Newspaper Self-Cannibalization Datapoint of the Day

Walter Hussman, the publisher of the Arkansas Democrat-Gazette, adds an interesting datapoint to the question of self-cannibalization in the newspaper industry:

Hussman, an early pioneer in newspaper paid online content and frequent speaker on the topic, said his newspaper now has about 3,400 online subscribers who pay $5.95 per month for access to everything on the Web site. Non-subscribers still get a significant portion of online news - including some blogs, multimedia, AP and others - but not everything.

Hussman said the paid content online generates just one-tenth of 1 percent (0.1 percent) of the newspaper’s total revenue. But the newspaper has been very successful in keeping print circulation up in part because the newspaper is not giving all its content away for free. The Democrat-Gazette’s daily circulation is up 3,000 to more than 176,000 over the past 10 years, while other newspapers in the Southeast are down (some significantly). Sunday circulation for the Democrat-Gazette is down just 1 percent in 10 years.

A USC-Annenberg study this spring (the Annual Internet Survey by the Center for the Digital Future) reported 22 percent of survey respondents said they stopped their subscription to a printed newspaper or magazine because they could access the same content while online.

My general opinion on the subject of self-cannibalization is that you first need to get past the natural hubris of newspaper publishers. Yes, there is a degree to which print and online versions of a newspaper compete with each other. But there’s an even greater degree to which a print newspaper competes for its readers’ attention with the entire rest of the internet. If you put your website behind a subscription firewall, there’s no shortage of other content which your readers will happily consume for free.

That said, Hussman has a point: in terms of reader psychology, newspaper subscribers lose a free excuse for not renewing if you create an online firewall. If the paper is available online for free, they can say “I’ll just read it online” — even if they don’t. But if they have to pay for it online, they realize that in order to read the content they’re going to have to pay for it somehow, and if they’re paying a subscription fee anyway, they might as well get the paper delivered to their door, like they’re used to.

I’m interested in Hussman’s online subcription level, too, or $5.95 per month: it’s higher than I would have guessed. The obvious model to use is the magazine subscription model: sell subscriptions at $10 or $12 per year — the minimum possible level at which advertisers really value your readership, on the grounds that you make much more from advertising than you do from subscriptions. Advertisers will pay a premium to reach paying subscribers, but they don’t much care how much those subscribers are paying. So you make the subscription price as low as you can, in order to maximize the number of subscribers and therefore the amount of money you can get from advertisers.

What’s more, the effect of a subscription firewall on print circulation is effectively binary: it’s the existence of the firewall which matters, not the price level at which it’s set.

So what’s the reason for charging $71 a year rather than $10, if online subscriptions account for only 0.1% of your total revenue? I suspect that there’s an anchoring effect at work: a print subscription is $17 a month, or $204 a year, and the online subscription has been set at 35% of that figure.

In any case, if a newspaper is both increasingly reliant on paper subscription revenues and is seeing its paper subscriber numbers decline, there might indeed be a colorable case for implementing a subscription firewall in front of the online content. That doesn’t apply to big papers like the WSJ, FT, and NYT which are not seeing their print subscription numbers fall, and which aspire to being global news sources. But it does apply to smaller, regional papers, where the economics of newspaper publishing are particularly gruesome.

Comments

[Joseph L. S...:]

I’m not certain how we’ll receive our “daily news” in the future. Some of us enjoy cozying up on Sunday morning with a big old newspaper chock full of local ads and local news as well as the national and international goings-on.

Some of us would just as soon not plod out in the rain to pick up a soggy bit of mulch that was once our morning paper, trudge through the ads and such that don’t interest us just to find out what is going on in the world, and then wipe newsprint all over the dog when we pet him.

I suspect there is a market for (1) local and regional news, (2) national and international news (3) specialized news such as that provided by the Wall Street Journal or the Financial Times, and (4) local ads and coupons. I think # 2 is well covered by the free Internet sites, but the others are not -- and I imagine will always find a paying audience to subscribe to them.

Whether it will be a newsPAPER is questionable. I’d say it’s more likely that we’ll carry a considerably more advanced iteration of Kindles or Apple iTouch Tablets that fit into pocket or purse but butterfly out or use optics to enlarge on any surface.

As long as we get the news we want, why kill a tree to get it?

