
"They might pull it off but I grade the service C- at best.
"One real business model for newspaper publishers is to become the 'Net Access provider as well as put up a Web site.
"Look at Pulitzer Publishing at the Arizona Daily Star and soon the St.Louis Post-Dispatch. What newspaper publisher wouldn't want to collect $25 a month and not have to pay a nickel in newsprint costs. Knight-Ridder understands this with the InfiNet deal. In addition, one of the most compelling reasons for putting up a Web site is to preserve, protect and defend the classified advertising base. Classifieds are very vulnerable to poaching by third parties who can develop sophisticated online search engines. In addition, the RBOCs have threatened the newspaper industry for years with taking its Yellow Pages and putting them online and allowing them to be updated by advertisers on a daily basis.
"Plus if you are a commmunity newspaper or small market publication you have the double benefit of bringing Internet access to places where the RBOCs and AT&T will not go, thus solidifying the community-based asset value of the paper. There are new skills to be learned (technical support, etc.) but the revenue stream can more than offset the risk. Newspapers are still the most effective medium to reach an active and intellegent audience. Newpaper readers are demographically the most likely to consider the purchase of Internet access. Who would an individual rather purchase Internet access from? Your local, trusted newspaper or some company called Netcom or PSI?
"Plus the triple benefit of directly poaching on the phone companies' turf after years of watching them threatening to screw the newspaper industry. Make no mistake, the phone companies will want to go into the Internet access business. Shouldn't newspaper publishers deal with the RBOCs from a position of strength?"
My response: I was critiquing the business model, not the service itself. I subscribe to Newspage myself, and concur with Richard's complaints about navigation and searches. It's not perfect.
I do not agree that the only real model for newspapers is to become an Internet access provider. InfiNet is taking a risky road in the long term. I wouldn't want to be an access provider in a metro area in 3, 4 or 5 years when that business will have become so competitive as to shake out all the little guys. (Does the newspaper industry really have the technical savvy to go up against AT&T, the telcos, Microsoft, @Home, TCI, et al?)
I believe that there still exists a short-term opportunity in the Internet access market for newspaper publishers. I know InfiNet believes that, too; but you can bet they are planning ahead for the day when content will bring in the bulk of online newspaper revenues, not the access business.
For a small, rural community, yes, the prospects for longer-term revenues from Internet access are attractive.
The best business model for an online newspaper service probably hasn't been thought up yet. There's room for many different approaches to be successful.
Steve Got a tip? Let me know about it
If you have a newsworthy item about the newspaper new media business, please send me a note at firstname.lastname@example.org.
This column is written by Steve Outing and underwritten by Editor & Publisher magazine. Tips, letters and feedback can be sent to Steve at email@example.com