August 05, 2011  BY Mike Jenner

Houston Harte chair, University of Missouri School of Journalism

While large dailies have been slow to embrace the concept of charging for online news content, smaller newspapers have quietly led the way in introducing paid subscription models in the United States.

Nearly half the publishers of small dailies contacted in a recent University of Missouri survey have begun charging for online content. In more than 300 phone interviews with publishers of daily U.S. newspapers, 46 percent of publishers of daily newspapers less than 25,000 circulation now require payment for at least some of their online content. Among newspapers with greater than 25,000 circulation, 24 percent now charge.

The survey was based on a random sample of all 1,390 U.S. dailies, and 301 interviews were conducted April 1 to 18 by the Missouri School of Journalism’s Center for Advanced Social Research. The response rate was 78 percent.

Underlying the move to begin charging is a strong belief that audiences will pay to consume quality news content. Two-thirds of the publishers believe customers will pay. Only 14 percent agreed with the statement, “I don’t believe we’ll ever be able to get customers to pay for online content.”

That confidence is reflected in the plans of publishers who have not implemented paid subscription models.

Of the papers that don’t now charge, 35 percent have plans to do so; another 50 percent might begin charging at some point. Only 15 percent of publishers said they had no plans to charge.

Newspapers continue to reel from the economy and from an exodus of advertisers who are seeking cheaper and more targeted alternatives. And though online readership of news continues to grow, print revenues continue to decline. Publishers say they are looking both for revenue and to establish value for the content their staffs produce.

Although publishers of papers that are charging welcome the new revenue coming from digital circulation, most have modest expectations about the amount pay models are likely to generate. In the coming 12 months, one-third believe the revenue from their pay models will count for up to 20 percent of their companies’ digital revenue. Only one in 10 expect revenue from content to make up more than 20 percent of their digital revenue. Half expect a negligible contribution to the bottom line.

Although most see no impact on print circulation, a few do. Six in 10 see no effect; one in three believe their pay model will slow or stop circulation decreases; and 4 percent think print circulation might actually increase.

Although smaller papers have been leading the charge to online pay models, larger papers have been most active in creating mobile phone and tablet apps. Sixty-two percent of newspapers with circulation of 25,000 or more have a mobile phone app, while 21 percent of newspapers less than 25,000 have a mobile app. The numbers were lower for tablet apps: 39 percent of papers greater than 25,000 circulation offered tablet apps while only 9 percent of smaller papers did.

Publishers seem eager to enter the space, however. In the next 12 months, 59 percent of newspapers that don’t offer a mobile phone app plan to introduce one, and 35 percent of those newspapers plan to charge. Less than 20 percent of newspapers overall offer a tablet app. In the coming year, 48 percent of newspapers that don’t offer a tablet app plan to offer one, and 45 percent of those newspapers plan to charge for it.

Publishers were also asked about their revenue mix and how they expect it to change. After years of talk about the need to bolster the proportion of digital revenue to offset declining print revenue, publishers are finally expecting a shift in the mix. They were asked to estimate the proportion of revenue represented by print, digital and “other” (niche publications, outside printing, etc.) and to project how the mix would change in three years.

The overwhelming majority acknowledged that digital revenue was still a small contributor at their properties. Fully 85 percent said digital dollars represent no more than 15 percent of their companies’ revenue, and 80 percent said print revenue still comprises 70 percent or more of overall revenue.

In three years, 60 percent of publishers expect digital revenue to represent more than 15 percent of their papers’ overall revenue stream, with nearly one quarter expecting digital revenue to represent more than 25 percent of all revenues. Overall, the “other” revenue category did not see significant change.

In analyzing the data, we looked for relationships between these trends. One interesting relationship stood out: Publishers who expect the most dramatic shift in the revenue mix from print to digital also happen to have a mobile phone app in the field.

Reprinted with permission from the Reynolds Journalism Institute.

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