Paywall: Falling ad sales in print have fuelled need for a new source of revenue

Posted on December 28, 2011

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Mr. Crovitz says Press+ started the year with 20 clients for its service. It now has roughly 220 – Postmedia and Torstar among them – and for 2012 has already surpassed that, with 300 planned launches in the works.

Traditionally, advertising was what held a newspaper’s business together, accounting for 70 to 80 per cent, or more, of its revenues. But then the bottom dropped out.

According to figures from the National Newspaper Association, revenues from print advertising in U.S. newspapers in 2010 fell to their lowest level since 1983. The industry collected $22.8-billion (U.S.) in total print advertising revenues in 2010, less than half of the sales they recorded five years earlier. Year-to-date, 2011 ad sales have dropped more than 10 per cent from last year. The declines have forced newspapers everywhere to search for a new source of revenue – the readers who access their content digitally.

In 2012, [paywalls are] moving from experimentation to operational,” said Ken Doctor, a U.S. media analyst and author of Newsonomics. The need for newspapers to quickly adopt a digital subscription model is gaining momentum, he believes, and it’s crucial that companies establish the value of digital content in the minds of readers now. Mr. Doctor estimates that within three years, many papers will see more than a third of their readers accessing the product only on tablets.

“I believe that the end game for most media companies is not the value of paywalls; it’s ultimately the value of bundled subscriptions,” said Earl Wilkinson, the executive director and chief executive of the International Newsmedia Marketing Association.

Bundles can also boost the performance of the printed paper, since a print subscription can offer a more reasonable price for an all-access pass: New York Times subscribers, for example, can choose a digital-only subscription that provides website and smartphone access for $15 every four weeks, or website and tablet for $20 – or they can sign up for home delivery of the Sunday paper, which comes with free digital access, for $19.60 in the greater New York area. That’s keeping some readers tied to the paper at least one day a week, a major value for publishers who still rely on print advertising and circulation for the bulk of their revenue.

“In the coming year, we’ll expand our digital bundle. If you’re successful in persuading [readers] of the digital value, then you have the possibility of retaining them as a print subscriber longer,” said Wayne Parrish, Postmedia’s chief transformation and revenue officer, who heads digital expansion.

Still, there is one major question: Will the appetite for paid digital content encompass the entire news media industry, or just major newspapers like the Times or The Wall Street Journal?

“I don’t think it’s by any means a panacea for all of the revenue challenges that we have,” said Toronto Star publisher John Cruickshank. His paper has not declared its plans to charge for digital access in 2012 – but he is not ruling it out, either. He anticipates the Star will eventually launch a paid product. “It’s one of the tools that I think we’re all going to be using in the future … everybody’s still trying to figure out where it’s all leading.”

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