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Newspapers ask online readers to pay

  • Article by: DAVID PHELPS
  • Star Tribune
  • October 31, 2011 - 7:09 AM

Newspapers are beginning to ask online readers to pay for something that for years they have gotten for free -- the news.

Within the past year, newspapers including the New York Times, Boston Globe and Dallas Morning News have adopted various digital subscription plans, or "paywalls," that require customers to be paid subscribers for unlimited access to the newspapers' content.

While there's a risk that consumers will reject paying for news online, it's one that traditional media finally are willing to take.

"It's become OK to pay for [digital] material," said Chris Wexler, group planning director for media buyer Compass Point. "As that becomes the norm, newspapers have an opportunity to do that as well."

This week, the Star Tribune will introduce a metered paywall, similar to the New York Times model, that allows readers 20 free views of articles or blogs per month before requiring a paid subscription to read further. Most Star Tribune print subscribers already get unlimited digital access.

"There was no reason not to do this from the onset [of news websites]," said Star Tribune Publisher Michael Klingensmith. "It was a mistake to go down the path that was taken. I never saw the common sense of it, to turn your back on your subscribers."

Klingensmith estimated that digital subscriptions can add 8 to 10 percent in additional revenue. In the case of the Star Tribune, that would be $3 million to $4 million a year, once the subscription model is fully functional. "It's very meaningful money with a basically marginal contribution," he said.

Growing revenue from digital subscriptions would be a huge boost for the newspaper industry, which has suffered declines in advertising and circulation, particularly in the aftermath of the Great Recession.

Since the mid-1990s, the industry has wrestled with how to build online sales, while technological advances allowed an array of competitors to siphon readers and advertising revenue. As a result, the newspaper industry is now a generation removed from the days when print was the dominant way to distribute news.

The shift by newspapers to charging for digital content has become even more critical in a technological world dominated by smartphones and digital tablets that allow readers to get their news anytime and anyplace. Those devices are compatible with pay-as-you-go subscription models. Today, consumers pay for music from the iTunes store, order electronic books or stream movies from Netflix.

Regional newspapers like the Star Tribune will have to continue providing premium coverage in areas such as local government, business, state politics, the arts community and high school sports, experts said. Investigative reporting and lively feature writing are critical as well to attracting digital subscribers.

"Sports is a big differentiator," Wexler said. "The Vikings, the Twins. Major League Baseball has a paywall that is huge. For power users, you charge for enhanced elements like video or the ability to operate on different platforms."

Dan Sullivan, a professor at the University of Minnesota's School of Journalism and Mass Communication, said smaller community newspapers also could benefit from a paywall because they do something that other major media do not -- news reporting at a grass-roots level.

"Small-town papers can pitch a paywall as a community-building activity that makes people feel more part of the community," Sullivan said.

The St. Paul Pioneer Press did not respond to inquiries about whether it would seek digital subscriptions or continue providing free content.

One advantage of a paywall is the ability of newspapers to do targeted advertising by getting more information from subscribers, similar to Google and Facebook. "Then you can track their behavior -- what stories are they reading, what are they interested in," Sullivan said. "You can marry behavior with identity."

For newspapers, however, a more fundamental question persists: Will online readers pay for the news?

A study released last week by the Pew Research Center concluded that the potential for subscription revenue from tablet users "may be limited." Only 14 percent of tablet readers will pay for news on their device, while just 25 percent said they would be willing to pay $5 a month if that was the only way to access their favorite source, the study said.

"Information is very sketchy so far," said Klingensmith. "But this is part of a transformation that needs to happen to our business model."

Earlier this year, the news website Mashable concluded that traffic on the New York Times website declined 5 to 10 percent after a paywall was implemented. But since then, the Times has seen its Sunday print circulation rise, as it bundled print and digital subscription plans.

Ultimately, part of the impact on readership will depend on how much free access the newspaper allows and how much it charges once the paywall has been reached, said Bill Mitchell of the Poynter Institute.

"If the meter is set up in a way that is annoying, you can diminish the audience," he said. "All of these pitfalls are serious, but news organizations are beginning to figure out how to adjust the meter to avoid those pitfalls."

Klingensmith is optimistic that the subscription model for digital news is here to stay. "No one has done it and canceled it," he said.

David Phelps • 612-673-7269

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