Digital Pricing Models: A Time of Forced Innovation


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Article ImageAfter years of wondering, "Will they or won't they?" observers of the news publishing industry finally have a definitive answer: Newspapers, large and small, are implementing paid digital content models. Whether from sheer economic necessity, availability of better technology to implement more sophisticated solutions, or simply because publishers have finally integrated their digital strategies into overall business strategies, experimentation around making digital content pay its own way is rampant. Allen Weiner, research vice president at Gartner, says, "It's a period of forced innovation for newspapers. How can you innovate, and how can you do it cheaply?"

In the past few months, large metropolitan dailies such as The Washington Post, San Francisco Chronicle, and The Seattle Times have joined the early adopters, charging readers for access to online content. Gannett Co., Inc.; McClatchy; and Lee Enterprises all rolled out paywalls across their local and regional newspapers during 2012 (though Gannett's USA TODAY remains free to online readers). According to the Pew Research Center's Project for Excellence in Journalism report, "The State of the News Media 2013," 450 American daily newspapers, out of 1,380 total, have implemented paywalls.

News organizations that have had paywalls in place for longer are tweaking models to capture more revenue. Witness the 2012 decision by The New York Times to lower the boom from 20 to 10 free articles a month, and to systematically route out the technical workarounds that have let readers bypass the paywall in the past.

Weiner believes those efforts are getting a serious boost in the form of improved technology, which handles the heavy lifting publishers used to have to figure out themselves. Companies such as Press+, TownNews.com, and Zuora, Inc. offer solutions to facilitate integration with existing content management systems, customer relationship management systems, and accounting. "Now, you drop a line of code onto the page and the vendors can manage the paywall," Weiner says.

Michael R. Gulledge, publisher of The Billings Gazette and vice president of sales and marketing for Lee Enterprises, says the technical aspect of rolling out paywalls for his organization, using the Press+ solution, took only a few months in 2012. The company first announced its plans to move to a paywall strategy in August 2011, but "what took time was the marketing and communications, and the internal training," Gulledge says.

Improved mobile technology has also spurred some publishers to make the leap. Mark Adkins, president of the San Francisco Chronicle, says, "The wider availability of mobile devices and responsive design technology created a perfect opportunity to offer premium content to digital subscribers." While the Chronicle still offers a free site at SFGate.com, the SFChronicle.com site has an uncluttered design intended to read "like a newspaper," and columnists whose full columns were formerly available on SFGate.com are now only available on the premium site.

Paywalls may be the most common model for capturing revenue from digital readership, but newspapers are experimenting with other approaches too. In 2012, newspapers including The Dallas Morning News and the Santa Rosa, Calif., Press Democrat opened digital agencies to provide web design, SEO expertise, and branded content development to their advertisers. "We were one of the early pioneers in digital agencies when we started three years ago," says Adkins, citing two groups within the San Francisco Chronicle that target small and medium businesses and larger customers for digital agency work.

Another approach is to offer more granular content that will appeal to niche readers who may not want a full print or digital subscription, such as a weekly Health section or a special feature on a nearby travel destination. Weiner says, "The technology is getting there to let people subscribe to one columnist or one section. It's much less difficult to do in a digital world." Patrick Smith, launch editor and chief analyst of TheMediaBriefing.com, adds, "People will pay for quality products, but that artificial bundle that is a print newspaper makes very little sense in the digital realm."

The notion of offering an online experience optimized for the interests of digital readers, even at the expense of the brand, is gaining some traction. Smith cites the Daily Mail as a publisher with an online presence ?(dailymail.co.uk) that has a considerably different focus than its legacy print publication. "They've launched something that most Daily Mail print readers wouldn't understand," Smith says, referring to the more tabloidlike focus of the online site. But as reported in March by DMG Media, the consumer publishing division of parent company Daily Mail and General Trust, PLC, Daily Mail's site drew 111 million users per month, which is up 22% from the previous year. That's math advertisers understand well; it puts the company on track to have its digital advertising growth exceed its print advertising decline. "You have to disrupt yourself, launch against yourself," Smith says.

Another area of trial-and-error experimentation is sponsored content, which blurs the line between editorial and advertising. As the Jan. 14, 2013, dustup over The Atlantic's sponsored post on the Church of Scientology showed, there is a great deal of sensitivity around the perception that sponsored content breaks down the walls of editorial objectivity. On March 27, 2013, Google News announced that it considers "these types of promotional tactics to be in violation of our quality guidelines," which could result in the removal of such articles, or entire publications, from Google News search results. Still, with the need to monetize digital advertising more effectively, expect to see the emergence of more branded content services first pioneered by magazines, such as Forbes' BrandVoice and Fortune's Trusted Original Content (TOC), leveraging a publisher's editorial expertise to capture more of their advertisers' digital spend.

According to Pew's research, in 2011, print and online advertising revenues totaled $23.9 million, which is less than half of the industry's 2006 $49.4 million peak. So the "will they or won't they?" question now becomes whether these moves are happening in time to allow newspaper publishers to survive. When asked whether he would have done anything different in rolling out paywalls for Lee Enterprises, Gulledge says, "I only wish we'd started sooner."

So the answer may lie with how flexible and responsive newspapers can be in evolving their models. "We're not even at Paywalls version 1.0," Weiner says. "More like Paywalls version 0.9."  

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