While the adoption of paid online models by daily U.S. newspapers captured the attention of the industry and the public, non-daily papers have quietly but steadily introduced paid content models of their own.
Forty-two percent of non-daily newspapers now charge users for digital content, according to an extensive survey of publishers sponsored by the Southern Newspapers Publishers Association and the Missouri School of Journalism.
1. Paid content
comes of age
A once-scorned strategy becomes a movement
2. From failed strategy to fad
to full-fledged movement
J
ust two years after being dismissed as a hasn’t made up for print
failed strategy, paid online content models shortfalls or even offset
have become a full-blown movement. stalled growth in digital
While pundits and the public watched to ad revenue. But asking
see how the New York Times’ model would readers to pay represents
be received, the rest of the industry wasn’t an important contribution
waiting. at time when newspapers
Frustrated by sluggish digital revenues, needed it most.
small dailies moved decisively, often creating Aside from the
their own models and solutions. Weeklies have financial contribution
also moved into charging for digital content. — viewed by many
Interviews with daily publishers in the publishers as “found money” — charging for
spring of 2011 revealed that four in 10 required online content movement makes an important
payment for some online content. And a statement: News content has true value. The
survey of weekly publishers at the end of the days of newspapers “giving it away” are
year showed that non-daily papers weren’t numbered.
far behind: when e-edition subscriptions were
combined with web pay models, more than 40 —Mike Jenner
percent were charging for digital news content. Professor and Houston Harte Chair
The revenue generated by these pay models Missouri School of Journalism
Contents
Weeklies begin charging for digital content Page 3
Small dailies lead way in move to paid content Page 6
Debunking the arguments against charging Page 9
Advice for those considering pay models Page 10
Limits on consumers’ willingness to pay Page 11
Economic modeling’s lessons for newspapers Page 13
2
3. Weeklies move strongly
into paid online content
By Mike Jenner
University of Missouri Key findings from the study
While the adoption of paid online models by u A brighter future: 72 percent of weekly
daily U.S. newspapers captured the attention of publishers are optimistic about the future of
the industry and the public, non-daily papers newspapers
have quietly but steadily introduced paid content u Print will endure: Two-thirds don’t
models of their own. envision a time when they will no longer pro-
Forty-two percent of non-daily newspapers duce a print edition.
u Weeklies charging online: 42 percent are
now charge users for digital content, according
now charging for online access; in line with
to an extensive survey of publishers sponsored dailies (43 percent).
by the Southern Newspapers Publishers Asso- u Mobile and tablets: Less than one in 10 have
ciation and the Missouri School of Journalism. a mobile phone app; just 7 percent have a tablet
One quarter of those who don’t charge plan to app.
launch a paid program in the next 12 months; u Revenue streams shifting: Although 80 per-
another 48 percent say they may begin charging cent of weeklies now garner less than 10 percent
after that. of revenue from digital sources, in three years 41
A similar study earlier last year showed that percent of publishers say
43 percent of U.S. dailies had begun charging digital will be greater than 10 percent.
for some or all-online content, with smaller dai- u Multi-tasking sales staffs: The advertising
staffs of 7 of 10 weeklies sell both print and
lies leading the way. Among non-dailies, circu-
digital products.
lation size did not play a significant role. u More training needed: 63 percent of
The non-daily papers — nearly all of them publishers say more digital training would help
weekly or twice-weekly community papers — their representatives achieve growth in digital ad
were undaunted by technical challenges: Nearly sales.
three-quarters (74 percent) implemented their
pay-for-content mechanisms themselves, while
the remainder joined a syndicate or vendor-cre- often adding material such as blogs, slideshows
ated network. and video. But many weeklies have been loath
More than 400 leaders of non-daily papers in to post all local content online for free. In part to
the National Newspaper Association’s database protect print editions, 26 percent of all weeklies
participated in in-depth telephone interviews have taken the opposite approach, offering less.
in October. The study, which had an 85 percent An equal proportion offers a replica edition; 48
response rate, was conducted by the Center for percent offer more than their print edition.
