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How newspapers plan to make money online

20.03.2011

In Wordtracker’s last Online Journalism article I posed the question of whether readers would be prepared to pay for stories online and the response was a very loud NO! But the days of free are numbered and despite the seemingly reticent position of many readers, the momentum is beginning to build towards a variety of pay models such as subscriptions, micropayments or pay walls. We take a look at what newspapers and publishers are doing to get money from online content.

Rupert Murdoch media tycoon

The much vilified media mogul Rupert Murdoch has just announced his decision to begin charging readers of the websites of his News Corporation newspapers «within the next 12 months.»

Murdoch, who owns titles such as The Wall Street Journal, the New York Post, The Times, The Sun and The Australian among others, says the current business model of journalism is «malfunctioning.» In a statement he said: «We are now in the midst of an epochal debate over the value of content.»

The Wall Street Journal online already requires a subscription fee, but this is the first time the billionaire has indicated the rest of his titles will be subject to a pay wall. Considering Murdoch has been in the business for more than 50 years, when he makes a move like this you better believe the managing directors of other newspapers across the world sit up and take notice.

Online advertising is failing to recoup the kind of finances needed to keep newspapers in the black. The ad revenue for print has long been taking a nosedive, even before the beginnings of the economic meltdown. As commentators pick at the fallout of what this means to journalism (beyond the financial constraints) they are now questioning the implications this has on the function of news reporting. Many feel the current starvation of news desks could threaten democracy itself if there aren’t the reporters or resources to cover stories.

You can’t blame newspaper owners like Murdoch for drawing a line in the sand and declaring free content to be a perk of the past. But there are major players saying that the pay wall is already history.

The problem with pay walls

Arianna Huffington of Huffington Post is more optimistic than most about journalism’s future. She believes we are «in the middle of a Golden Age for news consumers». She says we can’t pretend that the last 15 years never happened and we now have to look towards a «linked economy.»

What this means is that the money making potential lies in search engines, online advertising, citizen journalism, independent outfits. The future, she says, does not lie behind a pay wall and the restriction of information is not the way forward.

In her testimony to the US Senate Commerce Communications subcommittee in May, Huffington wrote: «I firmly believe in a hybrid future where old media players embrace the ways of new media (including transparency, interactivity and immediacy) and new media companies adopt the best practices of old media (including fairness, accuracy and high-impact investigative journalism).»

I like Huffington’s idea that we can borrow from the old and new and somehow marry them together to forge a new hybrid model. Her point is really based upon the idea that the genie is already out of the bottle. For the past decade newspapers have given their content away for free, so how can you suddenly decide it has a cost attached to it? Back in the dawning of the internet, newspapers should have had a collective agreement that they would trial free content with a view to eventually charging for it.

Huffington isn’t alone in having suspicions about the new pay wall schemes being touted by the likes of Murdoch. Robert Andrews writing for PaidContent.org says the pay wall is «an impossible dream.»

The Wall Street Journal online made $60m in 2007 and is continuing to do nicely against its competitors. The Financial Times website is profiting too, with online subscriptions of between £2.99 and £3.99 per week. In March subscription rates rose 9% to 109,000 while the FT Group posted profits rose 8% to £195m ($307m).

Andrews says these websites are able to get the subscriptions and make profits because they provide the «kind of unique information decision-makers will pay for.» He goes on to say that the prospects for premium subscriptions for those «general-interest consumer news sites» is «less rosy» or indeed, an impossible dream for some.

«That’s why sites like Times Online, Telegraph.co.uk and others are unlikely to ringfence themselves entirely. Instead, paid content will be piecemeal – publishers are looking across their networks to identify which individual sections and features might be chargeable (how about new, value-added services like databases and research?)»

Restricted content can be copied

And here’s another problem – just because you make people subscribe to your content doesn’t mean that the news story you paid for won’t appear on a blog post or on another free site. The upshot I guess is that you can sue for copyright infringement and even if a blog does duplicate copy Google will recognise that and ultimately won’t get the traffic.

Another problem, especially for the UK, is our reliance on the BBC which is a quality, well-respected and publicly funded site. All of these issues are against a backdrop of ropey consumer attitudes.

On one hand the response to my question, «Would you pay to read your newspapers online?», was met with a resounding NO! But a major piece of research by PricewaterhouseCoopers who interviewed 5,000 people in seven countries, found that 62% are willing to pay general online news content compared to 100% for general print.

