More newspapers set to charge for Web, mobile access

Despite unpredictability of business model, newspapers will increasingly offer online subscriptions, which analysts say may be the only way for them to survive as print declines.
Written by Jamie Yap, Contributor on

The digital subscription model for newspapers carries equal chances of success or failure, note analysts who are also unanimous in predicting more publishers will eventually charge readers for online and mobile access, through tablets in particular, in order to survive.

According to Adrian Drury, media and broadcast principal analyst at Ovum, the trend of subscription-based news content will only get bigger. Publishers are "refining and defining their paid content models", with varying combinations of free, paid and platform-specific charging models in the mold of The New York Times, he told ZDNet Asia in an e-mail.

Since scrapping its first subscription service TimesSelect in 2007, the Times officially rolled out on Mar. 28 metered digital subscription plans whereby users are charged for news access after exceeding a monthly quota of 20 free online articles. The monthly limit, however, does not include access through links from social media or search engines. Users will also have to pay to read news via its mobile apps.

The Times' latest move follows the footsteps of other prominent dailies including the Wall Street Journal (WSJ) and the Financial Times (FT) in opting for a pay wall--essentially blocking access to content unless payment is fulfilled.

Ken Doctor, media industry and lead news analyst at research firm Outsell, noted that the trend of charging readers for digital access can also be attributed to newspapers wanting to develop a second digital revenue stream besides advertising, since "they don't see [any other] way of supporting their large newsrooms".

In an e-mail interview, Doctor explained that the news industry has "long enjoyed a two-legged business model [with] advertising being the strongest leg", followed by circulation revenue. Today, however, the industry is "tottering" only on digital advertising, while circulation is declining, he said.

Risks, success of digital subscription unpredictable
Doctor pointed out that the metered approach used by the New York Times and Financial Times' is to "only charge the 5 to 10 percent of your heaviest, daily users, don't scare the rest away".

The paywall approach, he added, is likely to succeed at getting a small percentage of its digital readers to pay. However, the issue is whether that is enough to generate a substantial revenue stream, he said.

The Outsell analyst emphasized that the issue is not about when, or how, to charge.

"It's a question of what readers will pay for," said Doctor. "Human nature isn't all that hard to figure out. They'll pay for something of value to them, something they can't get for free."

In an e-mail, Rick Edmonds, media business analyst at Poynter, a non-profit journalism resource, referred to an article where he noted that a pay wall could either potentially put digital ad revenues at risk or provide a new opportunity where paid digital subscribers "become a premium class for advertisers and higher ad pricing".

Ovum's Drury similarly noted that depending on its readership, the Times' pay wall could be "the right move or a very expensive experiment". He added that when it comes to charging for content, the lack of a single magic bullet is clear. "The right model is going to be specific to the audience and nature of the content."

Mobile apps a new subscription channel
Drury also observed that the proliferation of smartphones and tablets creates a new format and payment model for premium news content, but cautioned these channels are also "not immune [to] the same price deflationary pressures that have hit online news".

Gartner principal research analyst Shalini Verma said newspapers will "definitely" try an app subscription model because they see an opportunity to leverage the mobile platform as people get more "digitally savvy". Smartphones and tablets in particular offer a "better experience with the touch and swipe, which makes it so much easier to read [than a] newspaper", she said in a phone interview.

Verma was, however, critical of the Times' "complicated and confusing pricing models" for its mobile apps.

The Times's digital subscription comes with three options, with rates ranging from US$15 to US$35 for four weeks' worth of access. All three plans feature unlimited access to its online news site, but differ in rates depending on mobile app access via smartphones or the iPad tablet.

The Gartner analyst said the newspaper ought to look at a pricing model which gives access across different devices. With more devices coming into the market and ownership of multiple devices on the rise, consumers "do not want to remember whether they have access to this or that device", or pay separate plans to have "seamless access across different connected devices to the information they want", she explained.

Old media needs new business models
According to Outsell's Doctor, the tablet is the first true replacement digital device that will hasten the demise of print. As a result, publishers need to figure out how to leverage the tablet to build "new hybrid business models because maintaining print and walling the digital world will no longer work".

He added that it is not too late for newspapers to start charging online readers, as in the most optimistic scenario, digital subscriptions can be "a lifeline to the future" for the news industry.

"At best, it is a virtuous circle. A publisher serves his best readers even better, delivering content to tablets, smartphones, online and print for a single price," he said. "The reader, valuing the new extended service of all-access, uses the products more and provides more useful information, valuable for ad targeting. The publisher then leverages both more digital readers and digital ad revenue."

At the same time, the threat is that "readers have been too conditioned to the free Web and continue to get enough free news, especially from broadcasters who have gone digital", he pointed out.

Gartner's Verma suggested a "freemium model" as a possible solution to address the dilemma. Similar to that of the gaming world, a freemium model for news would mean giving "free access to some content but charging for in-app transactions". Users are comfortable with the idea of making small purchases and "don't flinch" at paying US$0.99 for a game, for instance, she pointed out.

Publishers should be innovative in offering value add to in-app purchases and how they charge and package them, she noted, so that over time they can reach enough volume to generate revenue. These could range from credit or loyalty programs to partnering advertisers to give discounts, she said.

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