Tuesday, May 01, 2012

Hitting the Paywall: The Post-Star and other Lee properties resort to fee-for-online content

Part 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.


Stephen said...

The pathetic rise in digital explains just about everything. Online "pageviews" are worth about nothing. I can't blame advertisers either. I generally associate their product with annoyance and ignoring when I see them online next to a story I am trying to read.
If the PS signs up 25 people, this will bring in more money than whatever they lose in "pageviews". Sadly...that is not an exaggeration. If they are to be believed...this company that is running the PS paywall makes some pretty bold claims as to how much they improve circulation revenue

Mark Wilson said...

You put your finger on what makes this such a painful juncture. Moving to the paywall essentially divides the two main purposes of newspaper journalism: to reach as many readers as possible and to make money (not necessarily in that order).

In an age where low compensation for the hard work of news gathering is a given, there was always some consolation for the 4th estate's true believers that your work was reaching a maximal number of people in your community. Erecting a paywall seems to undermine that satisfaction, without necessarily restoring a higher level of compensation.

Stephen said...

Part of what makes this transition so difficult is that the last twenty years of journalism have been far and away the most fruitful. Newspaper people need to keep in mind that their product hasn't reached a majority of the population since the 1940s or 50s at the latest. I dont think the NYT was ever read by more than about 5 or 10 percent of NYC proper. Even the 60s and 70s were dominated by free media like TV and Radio. The Internet has given journalists a glorious, huge audience. It is ironic that this golden age has been the same time when journalists lost their jobs in droves.
Also keep in mind that most newspaper companies are doing just fine. Troubled newspaper companies are indebted newspaper comanies...their own damn fault.