Warchol posted recently, on The Crawler, a memo from Salt Lake Tribune publisher Dean Singleton, laying out a strategy for increasing revenue from online content. Singleton writes:
We cannot continue to give all of our content away for free; we must consider, create and deploy new products and sites that both decouple our interactive revenue from our classified business and offer a compelling new experience for a younger (non-newspaper buying) demographic.
As a business owner I can say that if a consultant tasked with addressing a slumping revenue problem came to me and said,
"Ya know, Jason, what I think the problem is is that you're just not charging enough for your product," I'd fire those people. Quickly. And in a manor news worthy, assuming (and it's a big assumption reading Singleton's plan for the
Trib) there were any local rags around to cover it. For business owners out there, imagine it. Problem: "We can't sustain ourselves at this level." Problem solving team recommendation: "Charge more, indefinitely, to stay afloat." Result: Competing providers of similar, if lesser quality product sweep your market out from under you.
I've been through the research on this issue a million times, because it's important to me. And I've yet to see one paper succeed with the plan Singleton lays out. Local newspapers, and their continued viability should be important to all of us. If Singleton sinks the Trib with this ingenious master plan of "we're not charging enough," we're left with Joe Cannon's
"daily PSA" D-News for statewide coverage. If that doesn't keep you awake at night, this post isn't for you. If it does give you chills, take a look at a unique research project undertaken by Neiman Journalism Lab's Martin Langeveld,
crunching the numbers on charging for access to online content: Total 2008 newspaper online revenue was $3.109 billion. Newspaper sites averaged 67.3 million monthly unique visitors in 2008, nearly all of them to free content. Now suppose a switch were turned, and each and every newspaper started imposing a monthly fee on all those visitors. Whether in the form of a monthly subscription or micropayments, clearly, the UV count would drop significantly. I assumed that an industry-average $1-a-month fee would reduce traffic by 30 percent, $2 would knock off 50 percent, $5 would chop out 70 percent, $10 would say goodbye to 90 percent, and $25 would wipe out just about all of it. And further, I assumed that the 2008 ad revenue level of $3.109 billion would be reduced by the same percentage as the visitor reduction (which is probably a generous assumption).
So the question becomes: Will the new monthly fees offset the lost ad revenue? Here’s what happens:
- At $1 a month, with viewer retention of 70 percent, subscription revenue would be $566 million. But ad revenue would drop by 30 percent, or $933 million, for a net loss of $367 million.
- At $2 a month, with viewer retention of 50 percent, subscription revenue amounts to $808 million. But newspaper sites would kiss away half their ad revenue, or $1,555 million, for a net loss of $747 million.
- At $5 a month, and 30 percent of visitors sticking around, subscription revenue swells to $1.212 billion. But 70 percent of ad revenue, or $2.173 billion takes a walk, cutting the net by $946 million.
- At $10 a month, sites retain just 10% of visitors, who pay a collective $808 million for the privilege, but 90 percent of ad revenue ($2.798 billion) flies the coop, leaving newspapers poorer by $1.990 billion.
- At $25 a month — well, I won’t bother with the arithmetic. Make your own assumptions, but nearly all the ad revenue goes away and viewer fees don’t replace more than a small fraction of it.
Are these viewer retention assumptions valid? Granted, they come from the top of my head. If you disagree, make your own assumptions; the math is simple. We don’t have a lot of real-world before-and-after figures from news sites that have imposed fees. But we know, for example, that the New York Times’s 2005-2007 Times Select experiment drew 227,000 paying customers at an average of about $3.70 a month (based on reported revenue of $10 million a year), at a time when the Times’s free content was drawing 13 million unique visitors a month — a conversion rate of less than 2 percent.
Obviously these numbers would be a bit higher for the
Trib, considering the demographics of the region, and their competition on a local, rather than national level like the
Times. But would they be different enough? Not likely. We're somewhat insulated from the outside world, but not isolated, and with a choice between paying for it, or getting a lesser quality, but adequate free substitute, the majority goes generic.
Singleton speaks, as so many before him have, as if he's stumbled upon an untried and as of yet unrealized revelation:
Simply charge them for it! I can't believe we haven't thought of this before.The trouble with Singleton's master plan for the
Trib is that many have tried it before. Few have succeeded in any significant way, while other's -- like the non-profit
Voice of San Diego, for example -- are forging the way ahead with paired down overhead (Executive overhead, AP fees, etc.) and doubling down on a focus on local, original coverage. They operate at a lower cost, and provide a more integral format of news coverage to their region that is irreplaceable and -- get this! -- people will use it with loyalty, and regularity, bringing with them advertising revenue perhaps on a smaller scale, but consistent and bankable for a
for-profit business.
Singleton's plan suggests passing on that tried and proven facet of the news industry in search of a way to breathe new life into a rotting business model. And if he succeeds at putting the plan in place, we'll all pay. Not with our pocketbooks, as he believes, but with a loss of an alternative voice in our state news coverage.
And I'll say it, since the
Trib staff can't:
how much time would Singleton's salary buy his papers?
(crossposted at KVNU's For the People)
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