How Steve Brill pitched newspaper executives on charging for online content — and why they’re buying it
“We’ve signed a couple, we’re going to sign some more, but we’re sort of holding off on making any public announcements about that, probably for three or four weeks,” he said in a phone conversation from his New York office yesterday afternoon.
Brill’s firm, which he launched in April with media magnates Gordon Crovitz and Leo Hindrey, is pushing a “common platform” for news websites to charge annual, monthly, and per-article fees. They believe publishers, by offering a mix of paid and free content, can wring subscription revenue out of 5-10 percent of their existing monthly visitors while maintaining 88 percent of page views and 91 percent of ad revenue. That, at least, is the pitch Brill made to leading newspaper executives who gathered in Chicago on Wednesday at the O’Hare Hilton.
We’ve obtained the slides from that presentation, and you can follow along right here:
The most intriguing slides, toward the end of the presentation, run some figures for hypothetical Newspapers X, Y, and Z — which appear to be roughly the size of The Los Angeles Times, Newsday, and The Austin American-Statesman, though those are just my own guesses. In our chat, Brill explained a few assumptions that aren’t on the slides but figure into his math, including: that 5-10 percent of current monthly unique visitors will be willing to pay for content; that 95 percent of those paying customers will choose subscriptions over micropayments; and that after subscribing, those readers will view 30-40 percent more pages than non-paying readers.
The price point of $50-$60 for an annual subscription was an arbitrary choice, Brill said, and would depend on how much and what kind of content was put behind a pay wall. Journalism Online is also arguing that newspapers can reduce the cost of acquiring new subscribers by offering bundled subscriptions to their print editions and websites, just like The Wall Street Journal, where Crovitz was formerly publisher. (In fact, there are a lot of similarities between their plan and the Journal’s current model.)
Some of their estimates seem awfully optimistic, and the bottom-line benefits cited in the slides wouldn’t be enough to, say, reverse the losses at a paper like The Boston Globe, which is said to be losing $85 million this year. Still, these figures offer a window into what some newspaper executives are weighing as they debate whether to take the plunge into paid content. Brill wouldn’t say which publishers have already signed letters of intent with his firm, but we’ll find out in a few weeks. He told me:
By the time I was in that room [in Chicago last week], we had met with at least half of the people one-on-one who were in that room, and you know, I didn’t feel that kind of skepticism. I think they’re just trying to decide what to do. I just don’t think they should be deciding it as a group.
In fact, Brill explicitly criticized the Newspaper Association of America, which organized the Chicago meeting: “I’m just not comfortable with the idea that there’s going to be any kind of a group decision, and I think the staff of that association is trying to steer them that way. And I’m not sure that’s a very good idea.”
We’ll have more on all this, including the full audio and transcript of my conversation with Brill, later today and this week. Until then, a final tidbit: Brill said his friends David Boies and Ted Olson have been retained by Journalism Online as antitrust counsel and “to formulate negotiating strategies” with search engines and aggregation sites. Boies led the Justice Department’s antitrust suit against Microsoft, and the somewhat unlikely pair recently teamed-up to fight Proposition 8 in California.
A quick word on the reporting process for this post: My boss Josh obtained the slides from a source who did not attend last week’s NAA meeting but was forwarded some of the materials presented there. I used that as leverage to get Brill on the phone, although he has spoken to other outlets, so maybe I didn’t need leverage. In any event, that allowed me to clear up some of what isn’t explained in the slides, and I tried to get that in this post. I’ll have a little more later today, if time permits, and will post the audio and transcript of my interview with Brill tomorrow morning. Which is all to say, stick around! —Zach
What ever happened to the folks at Kachingle? Seemed like an interesting idea that’s been eclipsed by this project.
Alex: Kachingle is still ramping up; should be out soon. It also has similar competitors: Contenture.com, Inamoon.com, and an open-source project called EmanciPay (Harvard project). All that activity tells me there’s something there, and Journalism Online is fighting the tide since it’s pushing back against the nature of the Internet and trying to re-establish control that cannot be regained on the web. JO’s numbers seem overly optimistic, too.
Thanks, Alex and Steve, for the question and answer. Just wanted to let you know that I just posted more about how micropayments fit into — or, really, don’t fit into — Brill’s plans. —Zach
“that 5-10 percent of current monthly unique visitors will be willing to pay for content”
Not a chance. I am officially going on record saying that NO general news paper that currently offers their content for free will reach .75%, let alone, 5-10%. Print it, boys!
I reviewed the presentation and walked away even less impressed than I was before.
This model = EPIC FAIL!
Good scoop, Zach — I have an interview up with Gordon Crovitz — Andy
http://www.beet.tv/2009/06/gordon-crovitz-news-brands-can-convert-10-percent-of-uniques-to-paid.html
Clearly Mr. Brill doesn’t spend much time on the web, or have children.
The demand curve for online content has been proven to be incredibly elastic; unless I’m mistaken, the only pay walls that have managed to survive on the web are those paid for by people’s employers.
To state that 88% of pageviews would endure is misleading or, at best, naive.
Z isn’t the Statesman. That circ figure is about 20,000+ too small.
Palmer, your prediction is duly noted.
Great video, Andy. I especially enjoyed Crovitz’ comments on Google toward the beginning.
Dustin, you may be right that Brill is overly optimistic, but for what it’s worth, he does have a 25-year-old daughter whose reading habits he actually mentioned in our conversation. (Look for the full and audio and transcript of that tomorrow morning.)
And, Greg, I only said and meant that Newspaper Z is roughly the size of the Statesman. It’s just a hypothetical paper with stats that, for all I know, Brill pulled out of the air. —Zach
After reviewing the slides and speaking with three people from different newspapers who were in the audience during Steve Brill’s presentation, it seems to me that Palmer Brown and Dustin Boswell’s assessments (or predictions) are more in line with reality than Brill’s naively optomistic projections.