Advanced Social Research, the research division Nearly half — 47 percent — of the weeklies
of the Reynolds Journalism Institute at the Mis- bundle free access to their web editions with
souri School of Journalism. print subscriptions. One quarter offer a metered
Until the widespread advent of paid content approach.
models, most dailies put the entire local contents In all, 36 percent of non-daily publishers be-
of their print edition on their websites for free, lieve revenue from their paid content models
3
4. will account for up to 20 percent of digital rev- 4 out of 10 non-daily
enue; 15 percent believe it will represent more
than 20 percent. About half thought it would
newspapers now charge users
have a negligible effect. for some online content
While most publishers expect their paid content
model to have no effect on print circulation, 7 per-
cent think it will increase circulation and 24 per-
cent think it will slow or stop circulation declines. Yes
42%
E-editions, or PDF replicas of the print edi-
tion that can be emailed to customers, play an
important role in the digital portfolio of week- No
58%
lies. One in six — 17 percent —offer e-editions;
all are charging for them.
Ninety-five percent of weeklies with more than
5,000 circulation have websites, compared to 77
percent of those with less than 5,000 circulation. Size of circulation did not play a significant role in
how publishers answered the question.
Positive attitudes
Economic challenges and changes in adver-
tiser and consumer habits haven’t shaken the of their papers’ revenue streams from print to
faith of most weekly publishers. Nearly three in digital. At present, 80 percent say less than 10
four — 72 percent — express optimism about percent of their revenue is attributable to digital.
the future of the industry. Another 21 percent are In three years, only 41 percent believe digital
neutral; only 7 percent say they were not opti- will make up less than 10 percent of total rev-
mistic. enue.
Like their daily counterparts, publishers of Forty-two percent believe their digital stream
non-dailies envision a strong shift in the makeup will range between 10 and 24 percent in three
Revenuestream: Digital
Revenue Stream: Digital
70%
61%
Current
60%
3
Years
Later
50%
40%
30%
25%
19%
19%
20%
16%
12%
12%
11%
7%
10%
3%
3%
4%
4%
1%
1%
2%
0%
0
-‐
4%
5
-‐
9%
10
-‐
15
-‐
20
-‐
25
-‐
30
-‐
35
-‐
40%
+
14%
19%
24%
29%
34%
39%
4
5. Less than 1 out of 10 have a of the decisions to implement paid content and
mobile platforms and products.
mobile phone app Thirty-six percent of weekly publishers say
their market is not saturated with broadband
internet coverage. Another 33 percent say their
Yes
7%
markets are saturated; another 31 percent are
neutral.
Publishers have a split view of competition
No
93%
in their markets. Exactly half say they don’t
face competition for local news coverage. One
quarter say they’re in a competitive news envi-
ronment and the remainder are neutral.
But the perception of competition for adver-
In the next 12 months, 28% of those that don’t have tising is a different story: 47 percent of pub-
a mobile phone app plan to create one. lishers say they’re in competitive advertising
markets. One quarter say their markets are not
competitive for advertising; another 28 percent
years; at present only 18 percent say digital rev- are neutral.
enue falls in that range. And 17 percent of pub-
lishers envision digital revenue in three years Digital sales, ad production and training
exceeding 25 percent of total revenue — only 2 In nearly 4 of 5 weeklies, sales representa-
percent say they’re in that range today. tives sell a full portfolio of print and digital
All the redistribution of revenue will come at products. One-fifth of the newspapers have at
the expense of print, publishers say. They see least one sales staffer who specializes in one or
little change in the relative contribution of other the other. In nearly half the organizations — 43
revenue components, including outside printing percent — sales reps also are responsible for ad
and niche products. creation and production. Circulation size was
not a significant factor.
