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Can paywalls and tablets save newspapers?

As newspapers' print revenue and readership continue to drop, the future of the industry depends on finding a way to collect money from people who read the news for free online.

And so the Star Tribune last week launched a new, paid subscription system for its digital content on phones, laptops and iPads. Modeled after the New York Times' digital paywall, the Strib's new service allows people to read up to 20 articles a month for free. After that, they will be "invited to subscribe" at rates that generally amount to a buck or two a week.

Subscribers to the Sunday print edition get an even lower rate, and if you take the printed paper more than one day a week, digital access is free. It's a pretty good deal, if you ask me.

And it's a necessary move by the Star Tribune and its publisher, Michael Klingensmith — who was just named "Publisher of the Year" by Editor & Publisher magazine. The so-called "paywall" has been a subject of intense debate in the news business for nearly a decade now, and I'm not going to rehash all the arguments here. Once the Times put up a paywall, it was inevitable that others would follow.


The question now is whether digital money can offset print revenue declines that continue to run in the high single digits year over year at most publicly traded newspaper companies. The privately owned Strib doesn't report its revenue, but according to reporting by my MinnPost colleague David Brauer, the hometown paper is doing better than the industry overall.

Digital subscriptions are not a surefire game-changer for the legacy print business. For the past couple of years, newspaper and magazine executives have touted the iPad as a potential savior. It's smaller than a laptop but bigger than a phone — a perfect size for delivering news content.

Star Tribune iPad

But a study of tablet use released last month by the Pew Research Center cautioned that the revenue potential for news on the tablet may be limited. Only 14 percent of current tablet users are paying for a news app, the study found. And of those who read their news on a tablet for free, only 20 percent would be willing to pay even as little as $5 a month for news.

Rupert Murdoch's "The Daily," an iPad newspaper that launched in February, has attracted only 80,000 subscribers at 99 cents a week. That's one-sixth the number Murdoch said would be needed to break even. If Murdoch — arguably the world's most powerful media tycoon — can't get a tablet newspaper off the ground, who can?

Two quarters into the launch of its paywall, the New York Times posted a profit in the third quarter and reported a total of 324,000 digital subscribers. But some analysts were too quick to credit the Times' paywall. The paper's profit was due more to severe cost-cutting than to strong business performance. The growth of digital revenue weakened in the third quarter, and print advertising at the Times was down 10 percent.

Tablets and paywalls are the best options available to the newspaper business right now, and the Star Tribune is wise to promote them. The Strib is among the early adopters at this stage, and it's a smart place for the paper to be.

But it's by no means certain that tablets and paywalls will ensure the organization's future. That will ultimately depend on whether news consumers continue to find value in the Star Tribune's content — and whether marketers believe the Star Tribune provides a good platform for communicating with those consumers.

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Comments (13)

I would be really surprised if there is a market for tablet versions of the Strib. For one thing, I have never found tablet versions of newspapers work particularly well. For another, I don't think that apart for apps from newspapers except those at the very top of the heap. For myself, I am a long term Strib subscriber, and I rarely look at the online version, and haven't even bothered to download the app.

The issues here are hardly limited to the Strib. Print media, like the rest of us, would like to have their cake and eat it too. They want us to look at the online version, supplying the eyeballs they can sell to advertisers, but they want us to pay for the privilege, and they don't us to cancel our print subscriptions. As long as the Strib maintains two versions of itself, the print and the online, it's competing with itself, and cannibalizing it's own businesses.

Yes, that Pew study I cited found exactly the dynamic you're talking about, Hiram. People who do read newspapers on tablets tend to just go to the homepage url, rather than downloading that paper's proprietary app. Papers would rather have you buy or at least download their own app, but so far most readers have shown they don't want to do it that way.

But all this is still in its infancy. A year or two ago, many well-known media theorists were arguing vociferously that paywalls would never work -- the loss of eyeballs and hence ad revenue would more than offset whatever revenue you gained from the paywall.

Now, paywalls are going up at many papers, and I think the question has been decided in favor of paywalls. It may be that papers will also find a way to make their apps more appealing or even mandatory -- incenting the reader to use the app rather than just typing "www.yournewspaper.com" into their browsers.

I’m inclined to agree with Hiram Foster’s conclusion (#1) about the ‘Strib competing against itself.

I haven’t been here a long time – 2+ years – but have been a newspaper reader for decades, and subscribed to the print edition of the ‘Strib as soon as I had my own address after moving here. Like Mr. Foster, I take and read the paper daily, and rarely access the online version. That's also true for my subscription to a national news magazine – I take the print version, and while I have access to the online version, I rarely make use of it.

That said, I’m not the demographic that the ‘Strib and its advertisers continue to focus obsessively about anyway. Most advertisers and their carriers, whether electronic or otherwise, are trying very hard to grab the “brand loyalty” of young readers, hoping to make them life-long, or at least long-term, customers.

The rise of Twitter and Facebook suggests to me that reading – at least in the long form version – is not something those current potential customers want to spend a lot of time doing. I'm a regular visitor to HuffPost as well as MinnPost, and HuffPost's articles, which are relatively brief to begin with, usually include a "quick read" that's often more teaser than summary. Aside from the purely technical issues involved, that tendency toward both providing and reading brevity supports the character limits of both Twitter and Facebook. The people who use Twitter and Facebook often don't have either the time or the inclination to dive into lengthy articles or write lengthy responses to what they’ve seen or read. I’ve no broad-sample proof of this, by the way, it’s just an impression drawn from the people I know who are regular users of Twitter and Facebook, so I could be completely off the mark.

