Hitting the Paywall: The Post-Star and other Lee properties resort to fee-for-online contentPart of a series on troubles at The Post-Star and its parent company Lee Enterprises
by contributor Mark Wilson
The Post-Star of Glens Falls announced in Monday’s editions that as of midnight May 1, they will charge a subscription for access to most online content. Officials at Lee Enterprises, Inc.—the Post-Star’s Davenport Iowa-based corporate parent—announced in late March that most of the company’s 48 daily newspapers would erect a paywall before the end of the year. The announcement comes at a precarious time for the Post-Star, Lee Enterprises and newspapers in general. Over the past decade, the industry has been staggered by numerous body-blows, many delivered by online and mobile technologies; some, sadly, self-inflicted. National, local retail and classified advertising, once roughly three quarters of Lee’s operating revenue dropped by over 40% between the second quarter of 2006 and the most recent second quarterly report released in early April. While part of that loss can be blamed on the national recession (income which may eventually return) most of the missing ad revenue has been steadily raided by national online advertising engines like Google, Groupon, Monster and Craigs List. That revenue is gone for good. As reported in earlier installments, much of Lee Enterprises’ financial woes stem from its wildly over-leveraged and over-priced purchase of the St. Louis Post-Dispatch (and the rest of the Pulitzer chain of newspapers), overseen by CEO Mary Junck and CFO Carl Schmidt in 2005. The resulting debt landed the company in bankruptcy court at the beginning of this year. The court-ordered reorganization seems only likely to prolong a grim reckoning for another few years. At the annual meeting of Lee shareholders in March, corporate directors rewarded Junck and Schmidt with $500,000 and $250,000 bonuses, respectively, for piloting the company through a “successful” bankruptcy. While this amounts to an insignificant fraction of Lee’s annual costs, at a time when Lee headquarters was ordering damaging layoffs at papers across the country, the bonuses attracted unwelcome attention. At the local level, the fiscal mess in Iowa has translated into increased layoffs (diluting valuable local content) and increased prices passed along to the consumer. Either one of the increases would be a tough sell to a readership in the grips of a national recession. Combined, they constitute an assault on even the most dedicated or dependent audience. In April 2010 the Post-Star doubled the newsstand price of its print editions, little more than a year after laying off 15.5% (25) of its listed staff (business and editorial). Post-Star circulation losses of 4.62% the year of the layoffs ballooned to 10.58% after the price hike—the fourth worst circulation losses in Lee’s entire portfolio. Needless to say, loss of paying readers only compounded advertising revenue losses. Of course, two years ago much of the paying Post-Star readership could easily retreat to the free content available at PostStar.com (visits to which have been growing steadily for years). The hope underlying yesterday’s erection of the paywall is that the paper will manage to reconvert enough of these online free-readers into paying news consumers, thereby reversing circulation revenue losses (which—in context—are still only 6.6% of advertising losses). The success of this plan or its failure—a potentially accelerated migration of readers—hinges on the outcome of two major uncertainties: The first is what role increased free-print and online competition in the Post-Star’s circulation region—NCPR, Adirondack Almanack and Denton Publications to the north, Saratoga Today, WAMC, the Times Union and YNN (Time Warner Cable) to the south, and the Chronicle within the city—will have in providing Post-Star readers with satisfactory alternatives. The second is how the Post-Star’s most recent layoffs—including the closure of its Saratoga Bureau and the attenuation of its northern coverage—might undermine readers’ loyalties in those vulnerable regions. Statistically, the answer to these questions will begin to emerge in six months when the Audit Bureau of Circulations reports semi-annual circulation and online activity numbers. Anecdotally, the answer may be more immediate. The Post-Star’s report yesterday of the paywall’s imminent introduction drew a high volume of comments from online readers. By six o’clock yesterday 82 readers had registered 94 reactions. A casual count of those comments showed roughly three of every four commenters objecting (a majority forcefully) to the move with one of every eight either resigned to or tepidly in favor of the move.