Newspapers Test Pricing for Digital Editions
Pricing is one of the most difficult challenges facing U.S. newspapers in the 21st century. The entire industry is feeling a tremendous financial squeeze. Revenues from display advertising have plummeted as many marketers engage customers via social media, Internet ads, special events, daily deal sites, and other promotional methods that sidestep newspapers. Just as important, revenues from paid classified ads have also slumped. Instead of buying classified ads to fill job openings, sell new or used cars, and sell or trade household items, large numbers of consumers and businesses are turning to auction websites, online employment sites, and social media sites.
Looking at trends in paid newspaper subscriptions, the news isn't much better. During the first decade of this century, weekday newspaper circulation fell by 17 percent, and the outlook for a turnaround in print subscriptions is not positive. One reason is that some people- younger consumers, in particular- prefer to get their news online or from television. With the rise of mobile devices like smartphones, tablet computers, and e-book readers, on-the-go consumers have a quick and easy way to click for news, at any time and from any place. The printed newspaper doesn't have the very latest news-but online sources do. Another reason is that many cash-strapped subscribers have cut back on buying newspapers, either because they're worried about their jobs or because they're saving money for other purchases.
In short, newspapers simply can't continue to do business as they did in the last century and expect to prosper in this century. Once-strong newspapers like the Rocky Mountain News have been forced to shut down, while others (like the Christian Science Monitor) have abandoned print in favor of online-only editions. Now, with fewer paying customers and fewer advertisers, newspapers are taking a long, hard look at their pricing strategies to find new ways of improving circulation revenues and profits in the digital age. Some newspapers continue to offer news for free, on the basis that this builds their brands online and offers extra value to readers who want to see updated news whenever it breaks. Other newspapers are trying a paywall, allowing only paid subscribers to see online content that's "walled off" to prevent free access.
Pricing the Digital Wall Street Journal
How do you price the online version of a print newspaper for readers? Should the Internet or mobile edition be entirely free because there are no print costs? Should it be free to customers who subscribe to the print edition? Should some content be free and some fee-only? Or should you set a price for reading almost anything other than today's headlines?
The Wall Street Journal was one of the first newspapers to confront these questions and try to find pricing approaches that made sense for its situation. A national newspaper that's heavy on U.S. and international business news, the Journal also covers general news and politics, economics, investment issues, the arts, and lifestyle trends. Many of its subscribers are professionals, investors, or businesspeople who need to follow the latest happenings in their field and stay updated on world events. During the mid-1990s, the Journal recognized that it had an unusual opportunity to pioneer a new pricing strategy for online news content. It started with a free website, quickly attracted 600,000 registered users, and within a few months, it announced a change to subscriber pricing. Once the site set its prices at $49 per year for online-only access and $29 for print subscribers who wanted to view online material, only 5 percent of the registered users chose to pay for access.
The Journal was prepared for this kind of response. Whereas other newspapers were testing prices for individual articles or for weekly access, the Journal believed it offered subscribers long-term value that they wouldn't appreciate if they could pay for content by the article or by the week. "It's easier for people to see the total value of a package if you have to pay for it all," said the online editor. Giving business readers a comprehensive overview of global markets day after day means "we're not a news site, we're a competitive advantage tool," said another Journal executive.
Despite the steep drop in visitors after the Journal began selling subscriptions, the site had 100,000 paid subscribers within a year. Within two years, it had 200,000 paid subscribers and was nearly at the break-even point. Since then, the Journal has increased its online subscription prices and instituted subscription pricing for access via apps on mobile devices. Today, the newspaper has more than 500,000 digital subscribers, including 80,000 who access the online edition by phone, tablet, or e-book reader. Non-subscribers have access to a limited amount of the Journal's online content, and new-subscriber deals encourage people to sign up rather than be casual visitors. Thanks to the Journal site's loyal and lucrative subscriber base, a growing number of major advertisers are willing to pay to reach this audience online, which contributes millions more to the newspaper's bottom line.
Pricing Digital Versions of Gannett Newspapers
Unlike The Wall Street Journal, which attracts many business readers, Gannett newspapers are for the general public. In addition to USA Today, its national newspaper, Gannett also owns 80 other papers in 30 states. No two of these local papers are exactly alike: some (like the Indianapolis Star in Indianapolis, Indiana) serve big cities, while others (like the Times Recorder in Zanesville, Ohio) serve smaller communities. In recent years, Gannett's circulation revenue has been dropping, and the company has decided to increase revenue by instituting monthly subscription pricing for the digital versions of its local newspapers. USA Today was not included in this new pricing strategy, because of its national distribution.
To start, Gannett tested pricing for online access to three of its local newspaper sites to learn about "consumer engagement and willingness to pay for unique local content," says a spokesperson. Based on the results of those tests, which included full access via computer and mobile devices, Gannett then announced that 80 of its local papers would limit non-subscriber access to digital content. Each local paper was responsible for setting the price, following the general principle that non-subscribers could view no more than 15 articles per month (or as few as five if the paper wants to be more restrictive). To view more content, consumers could choose a monthly subscription for digital-only access using a wide range of devices or a monthly subscription combining print and digital access. Even subscribing to Sunday-only editions will be sufficient to qualify for digital access, if a local paper chooses to price content in that way.
Will consumers pay for digital versions of local newspapers? Some experts believe that local residents will pay for in-depth local coverage and the very latest news, which they can't easily get for free from other sources. If consumers like to read a particular columnist or a regular feature that only appears in the local paper, they will have to pay to see that content online or in print. With the rapid penetration of tablet computers and smartphones, the ability to access local content digitally is increasingly more appealing than reading a once-a-day newspaper in print. Other experts say that consumers have grown accustomed to unlimited online access over the years, and they won't be receptive to paying for what was previously free. However, if consumers find themselves reaching the preset limit of how many articles they can read online, they may find that it's easier to pay than to have to click around and find the content elsewhere for free.
Gannett expects its new digital pricing strategy to increase revenues by as much as $100 million per year, once the pricing is implemented by all 80 papers. "This is a turning point for us," says an executive. Meanwhile, other local newspapers are testing different ways to price online content, also hoping that subscribers will sign up and then remain loyal. Will paywalls pay off?
When The Wall Street Journal began charging for online access, the number of visitors to its site dropped dramatically and slowly began rising again. What does this suggest about the price elasticity of demand for its products?