The Brickwire: Charging for Content--The Wrong Answer for Saving the Newspaper Industry - Kelly Olson - MediaBizBloggers

One doesn't have to look very far these days to realize the newspaper industry is facing enormous challenges. A number of well established newspapers have had to permanently issue the cry of "stop the presses!" while several others are in bankruptcy protection or fast approaching it. It's a morbid thought, but generally whenever a print subscriber dies they are not replaced with a new print customer. Today's younger generations are simply not consuming news through paper.

So what is the cause of the troubles facing the industry? It's certainly not that people are consuming less news content. Actually, consumption has grown significantly through internet readership. It's this online readership that has created the problem for newspapers. The transition from the traditional print edition to distributing content online has been inevitable and inexorable. And since there's so much free content online, newspapers have generally been forced to give away theirs for free in order to remain competitive.

The problem then is pretty simple. Newspapers have been forced to give away their content for free online, so all they need to do is figure out how to charge for this content and their problems are solved, right? That's certainly what has been the lament and focus of the industry. Everyone points to the Wall Street Journal as the model to strive toward. They have been able to charge for content, and look how well they're doing.

Well before we get carried away with our conclusion, let's take a step back and look at the numbers for newspapers. Where exactly do they get their revenues? Is it from the subscriptions they charge print readers (e.g. "charging for content")? Or is it from their advertisers? Looking at the last pre-bankruptcy Form 10-Q filing for the Tribune Company from September 2008, we can see that 73% of the Tribune's publishing revenues came from advertisers, and 16% from circulation (the balance coming from "other"). Not only did a small percentage of the revenue come from subscriptions, it also likely came at a loss! Of the $328MM of circulation revenue reported, there were expenses of $318MM for circulation distribution which excludes overhead costs associated with distribution.

So if charging for content in the print edition is at best covering distribution costs, could it be that the problem isn't on this side of the equation but on the advertising side? If news media consumption is up dramatically on the Internet, but revenues are down significantly, then isn't the problem the industries' inability to monetize eyeballs online at the same rate as print? The general estimate circulated is that an ad unit online delivers 10% of the revenue of a similar print ad, which if correct certainly supports this conclusion.

Instead then of focusing energy and effort on figuring out how to charge for content, the industry needs to focus on how to make the online ad experience similar to the print experience so that they can generate the same revenues from both. While that may be easier said than done, there is hope for the industry due to the advent of e-readers. But there's a lot more that can be done. In order to increase online ad revenues, the industry should:

1. Recreate the concept of the print edition through an online or e-edition.

2. Provide breaking news content from news services as received to remain competitive, but offer unique content in the daily edition (or editions!).

3. Stop posting high value content in web page format. Have a great article? Embed in the e-edition only.

4. Make ads more immersive through recreating the experience of ads in the print edition. Include full-page inserts for example.

5. Make ads interactive. Allow consumers to spin the product in an ad, or request more information. As interaction increases, so will ad revenues.

6. Coupons are still a big driver of print subscriptions, so provide e-edition only coupons for printing or online use.

7. Monetize older content through unique e-editions. Publish the top 100 restaurants for your region? Put it in an e-edition and sell one year full page inserts, or sell in new ads periodically.

8. Leverage quality amateur content providers. Yes, there may be an erosion of journalistic standards, but if you can get quality free content that can be monetized, why not?

So while the current picture is bleak, the good news is that what has almost killed the industry can also be what allows it to rise from the ashes and return to its former glory. I sure hope so, as someone who enjoys the experience of reading a newspaper there's nothing more I want than to have the opportunity again online, only this time without the dirty fingers and negative environmental impact!

Kelly Olson is Chief Financial Officer and Chief Operations Officer at Red Bricks Media. Kelly oversees all of Red Bricks Media’s operations to ensure that every process is efficiently directed at maximizing our clients' ROI. Kelly can be reached at kolson@redbricksmedia.com

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