SUMMARY REPORT

Online Revenue Initiatives 2009
Highlights of initial results from the paid-content survey conducted by ITZBelden in partnership with the American Press Institute

2009 SUMMARY REPORT

Online Revenue Initiatives
Charging for access to digital content has sparked one of the biggest debates within the newspaper industry The idea . seems to gain momentum whenever another news organization announces it is taking steps to move from free to paid content online. Newspaper executives are eager to know what their peers in other organizations are doing. What are the current practices in generating revenue from digital content? What are the various pay models? Are they successful? What approaches are news organizations taking to issues like site registration, electronic editions and tracking original content across the Web? American Press Institute, working in partnership with ITZ Publishing and Belden Interactive (operating as ITZBelden), set out to answer these questions. Initial results of an ongoing online survey, with responses from 118 (7 percent) of the 1,529 daily newspapers in the United States and Canada, show that industry executives are exploring multiple options for increasing revenue in the short term.

Among the findings:
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Nearly 60 percent of respondents are considering initiating paid access for currently open/free news and information online, and nearly 25 percent expect to implement a paid strategy in the next six months. This is a big change, considering that 90 percent of the responding newspapers currently do not charge for content, and only 3 percent currently have a paid-only site.
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The respondents are actively exploring many new directions they can take with monetizing content. When given 15 different options of which pay models to implement, respondents indicate they are seriously considering 11 of them, including online subscriptions, day passes, premium content and instituting a pay wall after a certain number of stories have been viewed.

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Capturing new revenue and preserving print are likely the key drivers of any final decision to adopt a paid-content strategy Thirty-four percent of respondents think capturing new revenue . opportunities is or will be the most important factor; 28 percent think it is or will be preserving print circulation. KEY DRIVERS OF DECISION MAKING Capturing new revenue opportunities Establishing value for copyrighted content Preserving print circulation Driving product development/new revenues Replacing lost display ad revenues Replacing lost classified revenues Don’t know Other
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34% 18% 28% 13% 4% 0% 3% 2%

There is no clear consensus on how well charging for content will work. Fifty-one percent of respondents say it is likely that paid access will raise enough new revenues to significantly contribute to the future of newspapers. Most of the respondents overlook the opportunities and discount the convenience of e-editions, which give users the experience of reading a newspaper online. Most are not charging for e-editions or are not charging enough. Only 67 percent offer an electronic edition of the paper on their Web sites; 59 percent of those offer it free to their print subscribers. Among those sites that charge for their e-editions, the median price for an online-only subscription is $5.99 a month. The median up-charge price for those who offer it to print subscribers for an additional fee is $4.99 a month.

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Current prices for online subscriptions strongly suggest that “convenience” pricing is generally in play That is, charges do not seem to be tied to rigorous price analysis or research into . what people are willing to pay Respondents report a wide range of online subscription charges . (from $1 to $27.50 a month), yet they report surprisingly uniform levels of uptake on subscriptions, typically 1 percent to 3 percent of print circulation -- regardless of price.
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While most of the respondents allow users to register for their sites, few require it and even fewer are monetizing registration in any way Only 27 percent require users to register, and 23 . percent have a specific program for monetizing registration information in active use. This is another area where the landscape may be changing: 36 percent of respondents indicate they are considering a registration program. WEB SITE REGISTRATION PROGRAMS Allows registration Requires registration Considering registration Monetizing registration
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71% 27% 36% 23%

There is some concern about unauthorized or uncompensated online use of content that originates in newspapers, but few papers are taking action on this issue. Forty-four percent of respondents indicate they are very concerned about content “piracy,” but only 25 percent are actively tracking the use of their content across the Web.

I There is a potentially deep disconnect between news organizations and the audience for their Web sites. For this segment of the research, industry executives' survey responses are compared with user responses aggregated from Belden Interactive 2009 Local Market Surveys.

While 54 percent of news executives rate their online news and information as “very valuable,” only 44 percent of news Web site users see it that way . PROVIDERS Very valuable Somewhat valuable Not very valuable Not at all valuable Don’t know VISITORS Very valuable Somewhat valuable Not very valuable Not at all valuable Don’t know

54% 39% 1% 1% 6%

44% 51% 3% 1% 1%

Only 9 percent of news executives indicate it would be “very easy” for their audience to find a replacement for the online content their news Web sites are currently providing, compared with 19 percent of users. PROVIDERS Very easy Somewhat easy Not very easy Not very easy at all Don’t know VISITORS Very valuable Somewhat valuable Not very valuable Not at all valuable Don’t know

9% 22% 34% 34% 2%

19% 33% 28% 15% 5%

The audience that gets its local news and information online would focus on the Internet and TV – not print – if their local newspaper Web site were no longer available. Sixty-eight percent of users say they would turn to other local Internet sites; 45 percent would turn to television; only 30 percent would turn to the print edition of the paper. Compare that to the responses of news executives: 75 percent of them say they think users would turn to their print editions if their Web sites were no longer available. PROVIDERS Your print newspaper Other local media sites Television Other local Web sites Radio Regional/National sites Other newspaper Other Don’t know
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75% 55% 53% 48% 46% 42% 31% 4% 3%

