Fees for online news: salvation or suicide for papers?

0 Comments | Deseret News (Salt Lake City), Jun 21, 2009 | by Michael Liedtke Associated Press

The Arkansas Democrat-Gazette is a rarity among large U.S. newspapers -- it's selling more weekday copies than a decade ago. In Idaho, the Post Register's circulation has remained stable, while many other print publications have lost readers to the Internet. How can this be?

The executives behind the Arkansas and Idaho newspapers believe it's because they've been giving free access to their Web sites only to people who subscribe to the printed edition. Everyone else has to pay to read the Democrat-Gazette and the Post Register online. Meanwhile, most publishers have been giving away their stories and photos to all comers on the Internet.

"To me, an online subscription is just the commonsense thing to do," says Roger Plothow, editor and publisher of the Post Register in Idaho Falls, Idaho. "To just give it all away on a Web site is completely and blindly idiotic."

The blunt logic is starting to resonate with many newspaper publishers, who are preparing to erect toll booths on parts, if not all, of their Web sites. They hope the switch brings in more online revenue and gives print subscribers another reason to keep buying the newspaper.

If it works, it would provide a sorely needed boost for an industry that has seen $11.6 billion, or nearly one-fourth, of its annual advertising revenue dry up during the past three years. But the strategy brings enormous risks. Ending free access to news could drive many online readers away and discourage online advertising at a time when more marketing budgets are shifting to the Internet.

Running free Web sites certainly isn't the only reason newspapers are suffering. The allure of less expensive advertising options offered by Google Inc. and other Internet companies already were hammering newspapers before the recession exacerbated the pain.

But the abundance of news on the Internet hasn't helped print editions containing virtually the same content that's often available online a day earlier. As a result, 28 percent of newspaper executives responding to a recent survey by the Associated Press Managing Editors, a group of newspaper executives, said their publications are considering online fees.

Newsday's owner, Cablevision Systems Corp., plans to charge for online access to the Long Island, N.Y., publication beginning this summer. MediaNews Group, which owns The Denver Post and 53 other daily newspapers, has decided to charge for the online version of its print editions but hasn't said when. Having already killed the print edition of the Seattle Post-Intelligencer, Hearst Corp. is assessing whether online fees could help save its 15 remaining daily newspapers, including the San Francisco Chronicle and the Houston Chronicle.

And a startup called Journalism Online is setting up a system that will sell a monthly subscription to material from multiple newspaper Web sites, beginning this fall. The participating newspapers will get slices of the revenue.

"Online fees will give people one less reason to stop subscribing to the newspaper" in the print format, said Steven Brill, Journalism Online's co-CEO. "Fewer people will be saying, 'Why am I buying this thing when I can get it free online?'"

Even though print ads aren't attracting as many dollars as they once did, they still sell for about 10 times the price of online ads. Consequently, Internet subscriptions could help some newspapers even if the fees serve mainly to keep print circulation stable.

Former newspaper editor Alan Mutter, now an industry consultant and blogger, calls decisions during the 1990s to make most newspaper Web sites free the industry's "original sin." But gaining penance won't be easy.

At this point, whether newspapers charge for their online content or not, free news is likely to remain a staple at major Web sites such as Yahoo, MSN and AOL that pay for the right to post stories from The Associated Press and other sources. Bloggers and citizen journalists are likely to keep posting their own takes on the news on free Web sites. Those free summaries may be enough for readers unwilling to pay for the original stories.

"If you do the math, there isn't going to be enough money to support newspapers no matter what they do," said Chris Tolles, chief executive of Topix, a Web site that shows snippets of free online stories from newspapers across the United States.

A recent study that the Newspaper Association of America conducted with media consultants supported the idea that online newspaper fees threaten to do more harm than good. The reason: The subscriptions probably won't generate enough additional revenue to justify driving away the majority of Internet readers who won't be willing to ante up.

The study concluded newspapers with circulations of about 50,000 probably wouldn't pick up much more than $1 million in annual revenue from online subscriptions. That estimate is based on the assumption that a newspaper attracting about 250,000 monthly visitors to a free Web site would be able to get just 2 percent of them -- 5,000 people -- to pay $17 per month.