In Depth

Arkansas Democrat-Gazette Making Online News Pay

By Jon Lafayette

While the newspaper industry searches for a business model that monetizes the all-consuming Internet, the Arkansas Democrat-Gazette is generating revenue online while maintaining its print circulation.

Democrat-Gazette stories that appear in print can be accessed online only by readers who get the paper via home delivery or those who buy digital subscriptions for $5.95 a month. At this point, 3,600 are ponying up.

Newspaper experts say that the Democrat-Gazette’s approach may not sweep the industry, but it is starting to look like the notion that Internet users will never pay for content is fading and that publishers may soon be generating significant revenue streams online, especially as viewers begin to access information on devices such as Apple’s iPad.

The Democrat-Gazette says its strategy has helped keep it from losing readers, which means it has been able to avoid the big staff cuts that have taken place at many larger papers suffering from loss of readers to the Internet and declines in advertising revenue.

“Our business philosophy is we charge for online content to protect our newspaper,” says Conan Gallaty, the paper’s digital director. “That’s for a very simple reason: The ad rates that we get on our newspaper are usually more than 10 to 1 what we can get online. So it makes sense for us to protect the part of the business that pays for 95 percent of the operation.”

Gallaty says that if you do the math, online revenues are just $21,400 per month.

“It’s a small number and it grows incrementally each month,” he says. “We’re not getting rich off that by any means. But the real purpose of it is we don’t want to encourage people to stop subscribing to the newspaper to get that same content on our site for free.”

The paper’s weekday circulation is 169,458, according to the September Audit Bureau of Circulation report. On Sundays, circulation is 258,160.

“Over the past 10 years, it really hasn’t dropped very much at all compared to some metro markets that lost 10, 20, 30 percent of circulation,” he said.

The paper also has a digital staff that creates original blogs, videos and other content for the Web. Some of that content is created by a dedicated Web staff and is paid for by online advertising.
But more than 50 percent of the site’s traffic comes to view paid content, most of which is very local.

Sam Eifling, who covers local media for Arkansas Business, says that while the Democrat-Gazette, like other papers, has gotten thinner over years, the Web strategy has helped.

“They didn’t lay anybody off before last spring,” he said. “And even then it was not the sort of Tribune Co. draconian slashing that you saw. They lost some people here and there, but that was to be expected in almost any industry.”

While there’s competition from local TV stations and an alternative weekly online, being behind a pay wall hasn’t affected the Democrat-Gazette’s status as the state’s leading paper. But there may be a downside.

“It’s tough to find people in my demographic bracket who read or talk about the Democrat’s music coverage or art coverage at all,” says Eifling, who is in his 20s. “And it’s largely because there’s a well-run source on the Web where information flows much more freely.”

Other papers have tried the pay wall to less success. In October, Newsday on New York’s Long Island made its content free to print subscribers and to subscribers of parent company Cablevision Systems’ cable TV and high-speed data service; everybody else had to be willing to pay $5 a week. A recent report in the Long Island Press indicated that only 35 subscribers signed up for the site.

“Both papers’ publishers have mentioned that they want to use online subscriptions as a way to protect their print revenues,” said Shafqat Islam, CEO of NewsCred, which consults with newspapers about online strategy. “As such, I think both of them have a shortsighted view on the future of the industry. If anything, they are sacrificing long-term success with short-term revenue gains based on a [print] product that is dying.”

Islam noted that the Gazette’s publisher recently said that print is what brings in the dollars right now. If online paid as well as print, he said, “I'd be willing to junk the press.”

All eyes are currently on The New York Times, which has signaled that it is about to make a second attempt to charge for its content starting next January with a “metered model,” which will allow users to view a certain number of stories before being asked to pay a flat fee for unlimited access.

The Times has experimented with a pay wall before, charging offshore readers for a time in the 1990s and, in the mid-2000s, asking a fee for access to its editorials and columns.
The change of attitude toward a pay wall has come suddenly.

Belden Interactive, which did a study on paid content for the American Press Institute in October, found that about 2 percent of a newspaper’s circulation would pay for an online subscription. (Surprisingly, the study found that the amount the paper charged had nothing to do with how many people bought subscriptions.)

But a more recent report, released in January, indicates that things have changed.

“We all thought paid content couldn’t work. We were very convinced of that,” said Greg Harmon, CEO of Belden Interactive. “Just over the last year, looking at this and different approaches, we’ve been persuaded that not only is it possible for paid content to work, but there is a real opportunity that if properly approached, properly marketed, properly priced … [while it’s] certainly not going to replace all print revenue, there is likely to be a really viable important business model here that we just didn’t think existed before.”

The strategy the Times is pursuing appears similar to that of the Financial Times, which has more than 30 percent of its circulation paying for online access, Harmon said.

Another game changer is the rise of the iPad and Kindle.

“We’re fairly convinced at the moment that the principal medium for the digital future of newspapers isn’t going to be Web sites, it’s going to be [electronic] readers and mobile phones, which will completely change all the business models again,” Harmon said.

However it’s accessed, Harmon is convinced that the best content will be paid content.

“The idea that information has to be free for people to be informed is pretty much just nonsense. The truth is, paid things work far better than amateur things. And over time — and I think this time is rapidly approaching — paid content is going to drive out almost all free content.”