Mobile and tablet efforts However, only one-third of publishers of
Weeklies trail dailies in development of mo- newspapers in which sales staffs sell both print
bile phone and tablet products. While 28 per- and digital believe their representatives can sell
cent of non-daily publishers said they offered a digital products as well as print. More than two-
mobile-optimized website, less than 1 in 10 — 7 thirds — 68 percent — believe specific training
percent — now have a native app for any kind in selling digital products would make a signifi-
of mobile phone. And only 3 percent offer a cant difference in sales results.
tablet app of any kind. Publishers also feel journalists need more
Of those organizations that don’t now have ongoing training in digital news coverage and
a mobile phone app, 28 percent plan to create production. Forty-seven percent say their news-
one in the coming 12 months, and 37 percent rooms need ongoing training. And 44 percent
of them plan to charge for it. In the coming 12 cite the need for ongoing training in digital ad
months, 26 percent of those newspapers without production.
a tablet app plan to create one; 56 percent of
them plan to charge for it. Mike Jenner is a professor and Houston
Harte Chair of the Missouri School of Journal-
External forces at play ism. He may be contacted at jennerm@missouri.
The absence of ubiquitou s broadband internet edu. Ken Fleming, Ph.D., is director of RJI’s
access across weekly markets and the competi- Center for Advanced Social Research. He may
tion for readers and advertisers are behind some be contacted at flemingk@missouri.edu.
5
6. Small papers lead the way
in charging for online content
By Mike Jenner 14 percent agreed with the statement, “I don’t
University of Missouri believe we’ll ever be able to get customers to
W
pay for online content.”
hile large dailies have been slow to That confidence is reflected in the plans of
embrace the concept of charging publishers who have not implemented paid
for online news content, smaller subscription models.
newspapers have quietly led the way in Of the papers that don’t now charge, 35
introducing paid subscription models in the percent have plans to do so; another 50 percent
United States. may begin charging at some point. Only 15
Nearly half the publishers of small dailies percent of publishers said they had no plans to
contacted in a recent University of Missouri charge.
survey have begun charging for online content. Newspapers continue to reel from the
The survey was based on a random sample of economy and from an exodus of advertisers
all 1,390 U.S. dailies, and 301 interviews were who are seeking cheaper and more targeted
conducted April 1-18 by the Missouri School alternatives. And while online readership of
of Journalism’s Center for Advanced Social news continues to grow, print revenues continue
Research. The response rate was 78 percent. to decline. Publishers say they are looking
Underlying the move to begin charging both for revenue and to establish value for the
is a strong belief that audiences will pay to content their staffs produce.
consume quality news content. Two-thirds of While publishers of papers that are charging
the publishers believe customers will pay. Only welcome the new revenue coming from
Revenue stream: Print
Portion of revenue expected from print
30
2011
25
2014
20
15
10
5
0
0-‐29%
30-‐39%
40-‐49%
50-‐59%
60-‐69%
70-‐79%
80-‐89%
90-‐100%
6
7. Revenue stream: Digital
Portion of revenue expected from digital products
30
2011
25
2014
20
15
10
5
0
0-‐4%
5-‐9%
10-‐14%
15-‐19%
20-‐24%
25-‐29%
30-‐34%
35-‐39%
40%
digital circulation, most have modest expecta- Tablet apps
tions about the amount pay models are likely to
generate. In the coming 12 months, one-third Overall fewer than 2 in 10 papers have a tablet app
believe the revenue from their pay models will
count for up to 20 percent of their companies’ 61%
digital revenue. Only one in 10 expect revenue 39% of newspapers with
39%
from content to make up more than 20 percent circulation of 25K or more
of their digital revenue. Half expect a negligible have a tablet app
contribution to the bottom line.
Although most see no impact on print 9% of newspapers whose circulation 91%
9%
circulation, a few do. Six in 10 see no effect; is below 25K have a tablet app
one in three believe their pay model will slow or
stop circulation decreases, and 4 percent think
print circulation might actually increase.
While smaller papers have been leading the
charge to online pay models, larger papers have Mobile phone apps
been most active in creating mobile phone and
tablet apps.
