The Strategic Issue of Newspaper Paywalls - Case Study Example

Topic: The Strategic Issue of Newspaper Paywalls Critically review the subscriber numbers released by News Corp on 2 November, and evaluate what they signify (a) for the UK revenues and profits at News Corp and (b) for the development of News Corp’s strategy in the UK, over the next two years. GMG have decided that they need you to provide answers to both of these questions in seeking to appraise their own strategic options. (1,000 words) When the News Corp paywall subscriber statistics were released on Nov. 2nd, 2010, Media Studies groups, industry analysts, and other sector specialists tried to understand the significance of the numbers despite the lack of depth and clarity in the statistics as presented. The Guardian’s lead media blogger Cory Doctorow led the critical analysis in asking three main questions about the dataset as presented by Murdoch’s company. (Doctorow, 2010) “What sort of purchases are the paid subscribers making?” “How much do advertisers value the additional information the Times can supply about paying users?” “What does it cost to get a subscriber?” These questions are important in determining what the paywall and subscriber numbers mean to News Corp’s bottom line profit figures. This experiment with the online subscriber model for news is important to the sector due to the declining revenues and bankruptcy of many traditional newspapers. If News Corp is successful in attracting consumers to its online subscription models, iPad only newspaper, and financial industry news, then it represents a business possibility or even necessity for other newspapers in the sector like the Guardian to follow. Looking at the actual numbers released by News Corp in their Nov. 2nd, 2010 press release: “News International today announces that the new digital products for The Times and The Sunday Times have achieved more than 105,000 paid-for customer sales to date. Around half of these are monthly subscribers. These include subscribers to the digital sites as well as subscribers to The Times iPad app and Kindle edition. Many of the rest are either single copy or pay-as-you-go customers. In addition to the digital-only subscribers, there are 100,000 joint digital/print subscribers who have activated their digital accounts to the websites and/or iPad app since launch. As a result, the total paid audience for digital products on The Times and The Sunday Times is close to 200,000 (allowing for some duplication in the digital customer sales number).” (Paid Content, 2010) Felix Salmon adds another aspect of the paywall that may not be immediately evident from this news release, reporting that “traffic has fallen off a cliff, from 21 million to 2.7 million pageviews per month” for these same sites. (Reuters, 2010) From these statistics, the 200,000 paid subscribers are only viewing on average 10 pages or news articles per month. This does not indicate a strong pattern of readership, but more of the average daily or single-setting news content of a site browser. In analyzing the effect of this, for example, as it relates to the Guardian business plan, it should be noted that by page volume this is approximately a 90% reduction in the number of advertisements served by the website per month. Thus, looking at the issue of paywalls and online newspapers from a strictly profit and loss perspective, the GMG can calculate whether a 90% reduction in advertising revenue would be offset by the savings on server infrastructure with reduced site traffic and the revenues generated by the subscription fees. To put this in context with what the News Corp numbers mean, Dan Sabbagah of the Guardian reviewed the three different subscription plans represented in the statistics and came up with an estimate: “the total is £5.5m a year, gross.” (Sabbagah, 2010) This includes the 1-day subscriptions, the monthly subscriptions, and iPad newspaper subscriptions. In this manner, it could be related that loss of 90% of site traffic and viewership for the newspapers was not worth the minimal gains in revenue, especially due to the loss of pay-per-click advertising (PPC) on every page. Furthermore, the subscription numbers do not include the amount in marketing and other costs that each subscription included as costs against the bottom line. As The Independent reports: “Faced with a collapse in traffic to thetimes.co.uk, some advertisers have simply abandoned the site. Rob Lynam, head of press trading at the media agency MEC, whose clients include Lloyds Banking Group, Orange, Morrisons and Chanel, says, ‘We are just not advertising on it. If theres no traffic on there, theres no point in advertising on there.’ Lynam says he has been told by News International insiders that traffic to The Times site has fallen by 90 per cent since the introduction of charges. ‘That was the same forecast they were giving us prior to registration and the paywall going up, so whether its a reflection on reality or not, I dont know.’” (Burrell, 2010) Thus, another result may be not only lowered advertising revenue related to volume of pages served, in this instance at 90% less, but also in relating to reduced advertising rates per page or campaign. In losing this large of a sector of the audience online, the news websites behind the paywall risk being marginalized in advertising budgets and losing significantly on PPC revenues. In summary, this aspect of online traffic related to PPC advertising campaigns and the pricing of them from major clients will be the foremost problem with the subscription model on News Corp’s bottom line profit figures. However, as Eric Schonfield of TechCrunch writes, News Corp may still be ahead by not earning that much through online advertising in the first place: “At 41 million estimated pageviews a month, assuming a $5 CPM (cost-per-thousand-impressions), that was only $200,000 a month in online advertising revenues. I am not counting the Sunday Times site here, but the lion’s share of the traffic went to the Times UK site. Maybe the average CPMs were higher if the online ads were bundled together with more expensive print ads, but in order to match its