A new subscription model that charges for frequent access to digital content was announced Monday by Digital First Media, including the newspaper group that publishes the Sentinel, as the company joins other news organizations in the quest to generate more revenue from its online and mobile offerings.
Digital First CEO John Paton announced the transition in a blog post Monday. “We need more gas in the tank if we are going to complete this journey of print-to-digital transformation,” he wrote.
The Pioneer Press in St. Paul, Minn. will become the first Digital First property to transition to the new model this week. With the exception of The Salt Lake Tribune, the remainder of the chain’s 75 daily newspapers will roll out subscription packages through January 2014. The Sentinel expects to adopt the new subscription model in mid December.
The all-access metered model will allow non-subscribers a set number of free articles per month. Subscribers will receive access to print, digital and multiple mobile products for tablets and smartphones.
Non-subscribers who now read these papers online for free will be given limited access and will need a digital or print subscription for continuous access. Occasional online readers probably won’t see much difference, but frequent online readers will be presented with a pop-up registration window. Previously, content on most Digital First sites was available free. Individual papers within the company had experimented with paywalls and other revenue generators, such as asking consumers to fill out surveys before accessing content, but neither approach had the desired results.
Surveys trimmed online traffic while traditional paywalls failed to generate significant revenue, Paton wrote.
Paton has been a vocal critic of paywalls in the past, calling them “a stack of pennies” in an industry swapping print dollars for digital dimes. He said he still doesn’t think subscription models hold all of the answers to the news industry’s financial woes.
“I do think long-term they can restrict audience growth, and that’s something we’ll have to be careful about,” he said in an interview. Still, he sees them as “a good, strong business initiative” in the short-term.
Paton said one of the reasons he held out for so long was that paywalls seemed too easy a solution to the digital media problem and one that could stymie innovation.
Digital First Media is among the last of the major U.S. newspaper companies to shift to a subscription strategy. Gannett Co., the largest local news chain in the country, already has implemented a subscription model at all of its newspapers except for USA Today.
“Paywalls are becoming the default for American newspapers,“ said Ken Doctor, a consultant whose work focuses on the transformation of the consumer media industry.
Publishers find paywalls allow them to increase prices for print consumers, providing a revenue bump without significantly cutting subscription volume. “If you execute well, you can usually keep 85 percent plus of those readers in that new program and get a bump in new revenue,” Doctor said.
About 40 percent of American newspapers will require some type of payment for online content when the Digital First Media transition is complete, Doctor said.
“People have received it far better than anyone expected three years ago,” Doctor said Monday. The result has been an increase in circulation revenue that had been drifting downward for several years, he said.
“Circulation revenue for the country as whole went up 5 percent last year, which in the U.S. meant half a billion dollars. I expect another 5 to 6 percent increase in circulation revenue this year because of this.”
Doctor called new subscription model “a building block of a new strategy. It’s what I call the revolution of reader revenue.”
Under the newspaper industry’s traditional model, he said, the reader contributed 20 percent of the revenue and advertising 80 percent. Today, that model is about 30 percent reader and 70 percent advertising. The New York Times now gets 56 percent of its revenue from readers and only 44 percent from advertising and other sources, he said.
“So we’re moving into this age of reader revenue, and this is part of the model. It doesn’t mean that advertising is not important, but it’s of lesser importance going forward. And it makes the connection between the journalist and the readers clearer.”