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News media — including newspapers, news weeklies and TV news programs — was struggling long before the 2008 financial crisis and subsequent recession.
It was a struggle, however, that many investors in 2006 and 2007 perceived as merely a temporary setback — a setback they attempted to capitalize on by snatching up seemingly undervalued media companies. In 2006, newspaper publisher McClatchy acquired what was then the second largest newspaper publisher in the U.S., Knight Ridder, for $4.5 billion in cash and also financed $2 billion of the company’s debt. In 2007, Rupert Murdoch purchased Dow Jones for $5.6 billion and Sam Zell bought the Tribune Co. for $13 billion — a move he quickly regretted when the company filed for bankruptcy one year later. Following that consolidation, more than 100 newspapers shut down in 2009.
The recession has forced news organizations to face what they have long suspected: Their business models are broken. The advent of the 24-hour TV and web news cycles and the convenience of digital distribution mean that many consumers no longer need or want newspapers and news weeklies. Combined with mounting print and distribution costs and the loss of classified advertising revenue — previously the bread and butter of newspapers — to websites like eBay, Craiglist and Google, news media has a serious crisis on its hands.
The numbers are ugly. Newspaper revenue fell 28% in the first three quarters of 2009, after declines of 17.7% in 2008 and 9.4% in 2007. Rounds of pay and staff cuts followed each bad quarter; nearly 15,000 employees were laid off in 2009 alone. Declining circulation also accelerated, dipping below pre-World War II levels — impressive, given that the U.S.’s population then was roughly half of what it is today. As the number of subscribers dwindled, so did the value of print ads on a per-ad basis. Weekly news magazines suffered to a lesser extent; between 2002 and 2009, Newsweek lost 25% and Time lost 18% of its subscribers, while U.S. News & World Report shuttered its print edition and moved its operations fully to the web. What’s more, evening TV news audiences also slid in 2008, even though it was an election year.
As a result, content quality and quantity have suffered, while subscription rates have gone up. Traditional media outfits have been less able to support costly investigative and foreign news items. By and large, newspapers have reduced news pages, eliminated entire sections and closed their Washington and foreign bureaus in favor of outsourcing.
Another problem, of course, is that when newspapers began to put their content online in the late 1990s and early 2000s, they allowed readers to access it for free. That decision has created a major dilemma, because consumers now feel that they have a right to free news content, yet online advertising does not currently generate enough revenue to support the free content model.
These are just some of the many challenges that news media companies are facing. And while this story strikes many as devastating, others find it inspiring. New technologies and business realities are forcing traditional companies to innovate, and new ones — from online news aggregators to Facebook news groups and dozens in between — are constantly emerging.
Since we’ve already profiled several sites experimenting with creative new business models, let’s take a look at five experiments traditional U.S. newspaper companies have recently developed to innovate and improve revenue.
1. Erect a Paywall
In October 2009, Newsday, a Long Island daily owned by Cablevision, became one of the first non-business papers to erect an impermeable paywall around its website, newsday.com. Charging readers for access to content has been one of the most obvious solutions to declining print circulation and ad revenue, and the move attracted significant media attention as a result.
Newsday.com charged $5 a week, or $260 a year for individual access to its site — expensive when compared to business papers like The Wall Street Journal, which charges $149 per year for full online access. Parts of the site, like the homepage, classifieds, weather, obituaries and stocks, remained free. In addition, all print and Cablevision subscribers — which already made up roughly 75% of Long Island residents (Newsday’s target audience) — continued to have free access to the site. The paywall was accompanied by a site redesign and launch that cost $4 million.
How many paid subscribers did the paper attract during the first three months? A mere 35, netting the paper a whopping $9,000 — which may or may not have made up for the accompanying decline in traffic and thus online ad revenue.
Arguably, the paywall was designed to enhance the value of Cablevision’s existing services. But it also suggests that users do not take kindly to paywalls after having become used to years of free Internet content — or at least they don’t take kindly to paywalls at Newsday’s price point.
