Two Paid Models for Metro News

Posted on 30. Sep, 2009 by in New News Organization, Paid Content

The debate over paid models has grown heated in recent months as publishers cast about for new revenues to replace declining advertising dollars. But, although asking readers to pay for the news seems to have gained favor of late, publishers are still divided on whether charging for online content is the best approach. Indeed, just 51% believe it will work.

In an effort to add to the paid-content discussion, we’ve built two versions of a paid model. The first is a “pure” paid content model where 100% of the main news site sits behind a pay wall. The other is a hybrid model that envisions keeping up to 80% of the content available for free. Both models have four scenarios with varying subscriber and fee levels (the hybrid model has additional variables for the level of free content, set at 50% and 80%). As with most of our models, Jeff Mignon and Nancy Wang at Mignon Media helped us build these paid versions and provided invaluable guidance and insight throughout.

Download the full paid version here and the hybrid here.

If you’ve taken a peek at any of the other models we produced and presented to the Aspen Institute you’ll see many of the revenue and expense components are repeated here. We’ve kept our staffing assumptions roughly the same and this news organization can take advantage of some of the same revenue opportunities (like events, coupons, and a range of services to local businesses) that are open to a free metro-wide publication.

Here are a few take-aways on the paid models:
– According to our assumptions, the main site of the fully paid model loses millions throughout the 3-year period.
– In three out of four scenarios, the main site in the hybrid model is profitable in year 3 (with the B-to-C and B-to-C services, it could be profitable in year 2).
– Profitability rises along with the level of free content.

To account for the impact of a paywall on advertising, we have made some notable adjustments from our New News Organization model:
– We’ve reduced the average sponsorship revenue assumption to $100 per week from $1500.
– We also reduced the commission the organization takes on ads sold into a metro-wide ad network to 2% from the 20% estimated in the free version.

I’m guessing that some folks will take issue with a few of those assumptions. As always, we hope you will tell us where exactly we’ve gotten it wrong. Plug your own numbers into light-blue cells on the “Paid Model Options” page and then send your spreadsheet back to us. If you prefer to work in Google Docs, the full paid model is here while the hybrid model is available here. (The New Business Models for News Project has been funded by the Knight Foundation.)

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16 Responses to “Two Paid Models for Metro News”

  1. JR

    01. Oct, 2009

    This really isn’t that complicated and, indeed, if it is that complicated then it’s just not going to work.

    1. Make the content free on the web sites
    2. Stop printing and delivering paper
    3. Figure out how to make money from the ads

    The newspaper model hasn’t changed, just the medium it’s “printed” on.

    Not rocket science, folks.

    Reply to this comment
  2. Matthew Caylor

    02. Oct, 2009

    I’m excited to see the Hybrid Model in action with a major news site (the Wall Street Journal although a hybrid is more of a niche pub). The Pittsburgh Post Gazette has launched their own Hybrid model and it will be interesting to see the effectiveness –

    http://plus.sites.post-gazette.com/

    I don’t think we can write off print, it still draws a large audience and we still do not know the demands that a currently online audience, Gen X and Y, will place upon the industry as they grow older. Will they shy away from technology and return to their “roots”, we just don’t know.

    Reply to this comment
  3. Christine

    03. Oct, 2009

    “Will they shy away from technology and return to their “roots”,”

    I don’t think they’re moving back to AOL and Usenet, and I’m fairly sure they’re not going to go back to getting their gossip from the schoolyard. Being in Gen Y, I am not aware of what other “roots” you are talking about. Newspapers were always online and free, and if they aren’t in the future then I’m most certainly not reading them because the reporting is terrible.

    I might buy The Economist and the WSJ, but that is only because they have a well earned reputation for quality. I will not buy the New York Times and I will not be buying local and regional papers.

    Reply to this comment
  4. Christine

    03. Oct, 2009

    “- We also reduced the commission the organization takes on ads sold into a metro-wide ad network to 2% from the 20% estimated in the free version.”

    A what ad network? You guys are dinosaurs, how are you going to do cross site demographic profiling using a metro-wide ad network? Or are you just going to give away online inventory to your dead tree customers like everyone else did for the last 10 years and completely destroy its value?

    And what is this B-to-C services? Are you talking about classifieds? They’re long dead. They aren’t coming back.

    Reply to this comment
    • Matthew Sollars

      03. Oct, 2009

      Hi Christine – Last questions first. We have a lengthy list of the services hyperlocals could provide on our revenue opportunities page. Check it out for a sense of the B-to-C services that might fit. And, no, we’re not talking about classifieds.

      http://newsinnovation.com/revenue-opportunities/

      Even with those other revenue opportunities, this model relies on advertising for half of its cash. Since we’re talking about an online-only product, those ads won’t be given away to “dead tree customers.” As far as advertising networks go, we envision a new kind of network. Go here for a bit more:
      http://newsinnovation.com/2009/08/19/the-new-ad-network/

      Reply to this comment
  5. Karl

    03. Oct, 2009

    I’m seeing a lot of numbers here, but no justification for any of them. This model is not even wrong. It can’t be critiqued.

    Reply to this comment
  6. Conrad S

    26. Oct, 2009

    Do you think 1% with 30% churn is realistic? If only 7 out of a thousand people become paying customers, the product or service is clearly not in demand. Is that an accurate assessment of the news industry?

    Reply to this comment

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