SUMMARY REPORT

OnlineRevenueInitiatives2009Highlights of initial results from the paid-content survey conducted by ITZBelden in partnership with theAmerican Press Institute

Charging for access to digital content has sparked one of thebiggest debates within the newspaper industry. The idea

seems to gain momentum whenever another news organi-zation announces it is taking steps to move from free

to paid content online.

Newspaper executives are eager to know what theirpeers in other organizations are doing. What are the

current practices in generating revenue from digital content? What are thevarious pay models? Are they successful? What approaches are news organ-izations taking to issues like site registration, electronic editions and track-ing original content across the Web?

American Press Institute, working in partnership with ITZ Publishing andBelden Interactive (operating as ITZBelden), set out to answer these ques-tions. Initial results of an ongoing online survey, with responses from 118(7 percent) of the 1,529 daily newspapers in the United States and Canada,show that industry executives are exploring multiple options for increasingrevenue in the short term.

2009 SUMMARY REPORT

Online Revenue Initiatives

Among the findings:

n Nearly 60 percent of respondents are considering initiating paidaccess for currently open/free news and information online, and nearly25 percent expect to implement a paid strategy in the next six months.This is a big change, considering that 90 percent of the respondingnewspapers currently do not charge for content, and only 3 percent cur-rently have a paid-only site.

n The respondents are actively exploring many new directions theycan take with monetizing content. When given 15 different options ofwhich pay models to implement, respondents indicate they are serious-ly considering 11 of them, including online subscriptions, day passes,premium content and instituting a pay wall after a certain number ofstories have been viewed.

n There is no clear consensus on how well charging for content will work. Fifty-one percent ofrespondents say it is likely that paid access will raise enough new revenues to significantly con-tribute to the future of newspapers.

n Most of the respondents overlook the opportunities and discount theconvenience of e-editions, which give users the experience of reading anewspaper online. Most are not charging for e-editions or are not charg-ing enough. Only 67 percent offer an electronic edition of the paper ontheir Web sites; 59 percent of those offer it free to their print subscribers.Among those sites that charge for their e-editions, the median price for anonline-only subscription is $5.99 a month. The median up-charge price forthose who offer it to print subscribers for an additional fee is $4.99 amonth.

n Current prices for online subscriptions strongly suggest that “convenience” pricing is gener-ally in play. That is, charges do not seem to be tied to rigorous price analysis or research intowhat people are willing to pay. Respondents report a wide range of online subscription charges(from $1 to $27.50 a month), yet they report surprisingly uniform levels of uptake on subscrip-tions, typically 1 percent to 3 percent of print circulation -- regardless of price.

n While most of the respondents allow users to register for their sites, few require it and evenfewer are monetizing registration in any way. Only 27 percent require users to register, and 23percent have a specific program for monetizing registration information in active use. This isanother area where the landscape may be changing: 36 percent of respondents indicate they areconsidering a registration program.

KKEEYY DDRRIIVVEERRSS OOFF DDEECCIISSIIOONN MMAAKKIINNGG

Capturing new revenue opportunities

Establishing value for copyrighted content

Preserving print circulation

Driving product development/new revenues

Replacing lost display ad revenues

Replacing lost classified revenues

Don’t know

Other

34%18%

13%4%

3%2%

0 %

28%

WWEEBB SSIITTEE RREEGGIISSTTRRAATTIIOONN PPRROOGGRRAAMMSS

Allows registration

Requires registration

Considering registration

Monetizing registration

71%27%

23%36%

n Capturing new revenue and preserving print are likely the key drivers of any final decision toadopt a paid-content strategy. Thirty-four percent of respondents think capturing new revenueopportunities is or will be the most important factor; 28 percent think it is or will be preservingprint circulation.

n There is some concern about unauthorized or uncompensated online use of content that origi-nates in newspapers, but few papers are taking action on this issue. Forty-four percent of respon-dents indicate they are very concerned about content “piracy,” but only 25 percent are activelytracking the use of their content across the Web.

PROVIDERS

Very valuable

Somewhat valuable

Not very valuable

Not at all valuable

Don’t know

54%39%

1%6%

1%

VISITORS

Very valuable

Somewhat valuable

Not very valuable

Not at all valuable

Don’t know

44%

51%

1%1%

3%

PROVIDERS

Very easy

Somewhat easy

Not very easy

Not very easy at all

Don’t know

9%22%

34%2%

34%

VISITORS

Very easy

Somewhat easy

Not very easy

Not at all easy

Don’t know

19%33%

15%5%

28%

PROVIDERS

Your print newspaper

Other local media sites

Television

Other local Web sites

Radio

Regional/National sites

Other newspaper

Other

Don’t know

75%55%

48%46%

42%31 %

4%3%

53%

VISITORS

Other local Web sites

Television

Regional/National sites

Radio

Your print newspaper

Other local Web sites

Other newspaper

Other

Don’t know

68%45%

35%30%

17%12%

5%2%

37%

n There is a potentially deep disconnect between news organizations and the audience for theirWeb sites. For this segment of the research, industry executives' survey responses are comparedwith user responses aggregated from Belden Interactive 2009 Local Market Surveys.