Mobile app activity correlates with newspaper size
Sixty-two percent of newspapers with
circulation of 25,000 or more have a mobile
phone app, while 21 percent of newspapers 62% of newspapers with 38%
62%
below 25,000 have a mobile app. The numbers circulation of 25K or more
were lower for tablet apps: 39 percent of papers have a mobile phone app
above 25,000 circulation offered tablet apps
while only 9 percent of smaller papers did. 79%
Publishers seem eager to enter the space, 21% of newspapers whose circulation 21%
however. is below 25K have a mobile app
In the next 12 months, 59 percent of
7
8. newspapers that don’t offer
a mobile phone app plan to
Paid content models
introduce one, and 35 percent
of those newspapers plan to
Smaller papers are adapting more quickly
charge.
Less than 20 percent of 54%
newspapers overall offer a 46% of newspapers under 46%
tablet app. 25K circulation charging
In the coming year, 48
percent of newspapers that for some online content
don’t offer a tablet app plan
to offer one, and 45 percent
76%
of those newspapers plan to 24% of newspapers whose circulation
charge for it. 24%
Publishers were also asked
is above 25K charge for some content
about their revenue mix
and how they expect it to
change. After years of talk
about the need to bolster
the proportion of digital How do newspapers charge?
revenue to offset declining
print revenue, publishers are
finally expecting a shift in
the mix. They were asked to Metered 15
estimate the proportion of
revenue represented by print,
All users must pay 30
digital and “other” (niche
publications, outside printing,
etc.), and to project how the Online users pay; subscribers have free access 54
mix would change in three
years. 0 15 30 45 60
The overwhelming majority
acknowledged that digital
revenue was still a small
contributor at their properties. digital revenue to represent mobile phone app in the field.
Fully 85 percent said digital more than 25 percent of all
dollars represent no more than revenues. Overall, changes to A former newspaper editor,
15 percent of their companies’ the “other” revenue category Professor Mike Jenner holds
revenue, and 80 percent said did not see significant change. the Houston Harte Chair
print revenue still comprises In analyzing the data, at the Missouri School of
70 percent or more of overall we looked for relationships Journalism. His position is
revenue. between these trends. One funded by an endowment given
In three years, 60 percent interesting relationship stood to the journalism school by the
of publishers expect digital out: family of Houston Harte, an
revenue to represent more than Publishers who expect the alumnus and the founder of the
15 percent of their papers’ most dramatic shift in the Harte-Hanks media corpany.
overall revenue stream, with revenue mix from print to The focus of the Harte Chair is
nearly one quarter expecting digital also happen to have a innovation.
8
9. Five reasons not to charge —
and why they don’t add up
By Andy Waters a print subscriber. Since we made the leap on
Columbia Daily Tribune Dec. 1, subscription revenue from our website
N
— www.columbiatribune.com — has exceeded
ot long ago I asked our expectations and we haven’t lost a penny of
a group of local advertising revenue.
leaders how many Why didn’t we do this years ago, and why
of them had customers who don’t more publishers do it now? Here’s a list
paid them for a product or of the top five reasons, along with some lessons
service. Nearly every hand learned along the way.
went up. u Page views will drop. Yes, but so what?
Then I asked how many Most newspapers have far more pageviews online
thought it would be a good than they can possibly sell to advertisers. In our
idea to start a website case, we were selling about 40 percent of our
and give their product or available inventory. The other 60 percent was
service away for free. Everyone started laughing. meaningless to us because it wasn’t contributing
It seems like everyone gets that joke — significantly to revenue. Once we realized that
except the newspaper industry. our metered approach would keep us from
For years, newspapers built their Web strategy losing anything close to 60 percent of our online
around the idea that if we offered free news traffic, the decision to charge was a no-brainer.
online, we’d attract huge audiences and have Since launch, our pageviews are down about
something valuable to sell to advertisers. After 15 30 percent, but unique visitors have remained
years, we’ve attracted the huge audiences, but the relatively steady. Non-subscribers are reaching
huge advertising dollars haven’t materialized. their limit and coming back the next month.
