2010 Itz Belden Paid Access Practices and Profiles Report: Four take-aways
A 2010 study shows that some newspaper sites charging for access have developed a stable, base of new revenues. Here are ten key take awayss from the report:
1. Sell-through rates vary from 1 to 9%. Most sites in the ItzBelden Paid Access: Practices and Profiles report sell another 1 to 3 % of their current circulation online, in addition to offering free registration to print subscribers.
Two newspaper sites added an extra 8 to 9% in online only subscriptions. Traffic drop-offs are managed by opening pay-walls further or by simply recover over time in some cases. The report studied 64 newspapers in the U.S. and one in Canada who currently charge for access.
Full disclosure, Local Media Insider partnered with ItzBelden to write the report including conducting about half of the executive interviews and sharing in revenues.
A key theory of ItzBelden that is backed up by top execs at AP, is that newspapers overcount visitors and undercount pageviews from and numbers of "loyalists," the group most likely to purchase subscriptions. This is due to the way computers "count" computers as visitors, while loyalists are apt to use multiple computers.
When 30% to 40% of subscribers also register to get the news online for free, this group is the core base for future online subscribers.
2. Best markets for paid access are smaller. So far the biggest success stories for newspaper sites charging for access are in small markets: Less competition means sites are easier to lock. We estimate that sites are taking in from $20,000 to around $200,000 (in one case) in extra sales – almost all incremental profits—after locking sites and letting print subscribers register for free. It’s not enough to “save” a company but enough to take a serious look. Publishers in these markets also gambled on a more businesslike approach, and so far, the ones we spoke with had no regrets.
The relative success of the small, relatively isolated communities in the study points out the importance of unique local content–and of competition. As one publisher noted, “99% of people in the world don’t care” about the content that he sells, but the 1% that cares will pay. And that’s the point. Paid access is not just about beating the competition by doing what they do better and cheaper; it is about creating unique areas that other media are unwilling to invest in covering.
Newspaper sites have a key advantage in that overhead is already paid, so investing in — or maintaining — expanded local content is easier than starting from scratch.
3. Business models are evolving as hybrids. The models differ at every paper but there are several basic types in use that the study looks at:
*Some form of partial “lock down” of web site content
*Premium content
* “nth story” or metered access
*E-paper sales
Premium content
Most of the premium content case studies involve sites building sports areas. It’s useful to think of premium content as “special sections” that are reader driven rather than advertiser driven. For print publishers, this is tricky, and not as immediate as slamming the top 100 advertisers into a fat profitable guide that lasts for the weekend. In spite of claims for a “long shelf life” these guides are beaten hands down by online “special sections”, available 24-7 with updates and reader interaction and content.
Rolling out one premium area a year for five years could transform a business model, plus create lucrative “sponsorship” and transactional opportunities as well. We’ll be following these models closely.
Partial locks
In almost all the locked sites in the study, ad -riven content like classifieds, events, and some special sections, remained free as did AP content and stories heavily covered elsewhere. Strategies about where and how to place the pay-walls are allover the board and worth reading.
One clear generalization is that unique local content is king. That means thinking competitively in a different way. When business journals launched in the 1980’s, the strategy was simple: If the daily had one business reporter, the business journal would hire three. Having enough local content to charge for is a similar equation: It depends on the other guy.
In addition to reporters, paid online areas should look at extra functionality such as chats with experts, searchable data, and other zippy stuff. One site had a great page of links (behind the paywall) for searchable databases fed from cities and universities for things like crimes, parking tickets, housing transactions, births and deaths, and so on.
As long as the site can “out-cover” local information in a way that is significantly better than competitors, the partial locks work. That means more local reporters than the other guy, covering news, not ad driven sections like “Food” and “Travel”.
Larger papers have a harder time with this because of all the competitors and may move more towards premium and metered strategies. Broadcast sites will compete, but they are likely to follow newspapers into paid access.
E-edition
Some sites intentionally under-develop the html site, and charge for the e-edition with success. I’m guessing that this strategy that is probably a mistake long term. There’s a number of successful case studies in the report; a couple of these sites are on the Olive Platform, good at selling e-papers, but at least one client complained that Olive is not working fast enough to develop the html platform. While e-papers sell an extra 1 to 3% of the daily circulation – as much as the partially locked html sites - it’s hard to imagine this is a viable strategy for the future. E-papers are,by nature, sorry, dogs. Hard to download, less searchable… well, enough said.
Success in selling e-paper attests to the strength of the franchise and isolation of the market, rather than the value of the product. Readers give a choice between a and b will not pick c. But c may come along one day, so why not create it yourself?
Nth story model
For larger sites, there is another model touched on in the study primarily for selling the diverse package of 24 hour local content that local media do best. The “nth story” model is based on metering charges by the “nth story” so that the heaviest users more and letting “flybys”, who make up 60% of visitors, go free. This allows the site to monetize visitors already most likely to pay, while letting the volume of traffic, mostly from search, continue to flow through the site. Though a phenomenal success at FT.com, no local sites in the study use this approach, and one is seriously considering it. The report also give the nod to Steven Brill’s Jounalism Online project (represented by ItzBelden partner Greg Swanson) which allows readers to buy across multiple sites by signing up once.
4. Pricing can go higher; revenues significant but not game-changing.
Most newspaper sites are pulling pricing out of the air, and the study gives a new pricing formula based on their collective experiences, and largely expands the revenue opportunity. One odd theory that seems to be working: a publisher in the study online subscriptions at a higher rate than print subscriptions, arguing that online is a separate business and since there is no significant advertising revenue, subsription prices should be higher.
But as even top performing publishers said, paid access revenues are still not “game changing” unless there is an equivalent online advertising play.
The consensus among publishers large and small is that the display inventory is never going to be “sold out” in a way that would preclude paid access. Keeping traffic volumes high is more important in preserving overall dominance of the franchise. Given the lack of a significant downside, going into paid content seems like an obvious move. There may also be a positive effect on the newsroom; making reporters more valuable and focused. There is nothing that separates the men from the boys like watching readers opt-in on a story-by-story basis.
To look at the full the report to see a current overview of specific working models in operation and theories. To request a copy of the full report, e-mail me at alisa.cromer@newmediahub.com
The author, Alisa Cromer is publisher of a variety of online media, including LocalMediaInsider and MediaExecsTech, developed while on a fellowship with the Reynolds Journalism Institute and which has evolved into a leading marketing company for media technology start-ups. In 2017 she founded Worldstir.com, an online magazine, to showcases perspectives from around the world on new topic each month, translated from and to the top five languages in the world.