But then a few days later a New Media Age survey found that 77% of UK regular online readers were not prepared to pay for access to news websites. It’s difficult to say whether we can rely on this kind of information – you may say to a researcher you would be willing but when it comes down to it, would you really hand over your credit card details to read a story?

Consumer reaction to pay walls

Scotch Macaskill who commented on our article ‘Would You Pay to Read Your Newspapers Online?’ said he’d “happily pay to read a story knowing it’s from a reliable, trusted source. But I want to pay only for the articles I’m interested in.”

Macaskill puts forward a nice idea of how you could receive content via micropayments: «Surely if, using a mobile phone, one can send an SMS to a given number in return for a ringtone or picture, it’s possible to gain access to selected content via SMS? So you SMS a number with the keyword for a specific article, immediately receive a password to access the article, and get charged a micropayment of a few pence. Next story or opinion piece you want to read, you do the same and the charges are made to your mobile phone account.»

AnneDroid2, who also commented on Wordtracker’s article, said 90% of what newspapers report has «no value.» It’s clear many readers are frustrated with what many newspapers deem to be newsworthy.

«I do not really care if Madonna adopts thirteen poorly chosen children. If it has no value, who is going to pay for it? …To get the same lameness online offers no choice, no change.

«So news, as it exists on paper, as a subscription, is not going to work online either. If newspapers or their online sites are going to survive, they need to re-invent themselves and give value that exceeds the cost of subscription.»

This point was echoed by Vicky May who commented that she hadn’t paid for a newspaper in 15 years because they are «mostly throwaway» products.

«The content is old before it hits the doorstep», she said. «It’s an inefficient way to disseminate material. I could see something like paid subscriptions for up-to-the-minute Sports or Financial information. I could see paying for a subscription to specifically tailored feeds (ie give me more than a regurgitation of the AP feed for my $.) I might pay for certain columnists, commentators, or other authors. But for News? No.»

Micropayments

Maybe it comes down to ‘how much?’ If it’s a few dollars a week is that OK? If it’s a subscription is that too much of a commitment? WSJ.com announced earlier this month that they will introduce ‘micropayments,’ a system currently favored by cable television production companies. WSJ is developing its own system to charge small sums to occasional users who might not pay more than $100 a year for a WSJ.com subscription. Pricing for individual articles and for premium subscriptions have yet to be decided, but it’s likely they’ll focus on readers interested in energy, commodities, wealth management and other niches.

Robert Thomson, editor-in-chief of Dow Jones and managing editor of the Wall Street Journal said the micropayments will be introduced on individual articles by this autumn. Major players like the New York Times and the Guardian newspaper in the UK are rumored to be investigating the potential of making people pay for content, and the global news agency Reuters confirmed this month that they were looking to create a paid-for model.

Troubled print

What’s emerging here is an opportunity to help publishers realize their money making potential online. In April three high-profile US businessmen (Steve Brill, Gordon Crovitz and Leo Hindery) announced a new venture called Journalism Online which it is said will fulfill an “urgent need” for troubled print publications. They will act as a central broker between websites and their readers, allowing them to levy subscription fees from readers or to charge micropayments for each article read.

It may serve newspapers well to take advantage of these new services. When the last print edition of the Seattle Post-Intelligencer went on sale on March 17, the realization that it could happen to other publications in the US hit home. It now survives online with just 20 journalists working, compared to some 150 that worked there previously.

The US newspaper industry has been in free fall with a staggering 12,500 job loses in the last two years. Steven Swartz, President of Hearst Newspapers who own Seattle Post-Intelligencer, told reporters: «Our sales people aren’t just selling the ad inventory on seattlepi.com — they’ll also be selling Yahoo inventory and search engine marketing for Google and MSN. You need a multitude of digital products to make the equation work.»

Swartz is right. To make the equation of ‘less staff + less advertising revenue = good quality product with loyal readership,’ is a real balancing act. Some will get it right and others will fail. When Rocky Mountain News folded, some staff launched a website called InDenverTimes.com with a goal of getting 50,000 subscribers for the online content, but they only managed to get 3,000 thereby forcing them to “consider alternative business models.»

Real losers

As newspaper editors grapple with the situation I feel as though one way or another the public is going to suffer. Either pay walls will be erected around content and that forces people to pay up, or if they refuse to pay for news stories online that will impact on the kinds of revenue re-invested in the newsrooms — which ultimately threatens what stories journalists can cover. As I have already argued in this article, if journalists and reporters aren’t given the tools to report the facts or uncover hypocrisy that’s a real threat to democracy.

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