The ballad of the death of journalism by way of the Internet has been playing for some time. But print newspapers may be pressing 'pause' with introduction of digital pay walls, as more local dailies follow the New York Times, Wall Street Journal and other national newspapers' lead.
According to Newspaper Association of America data, circulation revenue grew by 5 percent for dailies in 2012, making it the first year of circulation growth in a decade, in part due to widespread adoption of digital subscriptions. Publishers are hopeful that digital subscriptions will secure long-term survival as their newspapers meet short-term goals getting readers to pay for content.
Once upon a pre-Internet time, newspapers were built on the 80-20 model, receiving 80 percent of their revenue from advertising and 20 percent from print subscriptions. Maintaining that level of advertising revenue has been all but impossible for newspapers in the digital age, where ads command much lower prices than they did in print. With an infinite supply of ad space for advertisers online, demand — i.e., prices advertisers are willing to pay for page views — has plummeted. New techniques advertisers are using to buy online space more cheaply aren't helping media either.
"Years into the digital revolution it has become pretty apparent that newspapers won't be able to replicate [the 80-20 ratio] in a digital model," says Mark Jurkowitz, the associate director of Pew's Project for Excellence in Journalism.
Gannett, the nation's largest newspaper publisher, announced in February 2012 that it would be implementing digital subscriptions for its 80 community newspapers (its USA Today remains free online), and other major publishing chains — Lee Enterprises, McClatchy and E.W. Scripps — have followed suit. A number of independent newspapers have also adopted subscription services, and Pew estimates that some 450 of the 1,380 daily papers have or are in the process of adopting pay plans.
Maribel Perez-Wadsworth, Gannett's vice president of audience development and engagement, says Gannett had to "completely re-imagine" the way it thought of subscription services, once anchored to the price of delivery.
Many publishers have embraced the meter model — the method currently employed by the New York Times — which sets a number of online articles, usually between five and 20, accessible for free and then charges viewers beyond that limit. (Some models also exclude articles found through Facebook or other social media from their meter count.)
Some newspapers, like those operated by E.W. Scripps, have developed a different model, offering some free content, such as breaking news or public safety announcements, while reserving other types of "premium" content for paying subscribers. Publishers often offer digital access bundled into their print subscriptions in addition to digital-only subscriptions. Digital packages usually offer content on variety of platforms: the website, phone and tablet apps, and digital replicas of the print product.
And readers appear willing to subscribe. Revenue raised from circulation at the New York Times (12 percent from the pay wall specifically) exceeded its advertisement revenue and other papers are moving towards a 50-50 circulation-to-ad revenue ratio, "which is stunning considering the 80-20 model," says Jurkowitz.
Gannett, Lee Enterprises and McClatchy all credit digital subscriptions for bringing in extra revenue in their most recent earnings reports. According to a Pew study, "these added circulation revenues are rebalancing the industry's portfolio from its historic over-dependence on advertising."
While publishers and vendors say they are hitting their short-term goals, it is still unclear whether meter models will guarantee growth in the long term. The Newspaper Association said that 2012's circulation growth was not enough to overcome shrinking advertising revenue, and newspapers still suffered a 2 percent revenue loss last year.
But if advertising revenues continue to dry up, the shift to digital pay walls may be newspapers' only option. The dailies that have done so most successfully would be a helpful case study for not just other newspapers, but news organizations at large facing diminishing digital ad revenue.
"For years there was almost a theological debate of whether content should be free or not online," says Jurkowitz.
Publishers were also concerned about further decreases in advertisement revenues, as traffic sinks once an online reader hits a pay wall. Industry insiders say that after initial dips when a publication puts up its pay wall, traffic returns to pre-pay wall levels within a matter of months. Publishers also argue that subscription traffic is more valuable to advertisers — it is loyal readers who are seeing their ads, not just those who stumbled onto articles haphazardly via search or otherwise.
For small-sized publishers specifically, decreases in traffic don't necessarily mean lost ad revenue, according to Gordon Crovitz, a former Wall Street Journal publisher. He is cofounder of Press+, which sells the software to run metered pay walls to about 420 publishers. He says smaller newspapers have an online ad sell-through rate of only 50 percent, so a 10 percent dip in traffic (the average that Press+ sees among its clients) has minimal effect on their revenues.
Local newspapers also offer content unavailable anywhere else, like coverage of local sports, government, education and investigative pieces, which often garner the most subscription-user engagement.
And thus, it's worthwhile for publishers to take what Wadsworth-Perez calls a "holistic" approach to switching to a pay wall. She says part of Gannett's implementation included investing in more reporters to cover local beats.
"If you are going to get people to pay for content — whatever you're covering — it's going to have to be quality content," says Jurkowitz.
Convincing readers to subscribe takes some clever marketing too. Some publishers prefer to call their subscription plans "memberships" as opposed to the word pay wall, which "creates the image of, you're on the outside trying to scale an impenetrable fortress," says Jurkowitz. Some also offer perks with their digital packages — invitations to community events, discounted tickets to local plays or museums, as well as access to archival content and comments.
As legacy newspapers figure out how to best charge users for content, publications native to online would do well to pay attention. The average price of subscription among Press+ publishers has increased while the number of free articles before the meter kicks in has decreased, which Crovitz points to as proof that readers are willing to pay for content.
"Sometimes innovation is driven by necessity and for the traditional newspapers it's absolutely necessary to go down this route," he says. "Online publishers will have to go down this route too."
Yet daily newspapers have the advantage that their content was once purchased by readers in print form, while most digital-only outlets, such as the Huffington Post or Gawker media, have always been free. Their philosophical connection to the spirit of free online content may be an added obstacle, as could be the type of content online-only publications typically produce.
"They're going to have to produce something that you can't get anywhere else," he says. The opinion and commentary content that is the bread and butter of many online sites may not make that cut. Andrew Sullivan's Daily Dish blog, which has made a name for itself offering just that, first for Time, then on The Atlantic and The Daily Beast, is transitioning to a stand-alone meter model to mixed success, but for now The Dish is seen as just a notable exception and not the rule.
Meanwhile, other online news organizations are seeking new revenue through so called "sponsored content" — content paid for and, in some cases, written by advertisers to mimic editorial content — but not without controversy.
If these trends continue however, the path for local, daily newspapers to financial stability may be clearer. "Sometimes we fall victim to standing around, waiting for conditions to be perfect," says Steve Wagenlander, director of audience development for The Post and Courier of Charleston, S.C.
The independent, locally owned paper switched to meter system operated by Press+ last May and Wagenlander says it is happy with the results thus far. "We are 11 months in and we are ahead of the curve," he says.
And as for other local newspapers that haven't adopted a subscription service, Wagenlander warns: "They're leaving money on the table when they're not doing something."
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Corrected on 4/9/2013: A previous version of this article misstated the name of Gannett's vice president of audience development and engagement. It is Maribel Perez-Wadsworth.