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The writing’s on the paywall

TRENDAFRiCA October 26, 2012

The flood of sources and news aggregators like Yahoo and Google News have made access to news customisable, says Ornico CEO Oresti Patricios, and Google Alerts and a personalised Google News page allows you to read news on topics specifically tailored to your interests.

In fact, personalisation is a major feature of the internet – which is all about giving users what they want, when they want it and it has changed consumer behaviour with respect to news, which long ago became a commodity, Patricios points out.

“Media news brands in general and newspapers in particular, are going to have to work hard to differentiate themselves; remain relevant to readers; and keep true to their founding intent: whether it be informing the public discourse or championing democracy,” he says, asserting that large newspaper groups have been arrogant in their assumption that people would remain loyal to print because of quality journalism.

“The business model clearly is not working, and it needs to be rethought. The web is a mature place, and readers are savvy. Where once it was enough to replicate the current print model and place it online, this is no longer sufficient to convert eyeballs into revenues.”

Patricios unpacks paywalls internationally:

  • In March this year, The Los Angeles Times instituted a pay-to-read system, and a further 10 major US publications, along with several hundred smaller papers confirmed that they will soon limit access to content by using a paywall, only giving print subscribers full access.
  • Whilst most newspapers have had limited success in closing the net on their faithful followers, some have had very good results. The Wall Street Journal has around 537 000 digital subscribers, according to the Audit Bureau of Circulations in the US.
  • The UK’s Financial Times, which has been charging for online content since 2007, has 267 000 digital subscribers.

In the opinion of Patricios, the reason these publications are successful, is because they are world class, niche, and their content is not easily available elsewhere. They have also built up brand loyalty; and cater primarily to a business readership “for whom a $15-per-month subscription which provides online convenience is a nobrainer”.

Model

The key trend, Patricios says, is the model that the New York Times has adopted in the “open spirit” of the internet, allowing casual visitors free access to up to 10 pages per month.

He explains that their rationale is simple: around 95% of visitors to newspaper sites are casual readers – these are not readers who are going to be converted to paying customers, so they get a limited ‘free pass’. It is hoped that the serious readers will pay. This is known as a “porous” paywall and the New York Times is appealing to readers to subscribe to help them survive so that the paper can continue to provide “excellent journalism and be a voice for justice in your  community”.

And it is clearly working, Patricios points out, as since The New York Times began charging for online access one year ago, it has garnered 380 000 digital subscribers – around half of its daily print circulation. It also offset losses in online ad revenue against the expected growth in online subscriptions.  The move also created value in that the Nytimes.com now has two revenue streams.

“At this stage, their subscribers contribute over $35 million in additional revenue – a relatively small percentage of the company’s $500 million annual income, but the good news is that advertisers are willing to pay up to 30% more for subscribers’ eyeballs; once again there is a difference in perceived value,” explains Patricios.

Unfortunately the same strategy may not work for smaller newspapers or in smaller markets like South Africa, according to Patricios’ research. South Africa has a much smaller, disparate readership and walling off online content is more likely to make readers gravitate to the free alternatives out there.

The key trend for South Africa, as outlined by Patricios, is thus:

  • Paywalls may work for a few niche publications only.
  • Paywalls will limit the amount of ad revenue and hurt growth in the long term.
  • The online news model lacks engagement and poorly provides for video, audio, augmented reality, location-based technology and social media hook-ups.
  • Engagement is also the key for advertisers which need to serve up relevant and personalised messages on the platforms and mode that readers want to be engaged in.
  • Good content needs to be paid for, and advertising is the way this should be done – not by throwing up paywalls and charging for entry: “By trying to ‘lock in’ readers, you have more chance of locking them out, especially in a South African context,” Patricios explains.
  • Innovation is the key to engaging readers, and in South Africa we need to be innovative rather than reactionary.
  • Collaborate with people who do understand the internet, like Google which is working hard with news media to champion free press and pioneer new payment models.

While newspaper revenue has pretty much halved in territories like North America, internet advertising revenue is booming and continually growing – from under $10 billion globally in 2002 to over $70 billion in 2011. “It’s still far below the $130 billion being spent globally on newspaper advertising in 2011, but it looks like it’s just a matter of time before internet ad spend overtakes that of newspapers.”

Innovation case study

By way of an example of innovation, Patricios notes the strategy of Piano Media, which launched in May last year in Slovakia. They offer readers a “bundle” membership: by subscribing to any one of Piano Media’s affiliated newspaper sites, readers automatically get access to all the other newspapers on the national paywall’s system – at no further cost. Piano Media launched in Slovakia with nine publishers, but now they have most of the newspapers as well as a TV station, online video sites and many local magazines. For the publishers, this outsourced paywall system removes the headache of running a dedicated web “store” on their site; Piano Media handle all that, and provide valuable statistics on readership.

“In a way, this has broken a paradigm. Rather than competing against each other, Piano media has united the competitors in a subscription-based model, which is affordable and sustainable – it’s a win-win. Although it must be noted that publishers have been cautious not to place too much content behind the wall – offering paying subscribers access to ‘premium’ articles or features, while keeping the front page and current news free and open to all.

“Newspapers desperately need to shift beyond their print paradigm and embrace the digital world, and find a financially viable way of doing that doesn’t alienate readers, but engages them. Because if nothing else, good journalism is needed to expose vice and folly in society. That, and the small matter of upholding democracy,” Patricios concludes.

SOURCE: Ornico makes sense of the brand, advertising and media information flooding the marketplace. By collecting and analysing adverts and brand publicity, Ornico helps put marketing decision makers in the know. Ornico has the largest and most comprehensive library of TV, radio, outdoor, print and internet reference material, and offers a tracking service for emerging advertisements.

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