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Paid content
   comes of age
  A once-scorned strategy becomes a movement
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
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
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
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
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
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
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
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
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
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
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
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
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




14
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

                                                                                                      15
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

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Paid Content Report by: Mike Jenner

  • 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 14
  • 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 15
  • 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