Meanwhile, wise readers have figured out We’re still the largest news site in our market.
how to go online to get for free what they’d u Nobody will pay for news online.
otherwise have to pay for in print, and some Hogwash. The high-quality journalism produced
have made the perfectly reasonable decision to in America today is being done at newspapers.
do just that. That’s great for readers — at least People value what we do, and they’re willing
those who don’t mind reading news online — to pay for it. After eight months, we now have
but it’s a disaster for publishers. Why would we roughly 8,000 people paying us for access to our
actively encourage readers to dump the print website, far more than we expected. If any local
edition, which has a solid business model of newspaper publishers believe they don’t have
subscription and advertising revenue, and start anything to sell, they’ve got problems beyond
reading for free online, where the most we can whether to charge for online access.
hope for is enough advertising revenue to cover u The technology is too difficult. Difficult,
10-20 percent of our costs? yes. Insurmountable, no. The technology is
That question bothered us at the Tribune for getting more accessible as online subscriptions
years before we began charging for access to catch on. We worked with our Web content
our website at the end of 2010. We now have a management system provider to develop
metered site that allows visitors 10 free views the system we wanted, then spent months
per month before asking them to pay $8 a month integrating it with our print subscriber database
for online-only access or $1 a month if they’re so we could seamlessly offer bundled
9
10. subscriptions. More CMS providers are offering
this technology. Solutions like Press+ and
Pay model advice
Google One Pass are designed to be platform- u Consider a metered model. You get the
agnostic add-ons.
best of both worlds — subscription revenue and
u Advertisers won’t like it. If that’s true, they
minimal traffic loss. Visitor counts will drop less
have a funny way of showing it. Our online ad
than pageviews, and visitors are more important.
revenue is up so far this year. Online subscriptions
Allowing a set number of free views per month
are a non-issue for local advertisers. We’re
is a great way to let customers sample your
prepared to tell any advertiser who asks that we
product before they buy. Sure, you’re giving
now offer a more engaged audience that is more
away some content, but it’s to fly-by visitors
valuable to them. So far nobody has asked.
who would never subscribe anyway. Focus on
It will upset our loyal readers and build ill
u
will toward the paper. We were prepared for the loyal readers who value the news the most and
worst the day we launched. The extra customer don’t worry about the rest.
service reps we brought in for the occasion ended u Forget pageviews. Most news websites have
up twiddling their thumbs. Most of our customers far more pageviews than they need. How many
get why we’re doing this — so we can afford to do they need? Enough to serve the local ads
keep doing quality journalism as some readers they sell. Any more is good for bragging rights,
move online. Sure, we had some upset readers but not much else. National ad networks are
when we announced our plans. Most were habitual paying less than $1 per thousand impressions
violators of our commenting policy upset with us for remnant space. Try making payroll in the
for requiring a subscription to comment on our newsroom at that rate. Better idea: See how
news stories. Commenting on our site has dropped, many pageviews you actually need to serve
but so have complaints about inappropriate all your local advertising and set your meter
comments and the staff time necessary to react to accordingly.
them. The most common feedback I’ve heard since u Don’t neglect print – you could lose a
we launched has come from readers thanking me bundle. The technology to charge for content
for cleaning up the story comments. online is relatively simple. The hard part is
Those are just five things that give publishers integrating the online subscription data with
pause when contemplating paid online content. your print customer database, which is necessary
There are others. Sound familiar? to sell and keep track of bundled print/online
subscriptions. Make this critical element part of
Andy Waters is the president and general the planning process from the start.
manager of the Columbia Daily Tribune and u Have a bulk subscription plan. What
Tribune Publishing Co., a newspaper and will you tell businesses and institutions that
commercial printing company in Columbia, ask about discounted rates for multiple online
Mo. Reach him at awaters@columbiatribune.com subscriptions? They will ask. How will bulk
or (573) 815-1706. subscribers get access? Have a plan before you
go public with your online subscription strategy.
u Make obituaries paid content. Obituaries
Tell us your story are among the most popular content on any
If you’ve implemented a paid content model,
news website, so why would you give that
we’d like to hear what you’ve learned. Tell us away? Newspapers charge readers to read obits
about your experience and what worked — and in print. Do the same online. If you have a
maybe what didn’t work so well. Send an email metered site, non-subscribing relatives still can
to Mike Jenner at jennerm@missouri.edu, or read for free.
call (573) 884-2270.