Jul 30 06:15 PM

[Leftfield:]

The Hartford Courant has long been an unprincipled, tireless advocate for any and every proposed tax. Unprincipled because they stooped to lies to promote, say, the CT. income tax by mischaracterizing opposition at the Capitol as an unruly mob about the third of it's actual size and the content of their message. This was a lowlight of their general relentless generic PC message for decades.
I don't see an audience for their boring sameness to most MSM and see this as a general problem of MSM reaping the results of their opinionated biased reporting for many decades now.
There is a need for watchdogs and whistleblowers, but after the TARP heist and largest financial debacle in history playing out now featuring nearly wall-to-wall mindless cheerleading I fail to see the value of MSM in my life.

Jul 30 07:08 PM

[Joe:]

And it looks like that the sins of the past are beginning to catch up
with the newspapers. Here an older article by Jack Shafer:
Ghost readers
www.slate.com/id/2105344/
And then there is the very interesting pricing strategy of the
newspaper for their ads. Here a (European) blog mentioning the
case of the Rocky Mountain News that eventually folded - they
were very much into "ad rates up circulation down" (via the link
in the article one can access the original article detailing the
prices as well as quoting businesses and how they really
advertise, calculate and consider whatever (there are not so
many articles to that, unfortunately):
www.slate.com/id/2105344/

And, to make matters worse, ironically speaking:
AP, the agency, recently ranted about stealing content.
Lets have a look at the AP site:
www.ap.org/
and a look at Reuters, who are not pursuing such a policy:
www.reuters.com/

My opinion, guess, after landing at Reuters by comparing to
others is that the newspaper crisis and other such crisis is
not the end. Some are looking a bit silly actually. And who will
win, get through nicely is not so difficult to guess.

Jul 31 12:52 AM

[Joe:]

Sorry, I made a mistake and linked to Jack Shafer twice instead
of linking to the mentioned blog:
socratesbooks.blogspot...

Jul 31 12:53 AM

[holmesnmanny:]

ASCAP and the recording industry went through the same ordeal when getting rid of Kazaa and friends. Sure, they looked like a bunch of creeps at first, but a lot of money was on the line and they were forced to do what they have to do. The same is happening with the AP. You can't make money giving away your product for free or allowing others to use it for free.

One of the problems with the papers is they have the locale, but without a global face. Yahoo, on the other hand, has a global face, without the local touch. Instead of allowing Microsoft to steal their thunder, without paying full price and merge with them, Yahoo should have snatched up a newspaper with numerous markets and attempted to facilitate further "one-stop" growth. They have everything you need.....Search, News, Sports(more specifically Fantasy sports with additional paid subscriptions for Live stats), Personals, Answers, yada yada..... Instead of buying up, they gave up. And that's just too bad for the newspapers industry.


On Jul 31 12:52 AM Joe wrote:

> And it looks like that the sins of the past are beginning to catch
> up
> with the newspapers. Here an older article by Jack Shafer:
> Ghost readers
> www.slate.com/id/2105344/
> And then there is the very interesting pricing strategy of the<br/>newspaper
> for their ads. Here a (European) blog mentioning the
> case of the Rocky Mountain News that eventually folded - they
> were very much into "ad rates up circulation down" (via the link
>
> in the article one can access the original article detailing the
>
> prices as well as quoting businesses and how they really
> advertise, calculate and consider whatever (there are not so
> many articles to that, unfortunately):
> www.slate.com/id/2105344/
>
> And, to make matters worse, ironically speaking:
> AP, the agency, recently ranted about stealing content.
> Lets have a look at the AP site:
> www.ap.org/
> and a look at Reuters, who are not pursuing such a policy:
> www.reuters.com/
>
> My opinion, guess, after landing at Reuters by comparing to
> others is that the newspaper crisis and other such crisis is
> not the end. Some are looking a bit silly actually. And who will
>
> win, get through nicely is not so difficult to guess.

Jul 31 02:16 AM

[FullMetalPh...:]

Trying to strengthen one's circulation by having a sally port of subscription on the website, does not work. That has been proved over and over with the LA Times and the Mercury News. I suspect the Arkansas Democrat-Gazette is generating content that their readership needs and wants.

At this point trying to protect a paper's circulation by limiting what content is online reminds me a lot of the WWII Japanese soldiers found years after war on a Pacific island, who thought the war was still on.

Newspapers need to realize that they are not in the paper selling business but in the information delivery business. They need to embrace the web and integrate into the paper. If it is done right it should have a synergistic effect and boast the web and paper product.

The only way an online subscription will work is if AP, Reuters, Fox, CNN, ABC, NBC, CBS, BBC and all the other news sources went subscription. I don't see that happening soon. By putting more video, and interactive media that you can attach commercials and advertisements too will you begin to change the market pyridine and increase value in the web and printed product.

Aug 02 06:56 PM