Success of Pay Walls at Smaller Papers Is Good Sign for Print
NEW YORK (AdAge.com) -- If you want to know what paid content on the web can do for newspapers' paid circulation, keep your eye on places such as Lima, Ohio and Bend, Ore. If pay walls can't make it in these environments, they probably can't make it anywhere else.
The Wall Street Journal and The Financial Times have already proved that readers will pay for standout business news on the web, but if pay walls around general-interest news work in London, New York and Lancaster, Pa., maybe they'll work in many other places, too.
But the big questions about bigger papers' future on the web already have a proving ground of sorts at much smaller outlets that have already given paid content a go. It's not that pay walls will definitely work in major metro areas if they work in smaller markets, it's that they need to work in smaller markets if they're going to work in the majors.
"The newspapers that are going to have the best advantage instituting the pay walls are going to be the big national guys with differentiating editorial like The Wall Street Journal and some of the smaller guys that offer information that truly is not available in other media," said Randy Novak, director of newspaper strategy at NSA Media, a unit of the Interpublic Group of Cos. that specializes in buying local print media. "The ones that are going to struggle, I think, are the ones that fall in between, if they don't provide something that can't be readily accessed elsewhere."
So what are the odds for pay walls succeeding in, say, Boston or Chicago?
There's some good news from the Arkansas Democrat Gazette, the most famous general-interest paper to maintain a pay wall around its website and one that's holding up nicely in print -- its average weekday circulation increased 2.7% to 185,222 over the six months that ended in March, according to its new report with the Audit Bureau of Circulations. That includes 4,242 electronic editions, but paid print alone still increased 2.3%. And that's a large paper, although it's been charging since 2001, so readers are used to it.
The bad news is that last month Freedom Communications' Valley Morning Star in Harlingen, Tex., a paper with paid circulation approaching 20,000 copies, tore down the pay wall it just put up last July. Publisher Tyler Patton did not respond to calls seeking comment but was quoted on the reversal in a Valley Morning Star article: "While some readers and users gladly paid for our online content, providing free and unfiltered access to our website better complements our mission going forward."
However, the new round of newspaper-industry circulation reports last week suggest that pay walls at smaller papers, at least, often do help. They can help with print circulation, in particular, which is the venue for print ad revenue, still the most important revenue source for papers. And they can wring small but growing circulation revenue from the web.
Newspapers on the whole saw their average daily circulation for the six months ending in March fall 8.7% from the equivalent period a year earlier, according to publishers' reports recently released by the Audit Bureau of Circulations. This is a smaller decline than in recent periods but still significant and pockmarked by double-digit declines at 10 of the country's top 25 papers.
Smaller papers did better, pay walls or not. Newspapers with circulations above 50,000 averaged a 9.4% decline, while papers with circulations under 25,000 averaged a 6.5% decline, according to an analysis by the audit bureau.
But most smallish papers with relatively established pay walls reported better numbers still.
The El Dorado News-Times in Arkansas, for example, reported a 1.8% falloff in its average paid circulation from Mondays through Saturdays, to 9,669 from 9,851 in the six-month period a year earlier. Complete access to the website is only available to print subscribers or people who pay $4.95 per month for the electronic-only edition, which now has 307 subscribers, up almost 17% from 263 a year earlier.
Ohio's Norwalk Reflector reported a 2% increase in Monday-through-Saturday paid circulation, to 8,898 in the six months ending in March from 8,722 in the six months a year earlier. That total includes 497 online-only subscriptions, up from 242 a year earlier.
Since February 2008, the Reflector has been restricting full online access to print subscribers who can currently sign up for $124.80 per year, or online-only subscribers who can currently sign up for $34.95 per year. Back then, the Reflector had been reporting circulation declines, a 3% drop to 8,866 for the six months ending in March 2008.
It's true that some of the recent circulation growth has come from cheaper online-only subscriptions, and that print advertising remains the most lucrative revenue stream for newspapers, but the Reflector's print base might be smaller still without the wall. "We absolutely believe our print circulation would be lower if we were providing full, free access online," said Andrew Prutsok, its publisher. "I couldn't say how much."