— Andy Waters
10
11. Online news customers and
their willingness to pay
By Iris Chyi had high interest in news, and who were already
University of Texas actively using print, online and TV for news.
P
Respondents were also asked to assume that
rior to a couple their favorite newspaper was no longer free, in
of years ago, print or online. Under that condition, how much
only a handful would they be willing to pay for print, web, and
of newspapers were apps? While 30 percent were unwilling to pay
charging online — it was for a print newspaper, 60 percent said they would
considered to be a failure. pay nothing for online news, and three-quarters
Nearly 80 percent of said they wouldn’t pay anything for news apps.
U.S. newspaper sites were Using the amounts respondents said they would
generating revenue from be willing to pay, the study computed a mean
online advertising, but only price for each platform: $7.70 per month for
3 percent were charging for print, $3.10 for web and $1.50 for apps.
access. And 71 percent of users said they’d go to Finally, respondents were presented with six
other online sites that were free. specific models of newspaper content payment,
But ongoing declines in print revenue coupled including micropayments, a metered approach,
with the inability to show significant growth free access bundled with print, a subscription
in online ad revenue have driven newspapers with a free tablet, etc.
to revisit the notion of charging for access to The data show that willingness to pay for any
online content. of the models is extremely low.
Against this background, we conducted a study These results are important for several
attempting to determine the predictors of paying reasons. First, they can be used to provide
intent across platforms (print, web, mobile, estimates for the potential to increase online
tablet). The results are based on a survey of 767 revenues. (see Mantrala and Thorson, 2011).
randomly sampled online U.S. adults in August They are also important because they
of 2010 (about four months after the iPad was demonstrate that people are willing to pay
launched). The final analysis involved weighting for print news at a much higher price than for
the sample to ensure it was representative of the online or web news. This shows that consumers
U.S. internet population. consider online news to be what economists
The first question was “how likely is it that call an “inferior good.” These results imply that
you would pay for info on three platforms — consumers perceive online news to be more like
print, web, and apps?” Thirty-three percent ramen noodles, while print news is like a nice
were “likely” or “very likely” to pay for print; 13 dinner at an expensive restaurant.
percent for online content, and 8 percent for apps. In the lexicon of an economist, the term
Those most likely to pay for print were those “inferior good” has a specific definition: As
who had a high news interest, who already paid income increases, demand for inferior goods
for print, and who did not use online news. Those decreases. For normal goods, when income
most likely to pay for online were those who were increases, demand increases.
young, male, had high interest in news, and were
already active online news users. Those most likely Iris Chyi is a new media researcher and assistant
to pay for apps were those who were young, male, professor at the University of Texas at Austin.
11
12. Payment models studied
1. Free hardware with contract 4. Day pass: $0.99/day in all
for content: A free iPad with a 2-year ELECTRONIC formats. (1.8)
subscription at $30/month (i.e. $720 for 5. Customized content: A “build your
2 years) that covers all content in all own, mix and match” subscription menu that
ELECTRONIC formats. (1.6) covers all ELECTRONIC formats. Content
2. Micropayment: “Buy the article once, is self selected by topic (e.g., sports+local
no strings attached” at $0.19 per article in all news, etc.). Price: $0.99 per content topic per
ELECTRONIC formats. (1.6) month. (1.8)
3. Tiered (or metered) system: First 6. Free online access for print
10 articles free per week. $0.99 for each subscribers: Montly subscription that covers
additional article in all ELECTRONIC all PRINT and ELECTRONIC formats. Price:
formats. (1.8) $33 per month. (2.0)
Key findings
When we looked at which packages differ- but not 5 (customized content).
ent groups of people preferred we found some
striking differences. Here are the most salient u Not surprisingly, people who use a lot of on-
ones: line news liked all the packages except 1 (where
they’d get a free iPad—they probably already
u There were no differences in what men and have one) and 6, because they don’t want print
women chose except a strong preference by and therefore don’t want to pay for it.
women for print users getting everything else free.
