onsumers are willing to spend millions of dollars on the Web when it comes to music services like iTunes and gaming sites like Xbox Live. But when it comes to online news, they are happy to read it but loath to pay for it. Posted on 03/14/2005 6:04:15 AM PST by Drango
onsumers are willing to spend millions of dollars on the Web when it comes to music services like iTunes and gaming sites like Xbox Live. But when it comes to online news, they are happy to read it but loath to pay for it.
Newspaper Web sites have been so popular that at some newspapers, including The New York Times, the number of people who read the paper online now surpasses the number who buy the print edition.
This migration of readers is beginning to transform the newspaper industry. Advertising revenue from online sites is booming and, while it accounts for only 2 percent or 3 percent of most newspapers' overall revenues, it is the fastest-growing source of revenue. And newspaper executives are watching anxiously as the number of online readers grows while the number of print readers declines.
"For some publishers, it really sticks in the craw that they are giving away their content for free," said Colby Atwood, vice president of Borrell Associates Inc., a media research firm. The giveaway means less support for expensive news-gathering operations and the potential erosion of advertising revenue from the print side, which is much more profitable.
"Newspapers are cannibalizing themselves," said Frederick W. Searby, an advertising and publishing analyst at J. P. Morgan.
As a result, nearly a decade after newspapers began building and showcasing their Web sites, one of the most vexing questions in newspaper economics endures: should publishers charge for Web news, knowing that they may drive readers away and into the arms of the competition?
Of the nation's 1,456 daily newspapers, only one national paper, The Wall Street Journal, which is published by Dow Jones & Company, and about 40 small dailies charge readers to use their Web sites. Other papers charge for either online access to portions of their content or offer online subscribers additional features.
The New York Times on the Web, which is owned by The New York Times Company, has been considering charging for years and is expected to make an announcement soon about its plans. In January, The Times's Web site had 1.4 million unique daily visitors. Its daily print circulation averaged 1,124,000 in 2004, down from its peak daily circulation of 1,176,000 in 1993.
Executives at The Times have suggested that the paper, which already charges for its crossword puzzle, news alerts and archives online, may start charging for other portions of its content, but would not follow the Journal model, which charges online readers $79 a year for everything.
(The Journal charges $39 a year to online readers who also subscribe to the printed newspaper.)
"A big part of the motivation for newspapers to charge for their online content is not the revenue it will generate, but the revenue it will save, by slowing the erosion of their print subscriptions," Mr. Atwood said. "We're in the midst of a long and painful transition."
Most big papers are watching and waiting as they study the patterns of online readers. Analysts said that the growth in readers was slowing but that readers appeared to be spending more time on the Web sites.
"We're always looking at the issue," said Caroline Little, publisher of Washingtonpost.Newsweek Interactive, the online media subsidiary of The Washington Post Company. She said that the online registration process that most papers now require for use of their Web sites, while free, lays the groundwork for charging if papers decide to go that route.
"You're getting information from your users and you can target ads to your users, which is more efficient for advertisers," she said. "This has been a dipping of the toe in the water."
The Post has no plans to charge now because it would mean too big of a drop-off in readers. "It's just not a strong financial proposition at this point," she said.
Executives at other newspaper groups, including the Gannett Company, which publishes USA Today, said they had no plans to start charging either.
A report last week from the Online Publishers Association underscored the challenges facing newspapers in selling news. Internet users spent $88 million for general news in 2004, or just 0.4 percent more than they paid in 2003, the report said; by comparison, they spent $414 million on entertainment, up 90 percent.
Rob Runett, director of electronic media communications at the Newspaper Association of America, eyed the report ruefully. News, he said, may become an acronym for "Not Ever Willing to Spend."
The Tribune Company, which owns The Los Angeles Times, The Chicago Tribune and other papers, has conducted limited experiments in charging for access, some more successful than others.
The Los Angeles Times charges $4.95 a month for its Calendar Live section, which covers entertainment and provides listings and restaurant reviews, but traffic to the site has declined and a spokeswoman said the paper was reviewing the decision to charge for it.
The Chicago Tribune offers a "subscriber advantage" program, which gives print subscribers free access to archives and bonuses online. "It's an interesting first step to see how people react in trying to differentiate between the two products," said Alison Scholly, general manager of Chicago Tribune Interactive.
The difficulty comes in determining what readers will pay for on the Web. Most executives agree that national news can be found in so many places that it would be self-defeating to try to charge for it. But they are finding that readers will pay for sports, if the Web offers more than the printed page. The Milwaukee Journal Sentinel provides in-depth coverage of the Green Bay Packers, along with blogs, fan photos and audio reports, in "Packer Insider" for $34.95 a year.
But for the most part, publishers make money on Web sites by selling space to advertisers, and that is a booming business. Mr. Atwood at Borrell said a preliminary analysis of online revenues for about 700 daily newspaper Web sites showed an average increase of 45 percent from 2003 to 2004.
