Standing Taller on Two Legs

Article ImageNews publishers pine for the good old days, those days positioned prominently in the sun, the center of the media world, standing tall on two legs. Their business model has long been a strong, two-legged one, built on the seemingly permanent business model of the 80/20 rule: about 20% of revenue coming in from circulation, subscriptions, and single copy sales, and about 80% derived from advertising.

While circulation pricing stayed fairly flat, ad pricing drove growth and 20%-plus profit margins. Lately, circulation revenue has inched up to become about 25% of a much smaller, ad-revenue-diminished top line. But that's a short-term phenomenon; almost all of that circulation revenue is print-based, a problem as readers move at a furious pace to digital.

So 15 years into the digital revolution, the industry is looking at itself in the mirror, noticing its limp, and vowing to do something about it. That something is digital reader revenue: charging readers for digital access to the news. What are the top three strategies of news companies these days? Paid content, paid content, and paid content.

If 2010 was the year of preparation, building on the oratorical "we can't go on this way" of 2009, then 2011 will be the year of the paid content test. Can news publishers reclaim that two-legged business model, again standing firmly on both reader and advertising revenue?

The first test will come early in the year, as The New York Times puts up a pay wall-of sorts. The Times' strategy is less a wall and more a mountain pass for those travelers who want to go on a longer journey, those reading more than 10 or 20 or 40 articles per month. The Times borrows its strategy from that of the Financial Times, which first implemented a metered approach in 2002.

The first notion: Don't cut off your growing digital ad business to grow some new reader revenue. To that end, expect The Times to give its casual readers, those who take in less than 10 or 20 articles monthly, easy access to the site. It will concentrate on monetizing those and all the "fly by" traffic sent by Google, Facebook, and Twitter via ad sales.

The second notion: Target the top 10% of heavy users, those who value The Times brand and content, for digital subscriptions.

The third notion: It's not only a one-off world. Digital subscriptions won't be just digital-only. The game here-and I believe a dominant model we'll see in 2011-is all-access. Pay once and get the printed paper along with any kind of digital access you want: smartphone, tablet, desktop, laptop, and, soon, interactive TV. The big idea: Use your legacy products and the web to find your top customers, and satisfy the heck out of them.

The Times will have plenty of pay-wall-testing company: News Corp. has put up a high and hard wall at its London papers. Startup Journalism Online's Press+ should be powering at least several dozen daily newspaper pay experiments in early 2011, and others plan to do it themselves. Then, there's Apple, figuring out how to make itself a vital middleman with a new "news store" and News Corp.'s own pay-aggregation play, intended to be rolled out before the new year dawns.

Unfortunately, many news publishers may take the well-trod route of repurposing, moving web content (which had been repurposed from print) to tablets and smartphones. That won't be sufficient. As the run-up to Paid Content 2011 happens in the fourth quarter of this year, look to four important principles that should determine success or failure:

State-of-the-art customer management: Publishers must align print customer management systems with digital ones, recognizing and tracking customers across all platforms.

Best practice reader customization options: As we readers move from mobile to tablet to desktop and back throughout the day, we'll expect transparent technologies to know what we've read and shared (and with whom), no matter which digital device we've used.

An embrace of what the tablet and smartphone platforms do uniquely well: That's touch, interactivity, and video, all demanding a reach beyond the comfort zones of print.

More is more: Staff professional content may be the foundation, but embracing the higher end of the Pro-Am world-getting good topical and local content at very low cost points-is key to making any new digital pricing and profitability work.