u Heavy TV news users were also not sur-
u There were no differences in how people prising in their preferences — the day pass,
with differing levels of education preferred the probably because they don’t plan to use online
six different packages. newspaper very often — and customized top-
ics — where some topics like sports might be
u There were no differences in how people interesting enough to them to motivate them to
with differing levels of income preferred the seek the depth that newspapers provide.
six different packages, except that people who
made more money tended to prefer that print u The most interesting finding was that the
users get everything else free. people who expressed high interest in news
responded positively to ALL the packages.
u People who use a lot of print news liked This clearly indicates that heavy news users are
package 1 (free hardware with contract for con- much more able to overcome the negatives of
tent) and 6 (free access for print subscribers), having to pay for content.
12
13. Economic modeling offers
lessons in pricing models
By Murali Mantrala, Esther Thorson, Alex than investments in advertising or other areas
Prewett and Elina Tang of the operation.
University of Missouri Newsroom investment directly influences
I
print circulation, which generates circulation
ndustries around the revenue but also creates a positive feedback
world make use of loop affecting advertising revenue. There
economic modeling also is a positive feedback loop between print
to determine investment, circulation and online readers. This feedback
product and pricing loop is intuitively obvious: the more people
strategies. Newspapers read the print product, the more people will be
could profit from such reading the online version.
an approach, particularly
when determining Six simple assumptions need to be added.
whether to charge for 1. The print paid (or paying?) subscriber
online content. Rather base is relatively stable. (Slow downward
than relying on “best practices” or experiments trend in circulation does not challenge this
by other newspapers, economic modelers assumption.)
identify the basics of investment and revenue 2. Print advertising revenue is relatively
flow, use relevant data where it is available, stable. Although revenues have plunged over
and then build models that help businesses the past 3 years, they’ve hit a point where
determine analytic answers to questions they’re stabilizing.
like whether to charge for online content. 3. Print paid subscribers will get access to
Marketing modeler Murali Mantrala, the Sam the online version for little or no additional
Walton professor of marketing in Trulaske cost.
College of Business, University of Missouri, 4. Online readers are a mix of print
and Esther Thorson, Journalism Associate subscribers and non-paying online-only
Dean and Director of Research at Reynolds readers.
Journalism Institute, along with two doctoral 5. Online ad revenues are connected to the
students, teamed up to provide an example of number of online readers.
such a model. The model is described briefly 6. Online-only readers are price-sensitive to
here. It could be adapted to any individual cost. In other words, many are likely to refuse
newspaper situation to help with business to pay and go elsewhere.
decision making. Given the price sensitivity of online-only
We start first with a little background about readers we can infer in our model that the
how newspaper investments generate revenues higher the price of online content access, the
from print and line advertising, and from print greater the decrease in online-only readers will
subscriptions. (See research articles listed in be.
footnote.) It should be kept in mind that paying
The most important investment a newspaper customers, unlike free online-only news
company makes is in its newsroom. Those readers, are more valuable to the site, and to
dollars drive revenues much more strongly the advertiser because of their investment in
13
14. the product. Readers who are paying to consume online survey of 767 U.S. adults in August of
news on a site are more likely to read more of 2010 (about four months after the iPad was
the content, remain on the site longer, and be launched) she asked how likely people were
more likely to respond to the ads. to pay for information on three platforms:
In general, online profits are going to be print, web and apps. She estimated that
a direct function of the gain in profits from 60% of a newspaper’s audience will be lost
charging the online-only readers who are willing when you increase your online-only charge
to pay for access to online news minus any ad from zero. (This is a somewhat larger fall-
revenues lost because of online traffic declines. off than reported by Tartakhoff (2009)). Of
Then, the newspaper can have a net gain in course, people’s answer to this question may
revenues at some online price that is positive not perfectly predict what they really do,
rather than zero as long as the total number of and more sophisticated “willingness-to-pay”
online-only readers when online is free divided measurements may be needed. However, we
by the proportion of online readers lost per unit can use these data as a beginning estimate of
increase in the price is greater than the online ad how many online-only readers a newspaper
rate. will lose if it establishes payments for online
Thus to apply the model we need to know, content.
first, what to expect in terms of the loss of Chyi’s data also showed, however, that the
online-only readers when they have to pay for remaining online readers are actually quite
online news rather than getting it free. One inelastic to online price. In the less elastic range
way to answer this is to ask current customers (beyond 60%) there is a rough estimate of “b” of
what they would be willing to pay. Iris Chyi about 2.5, that is, there is an average decline of
(2011) did just this. In a random sample about 6.25% of the remaining online reader base
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15. with every unit increase in online price.
