Outside The Wall: Why La Presse broke ranks

Gesca may have found a paywall-free survival plan that works

Gesca may have found a paywall-free survival plan that works

The transformation of the newspaper industry from a print to a digitally based model has been underway for some time, but crossed an important threshold in Canada in 2013.According to information supplied by Newspapers Canada, virtually every major Canadian newspaper was charging for access by the end of the year. Victoria’s Times Colonist and Montreal’s The Gazette were the first to introduce digital subscriptions in May 2011, while TC Media’s Journal-Pioneer in Summerside, P.E.I. is the latest, erecting a paywall in November.

Last year saw 11 daily publications begin charging for online content, including several Postmedia Publications and the country’s largest newspaper, the Toronto Star. The Chronicle Herald (Halifax) and Truro Daily News also introduced digital subscriptions.

In a recent article on J-Source.ca, media economist Robert Picard, who heads the Reuters Institute for the Study of Journalism at Oxford University, said that Canadian papers are among the most ardent adopters of digital subscriptions, outpacing both their U.S. and European counterparts.

According to figures provided by the Newspaper Association of America (NAA), digital-only circulation revenue (derived from 12 companies that supplied detailed breakouts) nearly tripled in 2012. While it still accounted for a fraction of total circulation revenue— just 1%—NAA director of communications Sean O’Leary called it “vital” to the industry’s future.

The big question for publishers is how to monetize their digital user base; two prominent North American publications, The New York Times and Montreal’s La Presse, have taken fundamentally different approachs.

hen The New York Times introduced its digital subscription products in March 2011, an internal debate had been raging for more than a decade about whether making readers pay for online content was a shrewd business move or financial suicide.

It had been easy to dismiss the latter argument throughout the mid-2000s, when the Times’ digital advertising revenues were increasing by as much as 20% per annum. At the time, the rationale was that making content free would continue to attract readers, thereby justifying higher ad rates.

But the recession at the tail end of the decade hit ad revenues hard, and suddenly making Times readers pay for content—an approach the company had tried as long ago as 1996, when it charged its sizeable international audience to access its new website—made a great deal of fiscal sense.

A series of reader polls conducted throughout 2009 and 2010 indicated that at least half of the Times’ online readers—an estimated 30 million per month—would be willing to pay something, even if only $1 a month, for digital access to the paper.

“It was illuminating, and we owed it to ourselves to figure out what products and price points and segments of our audience an offer like this might make sense for,” says Paul Smurl, general manager, core digital products at the New York Times Media Group.

The New York Times Company finally introduced a paywall in March 2011. It offers a three-tiered model ranging from $15 every four weeks for web and phone access up to $20 for a web/tablet bundle and $35 for an all-access digital bundle.

As of the end of the third quarter of 2013, paid subscribers to the Times’ and International Herald Tribune’s digital-only subscription packages, e-readers and replica editions totaled 727,000—a 28% increase over the previous year.

Meanwhile, the company’s digital-only subscription revenues were up 29% for the quarter, to US$37.7 million, with revenues for the first nine months of 2013 up 42% to $110 million.

That’s in stark contrast to digital ad revenues, which fell 3% in the quarter. In its earnings report, the Times Company noted that digital revenues are being challenged by programmatic buying as well as pricing pressure caused by an abundance of advertising inventory, although it noted that it expects to return to positive growth by focusing more heavily on areas including video, tablet and custom advertising solutions.

The gap between the company’s circulation and advertising revenues grew more pronounced through the first nine months of 2013, with circulation revenues growing 6.5% to $578.9 million, while ad revenues dropped 6.3% , from $485.4 million to $454.6 million.

Smurl says print advertising and subscriptions remain “incredibly important” to the company’s future, but acknowledges the prominent role played by its digital subscription business.
“It is true that [if not] for digital subscriptions over the past three years we wouldn’t have had a lot of topline growth,” he admits. “It’s a business that has gone from zero to a lot of money in the space of just three years. There aren’t many business lines that I’m aware of that go from zero to $150 million in two-and-a-half years.”

Smurl is hesitant when asked how long the Times can maintain its current torrid growth pace, but believes there is still ample room for growth. He suggests that there are large swaths of audience both below the current $15 option and above the $35 threshold that are willing to pay for content. “It’s our job to find what those products are and at what price point, and deliver them to those audiences.”

The company plans to introduce several new digital products this year, including a series of lower-priced offerings that feature a digest-type product of the day’s top headlines, an opinion-related product and a third around food content that can be expanded to include other verticals.

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This story originally appeared in the January/February issue of Marketing, available now to subscribers. Check us out on your iPad.

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