Industry insiders cautiously optimistic about Postmedia’s online subscription plan

Media industry insiders are expressing cautious optimism about Postmedia Network Canada Corp.’s decision to charge readers a fee to access online news content in two trial markets. But the publisher of the Montreal Gazette and the Victoria Times Colonist has to be careful that the transition doesn't lose readers, they say. On May 25, Postmedia announced a new program to start charging heavy users of the Gazette and Times Colonist websites a fee for accessing “premium” content. Under the metered usage model, online readers receive 20 free views of premium articles, columns, features, photo galleries and videos. But readers that pass the 20-item-per-month limit will be required to pay $6.95 per month or $69.95 per year for online access to the Gazette and $9.95 per month or $99.50 per year for the Times Colonist. Gazette print subscribers will continue to have free unlimited access to the newspaper's online content. But Times Colonist print subscribers will be required to pay $2.95 per month to go beyond the limit of 20 premium articles per month. In an interview with The Wire Report, Postmedia president and CEO Paul Godfrey said articles from columnists like Conrad Black and David Frum will count as premium content, but breaking news and blogs will not. He said that with 10 metropolitan newspapers and one national newspaper, Postmedia wanted to test the pay model in a couple of markets using slightly different plans. The company selected the Times Colonist in the West and the Gazette in the East. There has been “lots of controversy” over web payment systems like the one Postmedia is implementing, but the only way to know how it works is to dive in, Godfrey said. “We figured we’re going to try it for ourselves,” he said. Depending on the outcome of the test run, Postmedia will consider rolling out similar plans in other markets, but Godfrey wouldn’t say where or when. “I don’t think we can put a pin in the calendar,” he said, adding that the company wants to make sure it has the right model before taking it elsewhere. The Globe and Mail at one time tried charging for online access to some articles, but the paper abandoned the system in 2008. The New York Times also introduced and then dumped an earlier paywall plan. But in March the Times again introduced a pay system. Similar to the Postmedia plan, the New York Times offers 20 free views per month, but to access more than that, readers must subscribe at a rate of $15 US for four weeks' of website access or $20 US per month for full access through the website and an iPad app. In late April, a month into the Times' new paywall, the newspaper said it had 100,000 paid digital subscribers. The Financial Times and the Wall Street Journal also operate pay systems for access to premium content. Godfrey said there’s no guarantee that this is the right time or the right model for the Postmedia papers—hence the test run—but said “we know which way the world is heading.” People are increasingly turning to the web to access information on tablet computers, smartphones, and other connected devices, he said. John Cruickshank, publisher of The Toronto Star, said in an interview that the industry will be watching the Postmedia experiment. “It’s good for them. They’re trying to get a sense of what’s going on. I think that’s great. I think it’s going to be very interesting for all of us to see. It’s the kind of thing every publisher with a newspaper and news websites is thinking about these days,” he said. He added that a pay system for the Star has been under “active consideration” for some time. “It’s something we’re always considering doing,” he said. But Cruickshank pointed to data from the Pew Research Center indicating that 77 per cent of news website visitors drop in just once or twice a month to access content. That means the consequences of introducing a paywall carry considerable risks. “If a very large percentage of your readership comes very rarely, it means you’re going to be metering that very small proportion of your traffic that actually drives most of your readership numbers,” he said. “If the market rebels, it’s going to have a disproportionate impact on your traffic.” Cruickshank said geographic demarcation could play a role in the way newspapers monetize digital content. A paper could charge online users from outside a certain geographical area while local users receive free access. He said advertisers want to target local readers, so that, in a sense, ads pay for the content that local visitors access. But advertisers aren’t interested in targeting outsiders, and newspapers need to find a way to make money from non-locals. “The notion is if you’re running the Vancouver Sun and you decided to do a metered model, you might charge anybody who lived outside of British Colombia, with the notion that you’re not delivering any of those eyeballs to advertisers in any useful way anyway,” Cruickshank said. Paula Gignac, president of the Interactive Advertising Bureau of Canada (IAB), said newspapers like The New York Times are doing well with paywall systems. “The companies that have tried it and have valuable content are seeing an uptake in subscriptions,” she said. But Christopher Waddell, the Carty chair in business and financial journalism at Carleton University, said successful models like those of The New York Times, the Financial Times and the Wall Street Journal are in a different class than the Gazette and Times Colonist. People turn to those sources for financial information that they believe will help them make wise investment decisions and earn more money, he said. In many cases, companies cover subscription costs for employees, and corporations generally have a higher tolerance for such costs than individuals, Waddell said. “A local newspaper or a metropolitan newspaper like the Gazette doesn’t have the same level of appeal,” he said. “The question trying to answer is, do they provide information that is of enough value ... that their audience will pay money for it?” Waddell said newspapers are seeking new revenue streams because online advertising—once considered the natural replacement for dwindling print advertising—is not considered a viable substitute. But the online ad market continues to grow. According to the IAB's latest data, Canadian online advertising revenues for 2009 grew by 14 per cent, reaching $1.82 billion. The 2009 increase came during a year of ad revenue declines across other major media. From 2008 to 2009, daily newspaper advertising fell 18 per cent, from $2.5 billion to $2 billion, the IAB says. news@thewirereport.ca

Industry insiders cautiously optimistic about Postmedia’s online subscription plan

Broadcast | May 27, 2011

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