paltry subscription revenues the Times online ads would have to command a $20 CPM, which is really high for a general news site. Depending on the actual CPM, financially they are doing at least two to four times better than they were before.” (Schonfield, 2010) In relating this to the domestic London and England audiences for news, both in print and online, News Corp risks further loss of circulation without regrouping significant revenue to justify the paywall experiment. However, this view does not reflect consensus within News Corp’s management, as Rebekah Brooks, chief executive of Rupert Murdochs News International, said: "We are very pleased by the response to our new digital services. These figures very clearly show that large numbers of people are willing to pay for quality journalism in digital formats." (BBC, 2010) Having publicly based their online strategy on the paywall model, its failure, as in the mySpace acquisition, will certainly result in management changes within News Corp within the next two years. Yet, with Rupert Murdoch himself leading the charge, the result may simply be the weakening of one of the few remaining giants in the international newspaper industry. 2. On the basis of your analysis, (a) make recommendations to GMG as to how they should respond to the paywall challenge, and (b) use your recommendations to spell out what you consider is the optimal strategy for them to develop over the next two years. (500 words) The GMG has already a strong domain presence, recognized brand name for news integrity internationally, and a well visited site. The Guardian.uk.co website combines featured articles with traditional investigative journalism, with blogs, user comments, and increased development into social networking such as dating. In building traffic and community of users in relation to the newspaper within the domain presence, the GMG has the ability to generate increasingly more advertising revenue from PPC and featured ad clients. Thus, it makes no sense for the Guardian to adopt a paywall and reduce traffic by 90% on site. Similarly, this is seen as restrictive and not in accord with the values of the Guardian’s own web and print readership. Therefore, in making recommendations to the GMG, the first would be to continue to build community on the site through social networking, and secondly, to adopt a “premium” membership that is equivalent to the News Corp subscriptions in price but offers additional services rather than restricting page views. In offering premium services on the Guardian online website, the users can access a news and current events driven social network, including hosting blogs on the Guardian domain. The social network can also assist users in organizing into online groups for discussion, reporting, investigation, and analysis of any number of historical or current events issues. In a manner similar to the Huffington Post’s “featured users,” comments listed by Premiere account holders can link to their profile and blog. The Guardian will obviously be required to moderate these posts and discussions, but in doing so can integrate the best blog commentary and citizen journalism on site to it main newspaper content, much as CNN does with iReport. The result of this plan is to increase traffic to the sight as well as user time spent on the domain, and through this, there will be additional revenue from PPC advertising that is organic and related to the theme of each page. Due to its brand recognition and existing traffic patterns, the Guardian.uk.co website has the opportunity to build a “mySpace for News” social network as a premium service, and charge a membership for these services much as News Corp does with its paywall. The result would be an evening of accounts in competition between GMG and News Corp, but also an outpacing of Murdoch’s company in viewership, community, and advertising revenue from the domain presence. Another option for the Guardian following the £1 day pass offered by the Times’ sites is to create special content publications such as online magazines, broadcasts, or events and charge a £1 fee to enter or download the file. The GMG can leverage media and venue contacts in London, the UK, and abroad to serve online concerts and special events live, through streaming web video, while also collecting a one-time subscription fee or up-selling a Premier Membership. The combination of social networking, blogs, citizen journalism, and media events in a Premium Membership would potentially sell to larger numbers than the News Corp paywall subscriptions yet not require limiting viewership to main news articles and journalism online. Sources Cited: Andrews, Robert (2010), UK Times’ Paywall Numbers: 105,000 Sales Since Summer, 50k Subs, Paid Content, Nov. 2, 2010, Web, viewed 17 January 2011, . BBC News (2010), Times and Sunday Times readership falls after paywall, BBC News, Nov. 2, 2010, Web, viewed 17 January 2011, . Burrell, Ian (2010), Has Rupert Murdochs paywall gamble paid off?, The Independent, Nov. 2, 2010, Web, viewed 17 January 2011, . Doctorow, Cory (2010), News Corp Kremlinology: what do the Times paywall numbers mean?, Guardian.co.uk, Nov. 2, 2010, Web, viewed 17 January 2011, . Ingram, Mathew (2010), It’s Official: News Corp.’s Paywalls Are a Bust, Giga Om, Nov. 2, 2010, Web, viewed 17 January 2011, . Pfanner, Eric (2010), More Than 100,000 Pay for British News Site, New York Times, Nov. 2, 2010, Web, viewed 17 January 2011, . Pompeo, Joe (2010), Paywall Numbers: The Times Of London Has About 50,000 Digital-Only Monthly Subscribers, Business Insider, Nov. 2, 2010, Web, viewed 17 January 2011, . Sabbagh, Dan (2010), Times paywall - who pays what then... How does the Timess 105,000 paywall number break down – and whats it all worth?, Guardian.co.uk, Nov. 2, 2010, Web, viewed 17 January 2011, . Salmon, Felix (2010), “Newspaper paywall datapoint of the day,” Drowning out mainstream media from the heart of Times Square, Blogs - Reuters, Nov. 2, 2010, Web, viewed 17 January 2011, . Schonfeld, Erick (2010), The Times UK Lost 4 Million Readers To Its Paywall Experiment, TechCrunch, Nov. 2, 2010, Web, viewed 17 January 2011, Read More