Newspapers: Making online pay

Anyone who has been paying attention to the news industries knows that newspapers have been struggling to find a way to generate enough revenue from their online operations to offset declines in print advertising and subscription revenue, and thus keep their newsrooms up and running.  (NPR’s “On the Media” radio program was running so many stories on the topic they developed a specific jingle for them a few years back.)  However, the issue was brought home recently by the release in March of a new study by the Pew Research Center’s project for Excellence in Journalism.  Their analysis of anonymous financial data from 38 papers found that, on average, they lost $7 in print ad revenue in the last year for every $1 they gained in online ad revenue.

I’m not going to get on a soap box about the potential negative repercussions for communities and our democracies if newspapers – or rather the newsrooms that have been financially sustained by newspapers – go under. Most of you have heard it somewhere before. Let’s just suffice it to say that I believe that we’d be worse off without those newsrooms because there are valuable types of news, particularly national and international reporting and investigative journalism, that bloggers and non-professional journalists have a hard time doing on a wide scale, largely because they simply require more time and resources than a single individual can muster.  Rather, what I’d like to do here is provide a quick-run down of some of the strategies that papers have tried to help them move successfully into the digital age.

Subscriptions: So far, it’s really only been the business and financially-oriented papers (like the Wall Street Journal) that have been able to make a go of it by making their material available only to those with a subscription.  (In other words, by putting almost everything behind a pay wall.)  The financial papers have the advantage of  focusing on more exclusive and practically valuable information and serving a relatively affluent audience.

A factor that might eventually change the dynamics here is the growth of tablet computers like the iPad. These “feel” different than a lap-top or desk-top computer.  We hold them in our hands, carry them along with us, interact with them tactically, and, even more importantly, are accustomed to paying for content – for “apps” – on them. This means that people might be willing to pay to have an electronic version of a publication delivered to their tablets, when they wouldn’t be willing to pay to log onto a newspaper’s website from their lap or desk-top computers. (The magazine industry is certainly seems to be holding its collective breath in the hope that tablet subscriptions to their publications will help them weather the transition to digital.)  Furthermore, if they generate enough readers, tablet editions also lend themselves to display advertising. The screens have the size and resolution to make large images look good and allow for the incorporation of video.

Hybrid Subscription Models: There are a handful of papers that have sought to develop “hybrid” models.  They allow some free access – allowing them to maintain the traffic from news aggregation sites and casual readers – while charging heavier users a subscription fee. One of the most visible examples of this The New York Times. Last year, they launched a digital subscription program. Everyone got to read 20 articles a month for free. After that, they were asked to pay for a “digital subscription,” which gave them access to as much as they wanted to read. (Print subscribers got digital access for free.) This seems to be working well for them.  In April, they announced that they were cutting back on the number of articles that could be read for free by half – to 10 a month. In the paper’s own article about the change they report that they’ve got about a half a million subscribers to the two newspapers sites they operate that offer digital subscriptions (The other is for the International Herald Tribune.) The shift suggests that they see the subscriptions as a more promising source of revenue than the advertising they’d get from the “free” readers.

Micro-Payments: One idea that was once repeatedly bandied-about, if rarely implemented, was the idea of micro-payments, or charging readers a few dollars or cents per article.  The obvious drawback is that the material would have to be A) unique and B) highly desirable to compel large numbers of people to pony up and pay for it.  If we’re browsing on the web, see an interesting story, click on a link and hit a window requesting credit card information, most of us are just going to hit the “back” button and seek the information out elsewhere – or seek out something else all together. Most news outlets, even good ones, seem unlikely to be able to produce enough material that routinely makes enough people take the time and trouble to pay. And if people don’t pay and don’t read the article, it can’t be used to generate advertising revenue either.

Online Advertising: Most papers seem to be trying to make it, more or less, on online advertising alone. That is, there’s no subscription fee, no pay wall.  They make their money by charging advertisers to embed a message in their content and reach their readers. The challenge here is that there’s so much competition for advertising online (advertisers can place display ads on a huge number of sites or use key word ads), that the advertising revenue from online papers just doesn’t match the revenue for the hard copies.  As the Pew’s study so vividly demonstrates, despite some enthusiasm about mobile, it just doesn’t seem to be enough revenue, at this point, to support a traditional newsroom.

Non-profits.  Another handful of organizations that passed on the idea of making a profit from gathering and presenting news at all.  They are trying to make a go of it as a non-profit newsroom or online paper.  The St. Louis Beacon, which was started as an online-only paper in 2008, is an example of this. Another prominent example is ProPublica, which is a non-profit newsroom based in New York. They publish their stories on their website and partner with traditional media outlets, including NPR and Nightline, to further distribute their work. Their stated focus is in-depth, investigative reporting and they have a couple of Pulitzers to establish that they can do it well. Each of these publications indicates that they seek out a variety of funding sources.  However, most of their operating expenses seem to be currently covered by grants and donations.