In Search of Revenues, More Papers Erect Paywalls

Newspapers, which have seen their print business decimated by the recession and the Internet, are fighting back by enacting paywalls on their websites in an effort to capture some of the revenue lost from reader defections from their print publications.

The latest newspapers to announce that they will begin charging readers for content beyond a limited number of free articles are The Los Angeles Times and most publications of the large media holding company, Gannett. Both companies have been hit hard, along with the rest of the industry, not only by declining subscription revenue, but by a loss of both classified and display advertising revenues. The ad revenues are unlikely to return to their former levels, which is leaving the companies searching desperately for more revenue. The Times apparently will follow the model set by The New York Times of offering a fixed amount of free articles per month and then charging for anything above that. It isn’t clear, however, whether they will have the same web-search loophole that the New York paper does which allows most people to bypass the paywall if they search for articles using Google or some other search engine rather than the one on the paper’s website.

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Gannett has a slightly bigger challenge as they will focus on charging for their 80 community-based papers based on market conditions. This means that they could have 80 different pricing schemes, which may be a little difficult to manage. Another challenge is that they want the papers to share the same application platform, which means some integration of all the papers. The company isn’t including its flagship paper, USA Today, which is probably a good thing since more than half of the paper’s subscriptions are generated by hotels, for which there is very little reader loyalty. Gannett has also gone out on a limb by predicting that the paywall will generate $100 million in extra profits. But that is based on the assumption that digital revenue will outpace the continued loss of both print subscription and ad revenue, which is no sure thing. Unlike The Wall Street Journal and to a lesser extent The New York Times, both The Los Angeles Times and Gannett face the challenge of whether or not readers think that their content falls into the “must read” category that is crucial to the success of any digital strategy. The Los Angeles Times might fit that category, but in general it isn’t considered a “must read” by most people, at least on the East Coast. Gannett is even less so, but may benefit slightly by the fact that they are the only newspaper available in many communities, leaving readers little choice but to pay up, at least initially. Paywalls are probably inevitable and will continue to appear across the country. But with news moving at near lightning speed, thanks to social media sites like Facebook and Twitter, only the largest and strongest newspapers will have the resources to compete against their free brethren, and even then it will be no guarantee of success.