In the next four weeks, The Times’s network of news sites will also go behind impermeable paywalls. Unlike Newsday.com, however, none of the articles will be available for free, and they will not be indexed by search engines. The latter decision might prove damaging, since search engines account for over 20% of upstream traffic to news sites. The Times is making it more difficult for subscribers to find the articles they are looking for — since they will now be dependent on the search engines available at each respective site — and these companies will be losing out on valuable exposure to non-subscribers.
2. Put Up a Semi-Permeable Paywall
Although Newsday has not fared well with the tried-and-true “freemium” model, whereby a percentage of articles are available for free in order to entice a small fraction of visitors to become paying customers, The Wall Street Journal has fared significantly better with it; it currently has the highest number of paid subscribers of all U.S. newspapers and has witnessed steady year-over-year growth even through the economic downturn.
The WSJ’s current model is not perfect, however. Most of the news outlet’s content is still accessible for free via Google, and thus many regular readers do not feel compelled to pay for unlimited access to the site when they can easily slip in the back door.
More dangerously, other sites have avoided linking to the WSJ’s articles because it’s highly likely that their readers won’t be able to access those stories. In fact, a study published earlier this week showed that although the WSJ had more than double the number of print subscribers as The New York Times in 2009, it was not one of the most-linked-to news outlets on blogs, Twitter or YouTube. Thus the company has lost, and continues to lose out on, both potential subscriber and page view-generated ad revenue.
The WSJ’s overseer, Rupert Murdoch, has promised that the WSJ’s current set-up will not last.
3. Implement a Metered System
In January 2011, The New York Times will go behind a paywall that is slightly different than the ones set up at Newsday.com and WSJ.com. Instead, the NYT will emulate the Financial Times’s “metered system” model, whereby visitors can read a set number of articles per day (at the Financial Times’s website, the limit is five) before being prompted to pay for further access. The subscription rate for full access to NYTimes.com has not yet been disclosed.
Like the news sites mentioned previously, The New York Times believes it will be more profitable to target the 19% of readers who say they will pay for online news content than to extract revenues from increased page views and/or higher online ad revenues. One thing’s for sure: It’s unlikely that The New York Times will remain one of the most-linked-to news sources on blogs or other social media platforms in 2011 if a paywall is in place.
4. Remain Free
Not everyone is going the premium route. A number of traditional news sites are going after more page views and thus more ad impressions; undoubtedly, many are hoping for a boost in traffic once the WSJ fills the holes in its paywall and the NYT implements its metered system.
The trick for these sites is to generate more page views more cheaply, and the best way to do that is by creating a lot of inexpensive content. The New York Times, in a way, pursued this same strategy when it launched its network of blogs (and when it acquired About.com in 2005). Blog posts on the NYT’s website do not undergo the same extensive editing process that articles do, and thus more pages are published more quickly and less expensively by the newspaper’s editorial staff and network of paid contributors.
The Chicago Tribune and The Washington Post are both pursuing a more aggressive strategy than the one pursued by the NYT.
As fellow Mashable writer Samuel Axon detailed recently, The Chicago Tribune has launched a site called ChicagoNow, a site “created by Chicagoans for Chicagoans.” It focuses on local events and culture, as well as national news with a local twist. What’s great from a business perspective is that the site’s 100 daily posts are generated entirely by a network of volunteer bloggers and overseen by a handful of community managers and web developers; undoubtedly, ChicagoNow is much cheaper to produce on a page-by-page basis than The Chicago Tribune’s main site, chicagotribune.com.
The Washington Post is pursuing a very similar strategy, where a small number of curators oversee a network of unpaid writers, but with a political emphasis that is much broader, geographically-speaking.
Both companies are essentially lending their curatorial skills — as well as their brand names — to fuel this additional subset of content. While these strategies will generate more pageviews to monetize, both companies risk damaging their brands if the quality of the content is poor.
5. Create Better Value for Advertisers
Instead of creating more pages to place display ads on, some traditional news companies are seeking more creative solutions to the problems of online ad revenue.
Historically, newspapers were able to demand a premium for advertising because there were limited opportunities for advertisers to run display ads in front of a high-quality audience. Now that the web offers nearly infinite ad space, display advertising has become a commodity and newspapers find it difficult to compete with ad networks that specialize in more efficient, targeted advertising packages across multiple platforms. As Scott Karp of Publishing 2.0 recently pointed out, news sites need to work on coming up with premium ad solutions — something no one else on the web can offer. These companies need “to create REAL consumer value,” Karp argues, “the kind of value that complements and even enhances the value of high quality editorial content; the kind of value that high-end brand publishers specialize in creating.” Microsites and front page takeovers are simply not going to cut it.
