Paid content: pioneers beware

Just as 2001 brought us the rise and fall of charging for newspaper Web site access, 2002 will bring another interesting campaign to get online users to pay. But local sites that want to find riches in charging for so-called niche content will be sorely disappointed, at least in the short term.

Although charging for generic Web access lost steam with the publication on Nov. 1 of the Borrell & Associates report, "Free vs. Paid Websites," the burning desire to make users pay something did not die.

Five things are driving publishers to find a successful web-subscription model. First, they have grown impatient with incessant losses in their Web operations. They also nod in agreement with Media General Chairman J. Stewart Bryan III, who was quoted as saying that giving away newspaper content on the Web is "dumb." They’ve gotten the OK from the Audit Bureau of Circulations to charge for online subscriptions and count the users as paid circulation. They have noted with great interest as a series of surveys by Belden Associates is published, showing newspaper sites with a significant out-of-market audience (on average, 33%) who offer no benefit to in-market advertisers. Finally, publishers still have this nagging feeling that, despite evidence to the contrary, readers have stopped reading because the Web provides the content for free.

Niche content is nice, but there are damn few successful models out there when it comes to the local news and information that newspapers offer. Sure, The Wall Street Journal has more than 600,000 paying subscribers to wsj.com, and New York Times Digital is plugging away with subscriptions to its online Crossword Puzzle service. But they’re national products, not local.

We’ll see many newspapers trying to find subscription revenue in "niche" content offerings in 2002. Belo Interactive is already attempting to mine it with a dozen specialized e-mail newsletters – mostly sports-related. A handful of others are doing the same.

• The News-Gazette (Champaign, Ill., 43,000 circ.) is developing a product around the University of Illinois athletics department.
• The Morning News (Springdale, Ark., 36,000 circ.) is working on "eHogs," which focused on the Arkansas Razorbacks.
• The Gainesville Sun (Gainsville, Fla., 51,000 circ.) is developing a subscription service around the University of Florida athletics program.
• The Milwaukee Journal Sentinel (266,000 circ.) is developing the "Packer Insider."

There are many more, I’m sure. But the road will be long and bumpy, and I doubt that many publishers will have the wherewithal to stick with it. In the scheme of things, the early-stage revenue from these programs won’t get their attention.

Let’s look at two examples. First, Adventive, an Internet pure-play that we might regard as having a higher potential for success. Adventive publishes a series of reports/discussion groups on the Web classified as an "Internet Knowledge Exchange." Over time it recorded 55,000 unique "subscribers" to the program. Last fall, realizing that ad revenues alone wouldn’t float their boat, they tried to convert to a paid model at $19.50/year. By Oct. 15 they wound up with a 2.2% conversion rate, or about $24,000 in sub revenue.

The 2.2% figure is so familiar: In the Borrell "Paid vs. Free" report, we found that most newspapers were able to convert no more than 2.6% of their print circulation base to a paying Web subscriber. We found that, even for sites that had been at it nearly two years, the maximum rate of sign-ups for the Web site did not go above that figure.

The report had as its centerpiece consumer research showing that Web users weren’t interested in paying for newspaper Web site access. We surveyed nearly 2,000 users and discovered that, among other things, the newspaper site actually enhanced their view of the newspaper and increased the propensity to read the printed product. A startling finding showed that, in the weeks that followed the Sept. 11 terrorist attacks, 38% of the users actually went out and bought a newspaper as a result of information they saw on the newspaper site. So much for erosion!

Other key findings in our study:

• 75% of newspaper site users would register for access. The report recommends asking users to register. However, results of sites asking users to register have so far yielded results no greater than 12.1% of a newspaper's print circulation.
  
• 87% of the site users went to the Web for information regarding the Sept. 11 attacks, indicating the Web's strength as a news medium.
  
• There is no evidence to support that restricting Web access via charging reduces costs. In fact, traffic and costs have increased at some sites that are attempting to charge users.
  
• The drive to charge for site access comes primarily from smaller newspapers. The largest newspaper restricting site access has 140,000 daily circulation; the majority are below 25,000 circ.

But one of the more interesting, hidden nuggets of that research was the fact that more than half the Web site users were never asked to pay for content. That sounds like an opportunity worth pursuing, right? Read on.

The other example we should cite is Belo Interactive. Belo has some really smart people at the helm, yet when they went out and asked users to pay, the results were less than promising. By early October they had converted only 1.3% of their 150,000 free e-mail subscribers to paying about $13 per season to continue receiving the e-mail newsletters. Even if the sign-up rate has since tripled, the revenue would be well shy of $100,000. Belo touts the fact that their newsletters are approaching profitability, but only if you isolate the costs to what they pay writers.

My intent is not to be critical of the effort to find wallet-worthy content. To the contrary, I hope the quality of what the Web has to offer increases wildly over the next year so that people are compelled to go online. We can’t throw a wet blanket over the whole effort to charge users. But those who embark on the path early will undoubtedly bear the mark of the pioneer: Arrows in the back.

Links
Belden Associates
Borrell Paid vs. Free report