But if I’m not, it’s something that works against the long-term viability of print media on portable electronic devices, whether smartphone or pad or whatever else comes down the consumer electronic technological pipeline. As an old guy, and someone who barely makes use of a primitive cell phone, I’m not interested in a contract with a cell carrier, which makes a smart phone or a pad something in which I’ve no real interest.

But again, I’m not the demographic the ‘Strib and other media outlets are after, even if I do have more discretionary income than many people who are 40 years younger.

"the future of the industry depends on finding a way to collect money from people who read the news for free online."

That's like saying TV needs to find a way to collect money from people who watch TV for free, ignoring the fact that viewers and website visitors are bombarded with advertising.

But to answer the question directly, no, at $100 per year it will not save newspapers. I didn't spend $500 on an iPad just to spend another $100 to read stuff on it.

" A year or two ago, many well-known media theorists were arguing vociferously that paywalls would never work -- the loss of eyeballs and hence ad revenue would more than offset whatever revenue you gained from the paywall.

Now, paywalls are going up at many papers, and I think the question has been decided in favor of paywalls."

Actually, I think the question has been decided AGAINST free online content based on advertising revenue. Online advertising doesn't generate enough revenue to support traditional journalism.

Whether paywalls work better is still an open question. And it will remain a question for quite some time.

Right now the core business of newspapers is print advertising. Online revenue supplements that. The print version business is creating and selling an audience to advertisers. With the paywall model, the online version business is creating a news product to sell to subscribers.

The question is whether the paywall and online advertising, by themselves, can pay for an attractive product. We won't know the answer to that until the print advertising model disappears as a revenue source.

The other issue is that large media organizations current online presence is huge because it is heavily subsidized by offline advertising revenue. Its not at all clear, that the product supported entirely by online revenue will be able to sustain that same share of the market.

As the big organizations are forced to shrink, the opportunities for competitors are going to increase. Some of those may be based on different models, but some will go directly after the audience the media has traditionally held a monopoly on.

Once the media lose their monopoly, the willingness of "news creators" to provide exclusive content is going to disappear. If you want to see the future, look at the Major League Baseball sites, including the Twins. Once the STRIB loses its print audience, what does it have to offer Major League Baseball other than competition for readers?

I know there's been thinking that online advertising isn't enough and can't save papers. But take a look at what I just encountered on the NYTimes website. Of course, they have a paywall now. But a couple days ago, I received a notice that Lincoln was paying my access fee so that I have free access for two weeks. Wow. I have warm and fuzzy feelings about Lincoln whenever I go online. Maybe that kind of advertising works. It's effective, so NYTimes can charge for it and I get free access.

Ummm...the StarTribune for $1.99 a week or NYT for $8.75 per week or Netflix online for $7.99 per month or Huffington Post or Pioneer Press for free. What's the best value when you have limited time? And there is always an IP mask for gaming the "free" (w advertising) 20 articles. $8+ dollars a month for a online local rag with advertising pop-ups is going to be a hard sell, even for those of us that like to read online.

I find both the StarTribune and NY Times worth reading. The Times, however, accepts only credit card payment for any use beyond the free 20 articles per month. I consider the banksters that issue credit cards financial predators who prey on poor people and students and therefore refuse to patronize them.

With regard to the Strib, I read parts of each news category, the opinion pages and sometimes parts of the entertainment section regularly. I would be happy to pay an annual subscription fee for access to the online paper seven days a week. How simple and convenient that would be, instead of the various buy-this-and-get-that versions. And I don't know if they will accept checks instead of a credit card.

Newspapers obviously need to "pay the rent" but the paywall at the Strib will likely result in a reduction of the political influence as the Strib increasingly "preaches to the choir". Of course no one would ever think of a "liberal bias" at the Strib.

I have already found alternative TV listings and 15 day weather forecasts online. I am making a game of sorts out of it but I am reading the Strib site a lot less.

With respect to reading the news on the tablets, we have a couple of them in our family but it's just not the same as reading a good-old fashioned newspaper. The same goes for magazines and books.

I also think the jury is out with respect to paywalls. For one thing, the newspapers themselves seem deeply ambivalent about them. The paywalls you see out there are more hole than cheese, because they are so easily gotten around. Newspapers want two things here; they want to be read, and they want to charge readers, in this case online readers, for the privilege of reading them. There is an inherent conflict between these goals, one that newspapers have not yet resolved.

Anybody who believes that the Pioneer Press can be read on the Internet at no cost is simply not up to date on their current sales policy.

We have had a partial week's subscription to the print paper along with a supposed daily access to the digital publication that we have also paid for. Recently, my digital access was modified to eliminate the opportunity to properly download and print the feature that justified my paid subscription, short of the remaining length of the agreed-upon contract for both the print and digital publications.

This prompted me to simply delete my digital contact with the Pioneer Press and to ride out the rest of the paid subscription for the print publication and thus end an association with this product that dates back to 1960.

With the value of mastheads that are not on the national radar screen rapidly diminishing, I'm convinced it's time we allowed the marketplace of readers to decide if and when the individual pieces of proprietary content we produce should be monetized. Not sure how a story achieves maximum viral interest if it's parked behind a paywall, and keeping score of how many stories I've read during a publisher-defined period of time is an instinctively negative experience for consumers. And just how many sites will a consumer subscribe to in order to read what they want to read? At some point that Darwinian factor will become a reality and we will be back to basically the same failed subscription model we have today.
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