When these numbers are plugged into the
equations shown in above, we can predict optimal
pricing. That optimal pricing depends on:
1. total original number of ‘free’ online-only
readers
2. estimated loss of online-only readers per
unit increase in online price
3. expected online ad rate after the change.
Applying this model to the Chyi data, and
using an estimated online ad rate of $1.5
per viewer using data from Evans (2009), 3. Online ad rates are relatively low (as is
the optimal online price to charge is about usually the case)
$5.47 per month. It should be noted that the These conditions are likely to be met for
Arkansas Democrat-Gazette charges $5.95 many newspapers. Hence, we believe it would
per month for complete online content access be worthwhile for most newspapers who
(Parrott, 2010). currently do not charge for accessing online
news to seriously consider and investigate
Conclusions moving to an online pay model.
Charging for access to online content can It should be noted that this analysis does not
yield a gain over current “free” online models consider the economic benefit of “protecting
revenues when: the print edition.” Many newspapers report
1. The number of online news readers that there is an increase in print circulation
currently attracted by “free’ online news is large when charging for online content is introduced.
2. Fall-off of readers due to charging for Adding this benefit will only increase the
online news is bounded and remaining online- revenue gain resulting from charging for online
only readers are much more price inelastic; content.
References Esther Thorson (2011),” The Journalism Institute.
Footnote: These findings Bricks that Build the Clicks: Evans, David S. (2009). The
are developed in the following Newsroom Investments and Online Advertising Industry:
scholarly publications: Online Advertising Performance” Economics, Evolution and
Sridhar, Shrihari, Murali International Journal of Media Privacy, Journal of Economic
K. Mantrala, Prasad A. Management• Perspectives. Volume 23, #3,
Naik, and Esther Thorson, •Mantrala, Murali K., Prasad Summer, 37-60.
(2009) “Dynamic Marketing A. Naik, Shrihari Sridhar, and Parrott, Scott (2010, April 29).
Investment Strategies for Esther Thorson (2007), “Uphill To pay or not to pay for online
Platform Firms” MSI Working or Downhill? Locating the Firm content. Project on the Future of
Paper [09-121] on a Profit Function.” Journal of Journalism, University of Alabama
•Sridhar, Shrihari, Murali Marketing, 71(2), 26-44. College of Communications and
K. Mantrala, Prasad Naik, Chyi, Iris (2011). Paying for Information Science.
and Esther Thorson (in press). what? How Much? And why Tartakoff, J. (2009, September
Dynamic Marketing Investment not? Predictors of paying intent 2). Taking the plunge: How
Strategies for Platform Firms. for multiplatform newspaper newspaper sites that charge are
Journal of Marketing Research. content. Presentation at Paid faring. Online article accessed
•Yihui(Elina) Tang , Shrihari Content Models for the Future, Mach 17, 2010, via
Sridhar, Murali K. Mantrala, and April 26,2011, Reynolds paidcontent.org
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16. Mike Jenner
Houston Harte Chair in Journalism
Phone: 573-884-2270
Email: jennerm@missouri.edu
Ken Fleming
Director, Center for Advanced Social Research
Phone: 573-884-6563
Email: flemingk@missouri.edu
Andy Waters
President and general manager, Columbia Daily Tribune
Phone: 573-815-1706
Email: awaters@columbiatribune.com
Murali Mantrala
Sam M. Walton Distinguished Professor of Marketing
Phone: (573) 884-2734
Email: mantralam@missouri.edu
Iris Chyi
New media researcher, University of Texas at Austin
Email: chyi@mail.utexas.edu