But some newspapers want to develop a cadre of paying readers as a second stream of revenue beyond the advertising.
Bill Keller, executive editor of The New York Times, said of relying on advertising as the sole revenue stream: "My main concern is that, however we distribute our work, we have to generate the money to pay for it. The advertising model looks appealing now, but do we want our future to depend on that single source of revenue? What happens if advertising goes flat? What happens when somebody develops software to filter out advertising - TiVo for the Web?"
At the same time, he said, charging for the Web site could alienate both current readers and potential new readers, particularly in growing markets like China and India, and The Times would be limiting its global reach.
Perhaps the biggest obstacle for newspapers is that online readers have been conditioned to expect free news. "Most newspapers believe that if they charged for the Web, the number of users would decline to such an extent that their advertising revenues would decline more than they get from charging users," said Gary B. Pruitt, chairman and chief executive of the McClatchy Company, which publishes The Sacramento Bee, The Star Tribune in Minneapolis and other papers, which do not charge for their Web sites.
The Wall Street Journal experiment suggests the contrary. About 700,000 people subscribe to its online edition, with 300,000 of them subscribing to the Web edition only and 400,000 subscribing to both the online and print editions. The print edition has 1.8 million subscribers.
"If you have strong value, people will pay for it," said Todd H. Larsen, president of consumer electronic publishing for Dow Jones, which owns The Journal. "There is nothing so magical about the Internet that everything has to be free."
The Journal's experience may not translate to other papers. It is primarily a financial paper, and analysts said that it is a business expense for many readers buying it. Moreover, charging online brings its own problems. By limiting readership to subscribers, papers also limit the amount of advertising space they can sell. Earlier this year, Dow Jones spent more than $519 million for MarketWatch, the financial news Web site, largely as a way to attract advertising that it was not getting online.
When the paper first charged for its Web site in 1996, daily traffic fell by about two-thirds, said Rich Jaroslovsky, who was the managing editor of The Wall Street Journal Online at the time and is now a managing editor at Bloomberg News.
"You have to take the hit some time if you do this," he said of charging for a Web site. "We took the pain because we felt over the longer term, we'd see the gain."
Since 1997, The Journal's Web site has grown, although growth has slowed dramatically. Subscriptions jumped 35 percent from the third quarter of 1999 to the third quarter of 2000, for example, but grew by just 2 percent from 2003 to 2004, according to the company. This reflects an industrywide slowdown, said Merrill Brown, the founding editor of MSNBC.com and a media consultant. "There is no question that growth has slowed as the medium has matured," he said.
"It's a pretty stagnant business for a variety of reasons," he added. "At a moment when big papers are so financially stressed and their prospects uncertain, they aren't investing at the level they need to grow their alternative distribution platforms."
On a smaller scale, another newspaper that charges for its Web site is The Spokesman-Review in Spokane, Wash., which has a print circulation of around 100,000. About 20,000 of those print subscribers also get the paper online for no additional fee; just 545 people pay for the Web edition only, at $7 per month.
Ken Sands, the online publisher, who until a month ago was the managing editor of the print edition, said the paper decided to charge for the Web in an effort to save the print edition.
"We had the sense that a lot of people had canceled their print subscriptions because they could read the paper for free online," he said. He said that as soon as the paper started charging for the Web, in September, new daily traffic, which had been growing by more than 40 percent a year, stopped cold. He said that traffic was 5 percent lower this January than it was in January a year ago. He added that the print circulation had been steadily declining somewhat anyway, and so he could not blame the Web for that.
"Print is going the way it's going, which is down, which is unfortunate because it's the revenue engine that keeps this whole thing going," he said. "The online business model won't ever be able to support the whole news infrastructure."
Mr. Jaroslovsky, the former editor of The Wall Street Journal Online, said that some publishers were regretting not having charged for the Web back in the 1990's when it was developing, because doing so now will be a bigger shock to their readers. Also, he said, the stakes are higher.
"When we did this, we were at the beginning of an investment curve and the amount of money at stake was not as great," he said. "Today, if you make a wrong decision, there's a chance it will be not only embarrassing, but very costly."
So the MSM can't come up with a sustainable revenue model to sell their lies online?
What does this say about them-- and their desired audience?
Maybe 'the unwashed masses' are too smart for them afterall?
Or the Washington Times. I love the content of the Wash. Times, but I'm mortified by it's ownership and provenance.
AND I get to choose how much to pay and how often (I contributed little for my first year or so, then pledged about $20 for a few FReepathons, was a dollar-a-day FReeper for over a year, and now throw in what I can when I can)...
Yeah, with that available, I'm sure everyone will opt for a flat charge of $79 per year for flat news with an idiotic slant and little actual content (how many times have you said to yourself, "Why doesn't this story answer more questions than it leaves open?" wfater reading a news story... and how many times after reading an FR thread?!?)