While 54 percent of news executives rate their online news and information as “very valuable,”only 44 percent of news Web site users see it that way.

n Faulty models are likely in place for assessing the opportunity and return on investment forpaid-content strategies. Survey respondents, apparently relying on automated logfile data, consis-tently report unique visitor counts that are 10 times print circulation and 1.3 times greater thanlocal populations -- no matter the size of the market. (A separate analysis reveals no increase inthe net monthly visit rates reported by Omniture and Google Analytics since 2003.) The datastrongly suggest that the number of monthly unique visitors calculated by Omniture/GoogleAnalytics is exaggerated, and news organizations risk failure if they use these figures to projectfuture revenue based on a percentage of online audience that will convert to paid subscribers.

Only 9 percent of news executives indicate it would be “very easy” for their audience to find areplacement for the online content their news Web sites are currently providing, compared with19 percent of users.

The audience that gets its local news and information online would focus on the Internet and TV– not print – if their local newspaper Web site were no longer available. Sixty-eight percent ofusers say they would turn to other local Internet sites; 45 percent would turn to television; only30 percent would turn to the print edition of the paper. Compare that to the responses of newsexecutives: 75 percent of them say they think users would turn to their print editions if theirWeb sites were no longer available.

Recommendations

Based on these initial findings and observations of the industry, we recommend that news organi-zations contemplating a conversion to paid online content – or any other revenue opportunity –consider these key variables:

1. Know what your goals are.Goals may be as varied as replacing lost ad revenues, driving product development and establish-ing a value for copyrighted content to preserving print circulation. Each will require a specificstrategy and a process for evaluating progress. Knowing why you want to charge for access toyour online content will guide the decisions you will make along the way.

2. Know the size of your audience and how it behaves. Among news executives, there is little understanding of basic reach and audience behaviors. Infact, research from Belden Interactive reveals that newspaper Web site audiences come in threebasic flavors:

n Fly-bys: They visit once a month, mostly through search engines. There is wide variationin the mix of viewers who live in and outside the market . Fly-bys are unpredictable and inany given month can be 25 percent to 80 percent of total site visitors.n Incidental loyalists: They visit one to three days a month, one to two times a day. They arepredominantly local.n Core loyalists: They visit 20 days a month, two to three times a day. They are mostly tooverwhelmingly local.

3. Know your content. For paid content to succeed, it must go well beyond repurposed print content and old models.Audiences are most likely to pay for unique content that is not available elsewhere for free. Fullypaid blocks of repurposed local area newspaper content have not proven to be a significant rev-enue source for news Web sites that have tried this strategy.

4. Know your user price points. Current pricing for online content suggests the need to explore price sensitivity more fully.Pricing will depend on the quality and desirability of the content as well as the suite of servicesoffered, such as improved search, personalized alerts or online reservations and shopping. Manyapproaches may combine unique content and services with delivery platforms, like mobile, Kindleor Audible. The amount of access will also determine price points. Will users pay by the story, bythe minute, by the day or by the month? Here again, knowledge of the audience is key to success.

n Single-story fees. Likely to appeal only to fly-by visitors; large resistance can be expected.n Single-day pass. Likely viable for all types of site visitors; this may represent the greatesttotal revenue opportunity and least resistance of all pay models.n Subscriptions. Likely to appeal only to core loyalists; expect some resistance and acceptthe likelihood of capped revenues. Of all the pay models, this is most familiar to newspapersand the easiest to implement.

5. Articulate benefits from the user’s perspective. Print precepts are still driving the thinking of most news industry executives, who are more com-fortable with words than interactivity; obsessed with objectivity, credibility and professionalism;and insistent on controlling the conversation. But digital media put the user in control. New infor-mation products, services and content must be developed from the outside in – responding to con-sumer “jobs to be done” – and the message to users must focus on how their lives will be betterbecause they subscribe.

About the SurveyAn online survey was sent to top-level and online leaders at 1,380 daily newspapers. Contactnames and e-mail addresses came from API's extensive database of newspaper industry execu-tives. The initial phase was conducted in August and early September 2009; by mid-September,118 surveys – representing 7 percent of the 1,529 daily newspapers in the United States andCanada – had been completed. The responses in this initial report represent a wide cross sectionof large, mid-size, small and very small markets evenly distributed across the country.Responses came from 20 independently owned newspapers and more than 30 corporate newspa-per groups, with none submitting data from more than seven news Web sites.

A slide presentation of the survey results is available here.

It is still possible for news organizations to participate in this ongoing survey. For details, pleasecontact Greg Harmon at itzharmon@gmail.com / (415) 566-4348 or Greg Swanson atitzgreg@gmail.com / (503) 241-3650.

About The American Press Institute The American Press Institute (www.americanpressinstitute.org) is an independent educationalcenter based in Reston, Va. API provides skills-based training and leadership development inthe newsmedia industry, offering seminars, onsite programs and consulting for newspaper pro-fessionals and organizations.

About Belden InteractiveBelden Interactive, based in San Francisco, specializes in audience research for Internet compa-nies, with a focus on the news and information industry. For more information, visitwww.beldeninteractive.com, or call (415) 566-4348.

About ITZ PublishingITZ Publishing, based in Portland, Ore., provides a leading voice nationwide in Internet revenuedevelopment for media companies. ITZ has also been retained by Journalism Online LLC to pro-vide benchmarking studies to affiliates and help maximize online revenue opportunities. For more information, visit www.itzpublishing.com, or call (503) 241-3650 or (800) 647-6917.