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Print-to-digital journey: Paywall Works for Times

24 May 2012

The U.S. Audit Bureau of Circulations' latest semi-annual FAS-FAX report, signals an important recalibration in media companies' shift from print to digital business models.

The official U.S. Audit Board reported that total circulation (print plus digital) increased overall for the 600-plus newspapers it tracks. This is a largely symbolic increase, influenced positively by changes in the U.S. Bureaux rules for counting digital subscriptions. It's nevertheless a noteworthy milestone in an industry that is suffering through mostly negative news for the past few years. For the highlights:


• The New York Times increased circulation by 73 per cent for weekday editions and 50 per cent for Sundays (print and digital combined). The growth is driven primarily by the Times' successful online paywall. The paywall has given the Times more daily digital subscribers (807,026) than print (779,731).

• The Boston Globe reported its first increase in circulation since September 2004 with daily circulation up 2.9 percent Sunday circ up 2.5 percent, thanks in part to the 18,000 digital subscribers added since the launch of the subscription-based last October.

• The Star Tribune, which made Time's dubious "most endangered newspaper" list just three years ago, reported circulation growth for the second straight year. Mike Klingensmith, publisher and CEO of Minnesota's largest daily, told Nieman Lab that the paper now has 18,000 digital subscribers.

The news is not all good. Time Inc. reported first-quarter declines in both advertising and subscription revenue (5 percent and 2 percent, respectively) compared to the year-ago quarter, leading to an operating loss of $4 million.

How can media companies - newspaper and magazine publishers alike - keep the momentum going? Their transition is far from complete. Here are three areas where publishers must continue to tinker with - or in some cases, blow up - traditional models in order to ensure continued revenue growth.


General interest publishers are exploring ways to disaggregate their content for specific audience segments - sports, business, entertainment for newspapers, for example, or product categories or industry topics for vertical publishers. The Star Tribune's Klingensmith told Nieman that too much disaggregation will limit the revenue potential of the content. Nieman's Justin Ellis writes:

Rather than break up your audience and allow them to have dissociated relationships with your company, create a product that appeals to various parts of your audience while giving them a door to the rest of your work.

"Pieces that appeal to segments, like entertainment apps or high school sports, if you put enough in a package I think you can charge more for the entire package," [Klingensmith] said. "My back of the envelope math says, so far, that's the way to go."

There's room for both packaging models. There's a case to be made for slicing off categories of content into separate apps, as Consumer Reports has done with its Mobile Shopper apps for baby/kid products and appliances. These apps can drive incremental revenue and represent an untapped opportunity for many publishers.


Ken Doctor nailed it last week when he wrote that "consumer pricing is not a core competence of many media companies." He points out that traditional models for newspaper and magazine pricing - as a subsidy to build audience and drive advertising revenues - no longer apply in the digital space.

Instead, media companies are struggling to adapt to a new era of 99-cent media, as established by Apple's iTunes. Publishers need to adapt their pricing to this new paradigm. But that doesn't mean that everything now costs less than a buck. Doctor describes the concept of "take rate":

Take rate is simple: What percentage of customers click yes -- and provide precious credit card data -- when confronted with an offer. Offer readers the ability to start a "trial" for 99 cents, and you'll see results two to three times any other number, says [economist Matt Lindsay]. At 99 cents, readers "take that as a signal. They understand that you want them to adopt this product. By setting the full price at a high number, you are basically saying, 'This is the true value of the product.'"

Doctor concludes:

"If you have lots more to sell, then 99 cents isn't a price, it's a price of admission. ...It's not about the money -- it's about establishing a new relationship."

Next Issue Media is adapting this concept to the Netflix-like pricing model it launched last month for its digital newsstand. Consumers get unlimited access to a library of magazines for a flat monthly fee of $9.99 or $14.99 a month. How can you make this approach work for your content?


Writing for DigiDay, QuadrantOne's Mario Diez says publishers, having ceded current digital content distribution to platforms such as Google and Facebook, now need to create new distribution models:

"Publishers need to exclusively own the distribution and the majority of it. ... Publishers should understand how consumers are receiving the information you're distributing and explore means of owning business relationships with these distribution companies that go far beyond organic search, paid search, tweets, etc. That means creating exclusive pipes."

This will require some serious out-of-the-box thinking. We've seen a few examples: Next Issue Media was formed by Conde Nast, Hearst, Meredith, News Corp., and Time Inc., as an alternative to the Apple and Android app stores. Similar ventures could make sense for vertical publishers.

Distribution also could be controlled through members-only community sites that cater to special interests. This builds off of the freemium model, in which some content is freely available while premium assets - exclusive research, discussion forums, or passes to live events or webinars - are gated for paying members.

The key is to keep thinking - and experimenting - until you find a model that makes sense for your audience.

Source: emediavitals

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