FR should be the future look of all news outlets.
problems i've noticed:
1. the composite readers' interest of national and international papers is higher than the interest of one paper. this is to say you have more to chose from on the internet than if you subscribe to one newspaper.
in contrast, your hometown paper looks boring. and, in many cases, it is boring because gannett and their ilk bought out many medium-sized city papers dumping the same junk in all of them.
2. but i could never afford to subscribe to all of the national and international papers that i take a look at.
3. there's been a general decline in most newspapers with the exception of the wall street journal and ibd. the decline owes to the boomer journalists' decisions in the early 1970s to abandon "objectivity" for personal opinion and fantasy.
don hewitt of 60 minutes actually said something to this effect. the "logic" of this follows: "everyone is biased, so i have a right as a journalist to publish my biases". the only problem is, most journalists issue from university j-schools which abandoned math, science, history, latin, greek, or economics for the fashionable "critical studies".
4. this is because feminists and "progressives" control most newspapers in the states. they gained their radicalism from their university educations which the vast majority of americans do not share.
to test #4--try to get most newspapers to publish anything that contradicts radical feminism and you'll see that it will not get published. is there a dr. laura schlesinger column in your local paper? rush limbaugh? nada.
in sum, until newspapers democratize and include the actual "diversity" of public opinion, and abandon their elitism, they'll continue to decline.
Dear Drango,
The Washington Times isn't bad, regarding content. The effort at presenting a conservative point of view is sometimes a bit labored. And the folks who write for the Washington Times are journalists, with all the bad stuff that implies. When they've reported on local stories with which I'm familiar, they do the usual thing that journalists do - report a large number of the facts, without any idea of how they actually go together.
However, the Washington Times won't survive the Internet, unless it gives up its paid subscription revenue. The Examiner, and papers that spring up like it, will ultimately eat away at the subscription base of paid subscription papers.
In the case of the Examiner, the conservative billionaire from out west who owns it reduced the costs he must amortize by buying printing assets from a local chain of community newspapers for a fraction of their original cost. As the costs associated with printing technology decline, he'll be better able to take advantage of them, because he will have less, by way of depreciable assets on the books, to write off.
On the other hand, his friends at the Washington Post and Washington Times will have printing assets purchased new, at full price, to write off.
The next ten years or so are going to be interesting. Dontcha think?
sitetest
I can't wait to flush what remains of your paper out of my system.
WSJ Ditto. Just wish I could get it earlier in the day.
If the Times charges for news, that will not impact the ability of FR members and weblogs to highlight articles and assess their accuracy under the "fair use" doctrine. All that will happen is that the Times will lose the advertising revenue that it gains from those readers at those times when they click through on advertisements.
I remember the worthless B2B auction sites that made you register and sign in to see what was for sale. Now I see the job sites that charge you for delivering mainly the same jobs that you can find for free on Monster.
There are ways to make money from free content with ads. These dinosaurs just need to figure out how to do it.
"For some publishers, it really sticks in the craw that they are giving away their content for free," said Colby Atwood, vice president of Borrell Associates Inc., a media research firm. The giveaway means less support for expensive news-gathering operations and the potential erosion of advertising revenue from the print side, which is much more profitable.
It's there fastest growing revenue source, yet this guy can't see the forest for the trees.
I think we have to look at the television model here: With TV we may pay for the transmission of programming, but we aren't paying for content, advertising pays for the content and on TV when you do pay for content, it's commercial free.
I already pay transmission fees (DSL hookup), but I will not pay for content. I think that newspapers are being "backward thinkers" and that they'll reap benefits from both consumers and commercial accounts if they go with the TV model.
I only buy the NYT when I run out of toilet paper.
Very apt and amusing.
I was contacted by a national polling company for the NYT about consumer reaction to charging for internet services. They apparently have several models for their coming changes.
I used to be a paid subscriber to their 'additional sections' to get their crosswords but quit when they went from $9 per year to almost $30.00.
Forgot the most important part of my previous post. Although I still read some of their stuff and occasionally go on their forums to drive the Libs nuts, I told them I'd NEVER go to their site if I had to pay for it--and I won't.
First, we're not giving information, it's being taken from us by the use of tracking software. If the government used the same techniques, the MSM would be screaming. 'Wasn't this the same bunch all concerned that someone would find out what library books we read? And they're the same group that uses tracking software to watch everything we read, look at, or buy.
"And forum posters and bloggers are illegitimate sources of information and they need to be regulated." Yep, MSM is in deep trouble and we're in their sites. We need to fight web censorship and taxation.
Advertising revenue from online sites is booming and, while it accounts for only 2 percent or 3 percent of most newspapers' overall revenues
Over 50% of their readers are online yet it only pays them 3%. The market is telling them how much their hard left bias is worth.
The NYT is often calling themselves “The Times” as in this article:
The Times's (sic) Web site had
Executives at The Times have
and The Times would
Isn’t there a UK newspaper who’s actual name is “The Times” and wouldn’t this infringe on there trade name somehow?
It's worse than that. I have the Denton paper delivered to my door everyday, and I didn't even sign up for the damn thing.
So it goes into the gutter
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