The wall might not be as effective if it hadn't made an important change along the way. "At first we were putting up our police log online every day for free," Mr. Prutsok said. "Our online paid was stuck on about 140. When we took the police news away, the paid online doubled."
The Lima News, another Ohio paper, just reported average Monday-through-Friday paid circulation of 29,981, down 3.9% from 31,208.
That's better than the average for papers small or large, but publisher James Shine doesn't think the pay wall that went live last August is playing a big role one way or another. "My sense is that people who like the printed product prefer to get it that way, and those that like to read us online do so because they are out of town or it is more convenient for them," Mr. Shine said. "They seem to be two pretty diverse groups."
The biggest factor lately has been the paper's own pricing, said Mr. Shine, who noted that it raised its newsstand price in March 2009 and increased home-delivery prices last June, common tactics nowadays for newspapers looking to shore up their finances. "Both of those actions accelerated our rate of print copy decline," he said.
Where they want it
In the Florida Keys and Key West, you can read much of the Citizen free on KeysNews.com, but full access and the PDF electronic edition have required a print or online subscription since 2006. The Crime Report, for example, is not for free riders in Key West either.
It's a stronger performance than many, many newspapers -- even small ones -- but Publisher Paul Clarin said he wasn't sure whether the pay strategy is affecting his paid print circulation. "We don't operate in a vacuum," he said. "If a customer wants to buy online, we sell it to them. About 800 of our subscribers who are online live between Key West and Marathon, where we offer home delivery. So, it's the customer's choice."
And the Bend Bulletin in Oregon just reported a 34% increase in weekday paid circulation, but largely because this year it took advantage of Audit Bureau rules allowing newspapers to count subscribers twice if they pay extra for content on the web. The print edition costs $10.50 per month, print plus the electronic edition costs $11 per month and the electronic edition alone costs $8 per month.
Leaving the officially sanctioned double-counting aside, print home-delivery subscribers notched a modest gain of less than 1%.
"The rationale of being able to use your website to increase your ad revenue through increased traffic simply has not proven accurate," said Keith Foutz, corporate circulation and operations director at Western Communications, which owns the Bulletin.
Free content online has instead made it easier for people to stop buying print, eroding ad revenue for the print edition in the process, Mr. Foutz said. "Do we need to do a better job of adapting and opening up our lines of distribution?" he said. "You bet. But not for free."
None of this means pay walls are cures, even in small markets where competition is still relatively limited. And their effects can be hard to gauge, certainly in the short term. The two Dow Jones newspapers that restricted online access Jan. 12 reported worse-than-average circulation losses.
One of those, The Record in Stockton, Calif., saw its weekday circulation fall 14.7% to 42,821, a drop President- Publisher Roger Coover blamed on sharp unemployment in Stockton; the paper's shift away from offering deep discounts on subscriptions; and, well, offering the paper free on the web until four months ago.
"In the beginning, it was young professionals who commuted to work who were telling me they read us online," Mr. Coover said. "I started having senior citizens tell me, 'I've always read you in print, but to save $200 a year, I'm learning how to read you online.'"
Now that a pay wall confronts frequent visitors, The Record intends to stabilize its paid circulation -- whether readers are paying for the print or electronic edition. Web traffic has dropped since the wall went up, but that's OK by Mr. Coover. Unique visitors fell 25% and page views dropped 35%, but they've started to recover, he said. Perhaps more important, the site was previously selling just under 50% of its available ad inventory locally. "The rest was filled with standby ads from national accounts, which is too low a rate," he said. "So the only inventory we've lost was remnant."
The advertising equation is more difficult for bigger papers, which rely on more business from national marketers. For advertisers themselves, pay-wall effects boil down to whether you're a local-market advertiser or a national marketer, said Mark Kaline, global media director at Kimberly-Clark.
"National advertisers are more interested in the collective circulation and market coverage for both the print and online editions," he said. "If ... online audience does not convert to online subscribers as a result of a pay wall, it will likely impact ad pricing at the national level. Since smaller newspapers in markets outside the top 50 have a higher concentration of local advertisers and have less competition for local media dollars ... they have had more encouraging results with pay walls to date."
If that's more or less clear now, with exceptions such as the Valley Morning Star, the industry seems ready to test the pay notion in the bigger leagues.