Recently, I spoke with Chadi Irani, the online manager of The Palm Beach Post. Like many other traditional news organizations, The Palm Beach Post has suffered from declining print circulation and advertising revenue. Local advertisers are no longer interested in what Irani describes as “the old-fashioned, standard [ad] packages we used to throw out.”
What local businesses need, Irani has discovered, are not advertising solutions in the form of display advertising packages, but advertising partners. These businesses don’t understand how to advertise online and they want advice.
A few years ago, Irani and his team began blogging and holding free seminars in an attempt to educate local businesses about online advertising. They cover topics ranging from how to claim your business on Google to the basics of search engine and social media marketing, yet do not try to sell ad space on palmbeachpost.com during these meetings. Instead, they have positioned themselves as a go-to resource for questions about online advertising. After the seminars, Irani’s team offers free one-on-one website evaluations and a media buy assessment if a business asks for one. “The key thing is to establish ourselves at The Palm Beach Post as the online experts,” Irani explained. “If [local businesses] have online questions, they come to The Palm Beach Post first. We begin with conversations, which leads to a meeting, which leads to further appointments [and] eventually leads to a campaign with us.”
“We’ve opened up a mini-advertising agency here,” Irani said. “We learn about local businesses, have brainstorming sessions and bring them back ideas. They tell us what they like and then we produce solutions based on the goals they select. We didn’t use to listen as much. Now we work hand-in-hand. It’s more about selling the idea than the product.”
The Palm Beach Post has also begun to offer creative advertising opportunities beyond simple banner ads. For instance, realtors can now stream their tweets on palmbeachpost.com to showcase their listings, and nearby restaurants can buy space on the website during lunch hours to tweet their lunch specials. The news site is launching a “What’s For Lunch?” hub soon, where users can browse lunch specials from a large number of local venues via a Twitter aggregator.
Not only has ad revenue picked up, but The Palm Beach Post’s audience has also grown in the last several years, Irani says. Although print circulation continues to decline, the site’s traffic has grown to roughly 40 million page views per month, while its mobile site garners another 600,000.
Irani acknowledged that this model would not scale to large, national or multi-national news organizations. “This is more of a local approach. Most newspapers thrive on their local business, their local partners. Most of the national papers deal with large brands that have agencies dedicated to them. Local companies don’t have ad agencies, so we need to provide those services for them.”
Conclusion
Traditional news organizations have had a lot of issues to tackle in the last several decades, including a decline in readership, loss of ad revenue, the climbing cost of print production and new (digital) models of distribution, among other things previously mentioned.
I spoke with Jay Rosen, a member of the faculty at Arthur L. Carter Journalism Institute at New York University and author of PressThink, about potential solutions to monetize news media. Because “the business model crisis is actually five or six things overlapping,” Rosen contends, “there isn’t going to be one thing that works. There isn’t going to be one model that replaces the old model.”
“Therefore what news organizations have to do is experiment with lots of different ways of raising revenues and cutting costs. Creative combinations of revenues from advertising, membership events, direct commerce, selling the services, selling the brand in different ways, some unknown combination of things will be successful — but as to what that combination is, I don’t pretend to know,” Rosen confessed. “Instead of placing your hopes on one thing, it’s better to try them all.”
News organizations should continue to cut costs where possible and seek out new, creative streams of revenue to leverage what has always been their greatest assets: the quality of their content and readership.
Do you agree or disagree? How do you think traditional news media can monetize itself?
Special thanks to Vadim Lavrusik for his help with this post.
Series supported by Poynter Institute’s Mobile Media blog
This post is part of a Mashable series providing analysis of how mobile use impacts journalism. The series is supported by The Poynter Institute’s Mobile Media blog – your guide to the intersection of mobile and media. Sign up to receive our blog in newsletter format and be entered into a drawing to win an iPad. Learn more at Poynter.org/ipadgiveaway.
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