VISITORS Other local Web sites

68% 45% 37% 35% 30% 17% 12% 5% 2%

Television Regional/National sites Radio Your print newspaper Other local Web sites Other newspaper Other Don’t know

Faulty models are likely in place for assessing the opportunity and return on investment for paid-content strategies. Survey respondents, apparently relying on automated logfile data, consistently report unique visitor counts that are 10 times print circulation and 1.3 times greater than local populations -- no matter the size of the market. (A separate analysis reveals no increase in the net monthly visit rates reported by Omniture and Google Analytics since 2003.) The data strongly suggest that the number of monthly unique visitors calculated by Omniture/Google Analytics is exaggerated, and news organizations risk failure if they use these figures to project future revenue based on a percentage of online audience that will convert to paid subscribers.

Recommendations
Based on these initial findings and observations of the industry, we recommend that news organizations contemplating a conversion to paid online content – or any other revenue opportunity – consider these key variables:

1. Know what your goals are.
Goals may be as varied as replacing lost ad revenues, driving product development and establishing a value for copyrighted content to preserving print circulation. Each will require a specific strategy and a process for evaluating progress. Knowing why you want to charge for access to your online content will guide the decisions you will make along the way .

2. Know the size of your audience and how it behaves.
Among news executives, there is little understanding of basic reach and audience behaviors. In fact, research from Belden Interactive reveals that newspaper Web site audiences come in three basic flavors:
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Fly-bys: They visit once a month, mostly through search engines. There is wide variation in the mix of viewers who live in and outside the market . Fly-bys are unpredictable and in any given month can be 25 percent to 80 percent of total site visitors. I Incidental loyalists: They visit one to three days a month, one to two times a day They are . predominantly local. I Core loyalists: They visit 20 days a month, two to three times a day They are mostly to . overwhelmingly local.

3. Know your content.
For paid content to succeed, it must go well beyond repurposed print content and old models. Audiences are most likely to pay for unique content that is not available elsewhere for free. Fully paid blocks of repurposed local area newspaper content have not proven to be a significant revenue source for news Web sites that have tried this strategy .

4. Know your user price points.
Current pricing for online content suggests the need to explore price sensitivity more fully . Pricing will depend on the quality and desirability of the content as well as the suite of services offered, such as improved search, personalized alerts or online reservations and shopping. Many approaches may combine unique content and services with delivery platforms, like mobile, Kindle or Audible. The amount of access will also determine price points. Will users pay by the story, by the minute, by the day or by the month? Here again, knowledge of the audience is key to success.
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Single-story fees. Likely to appeal only to fly-by visitors; large resistance can be expected. Single-day pass. Likely viable for all types of site visitors; this may represent the greatest total revenue opportunity and least resistance of all pay models. I Subscriptions. Likely to appeal only to core loyalists; expect some resistance and accept the likelihood of capped revenues. Of all the pay models, this is most familiar to newspapers and the easiest to implement.

5. Articulate benefits from the user’s perspective.
Print precepts are still driving the thinking of most news industry executives, who are more comfortable with words than interactivity; obsessed with objectivity, credibility and professionalism; and insistent on controlling the conversation. But digital media put the user in control. New information products, services and content must be developed from the outside in – responding to consumer “jobs to be done” – and the message to users must focus on how their lives will be better because they subscribe.

About the Survey
An online survey was sent to top-level and online leaders at 1,380 daily newspapers. Contact names and e-mail addresses came from API's extensive database of newspaper industry executives. The initial phase was conducted in August and early September 2009; by mid-September, 118 surveys – representing 7 percent of the 1,529 daily newspapers in the United States and Canada – had been completed. The responses in this initial report represent a wide cross section of large, mid-size, small and very small markets evenly distributed across the country . Responses came from 20 independently owned newspapers and more than 30 corporate newspaper groups, with none submitting data from more than seven news Web sites. A slide presentation of the survey results is available here. It is still possible for news organizations to participate in this ongoing survey For details, please . contact Greg Harmon at itzharmon@gmail.com / (415) 566-4348 or Greg Swanson at itzgreg@gmail.com / (503) 241-3650.

About The American Press Institute
The American Press Institute (www.americanpressinstitute.org) is an independent educational center based in Reston, Va. API provides skills-based training and leadership development in the newsmedia industry, offering seminars, onsite programs and consulting for newspaper professionals and organizations.

About Belden Interactive
Belden Interactive, based in San Francisco, specializes in audience research for Internet companies, with a focus on the news and information industry For more information, visit . www.beldeninteractive.com, or call (415) 566-4348.

About ITZ Publishing
ITZ Publishing, based in Portland, Ore., provides a leading voice nationwide in Internet revenue development for media companies. ITZ has also been retained by Journalism Online LLC to provide benchmarking studies to affiliates and help maximize online revenue opportunities. For more information, visit www.itzpublishing.com, or call (503) 241-3650 or (800) 647-6917.