But Brill has always been a salesman whose interest in journalism is only as a business model – and he hasn’t been very successful. “American Lawyer” was to actual reporting about the business of law what Fox News is to fair and balanced, and the publication ran into such deep financial trouble, it was fire saled it to its arch rival, “The National Law Journal.”
Court TV had a lot to do with sensational trials that drew viewers and commercials, and very little to do with serving any public interest other than prurient, and was another financial disaster.
Given Brill’s track record, if I were a publisher I would think twice about signing on without getting an independent assessment.
Charley, your comment is similar to several I’ve received via email. There’s a lot of skepticism of and resentment against Brill. I hear you — but take no position.
And everyone should check out Tyler Dukes’ word cloud of Brill’s slides. It’s an interesting way to approach what’s going on here. —Zach
Zachary,
Thank you for taking the time to respond and engage your readers. You and this story/thread is how newspapers need to engage their readership… create a conversation within the community. I have bookmarked this and will use it in my presentations as one example of ‘doing it right’.
Re: my earlier post. I read the piece and my mind was processing subscribers, not uniques. In other words, I was interpreting the 5-10% as a percent of the print subscribers. Now that my little mind has processed it correctly I need to modify my prediction (which is still very safe btw).
If their website has been around for any time and is halfway decent, their uniques are probably 6-8X the subscriber number. So the prediction as a percent of uniques is….. (drum roll) …
.001%
unfortunately, this says more about newspaper publisher desperation and ignorance about how online economics works than it does about the viability of Brill’s plan. What’s dangerous about this is that it deludes legacy publishers into thinking that a print model payment scheme will work online while they should be spending more time and energy trying to figure out how online revenue models work. Borrell Associates has estimated that local publishers can earn 30% of total revenues with online advertising, which would far exceed what they can make by charging subscribers (and walling off content and advertising potential in the process). The WSJ is the exception, not the rule for subscribers, but it’s indicative of how a pay subscription model puts the brakes on online traffic. WSJ’s online traffic is just a fraction of what the NYT gets. True, NYT is not making enough online yet, but that’s where I’d look for online innovation.
I agree completely with chuckl’s assessment.
Also, chuckl stated, “Borrell Associates has estimated that local publishers can earn 30% of total revenues with online advertising”. Adding to that, the OP margins are higher online… as much twice the OP.
Thanks for the kind words, Palmer (how could I not respond?), and thanks to both you and chuckl for bringing some numbers to the table. Another report I’ve bookmarked is the latest from PricewaterhouseCooper. Plenty of data in there. —Zach
I think Alan Mutter might have a better idea in his most recent blog post. Thoughts?
http://newsosaur.blogspot.com/
Glad you asked.
Completely disasterous presumptions
There IS no 130k circ newspaper that has 1 million uniques per month on their website.
The most a circ paper of that size would have is about half to 600k uniques a month.
Then, cut down on the amount of retained users and revenue — double the loses.
That would about be right…
Goog luck with all this
Three quick questions to ponder:
1. In American business history, name another dying industry which arrested its decline by raising price.
2. Name another online business which places “deserves” in the first line of its mission statement. For the love of god, please don’t let anyone born after 1977 see that.
3. (Stolen from someone else, I can’t remember whom): If a 14-year-old with broadband access and too much time on her hands can wreck your business model not because she hates you but because she loves your product, should you maybe look for another line of work?
Oh, and a fourth question, a la Kachingle:
4. What portion of the people who would subscribe under the Brill model would do so without a pay-wall, because they simply think they are “doing the right thing?” (see comment #2 above. Rather than soaking your best customers by turning off access to what they like most, what if you just enabled a pay-what-you wish model? Would the incremental revenue be that much different? A paper could still charge premium ad rates against those very special people, and not lose *any* other ad revenue.
Rod, the Austin American-Statesman comes close, but I’ll grant your point. I kindly refer to a lot of the numbers as hypothetical, but “arbitrary” or “made up” are terms that could have also applied.
Jon, 1) Well, business is always about hitting the right price point (including, potentially, zero), but I hear you; 2) Haha, I was born in 1985, but I hear you on that one, too; 3) That is not necessarily what is happening to newspapers, but yes; and 4) I think that’s not likely without some sort of incentive beyond “doing the right thing,” which rates more highly in surveys than in reality. —Zach
Zach,
Steve Brill’s concept was not the only one presented at the Chicago meeting. There was also the ViewPass idea presented by Alan Mutter, and at least one more I could not identify yet.
The point is, however, that neither Brill’s idea nor Mutter’s seems original; they resemble very much some of the (micro)payment platforms that already exist and operate online. Tom May provides a good review of the various systems in his article in the latest issue of the British .Net magazine. More importantly, some of the existing solutions, for example Znak it! (www.znak-it.com), are much better or at least more universal and easier to implement. Znak it! has been developed especially for the “traditional” content providers, like the newspapers and magazines, to go digital and increase their revenues. But it can be used by any content creator or publisher worldwide.
Znak it! was presented first during the 2008 Web 2.0 Expo. Then, it was recognized as one of the most innovative content monetization solutions and invited to participate in the Digital Innovator’s Summit in Berlin, Germany. Znak it! was also one of the silver sponsors of 2009 Web 2.0. Expo in San Francisco.
I am afraid both Brill and Mutter try to re-invent the wheel, or even worse. Alan Mutter seems particularly dishonest in his promoting ViewPass as his original idea. At the same time, he refuses to inform his audience that there are other better solutions, claiming (deceitfully) “I do not let anyone – including me – write self-promotional stuff in my blog.” Now, he started deleting my comments inviting him to cooperate with Znak it! from which he seems to have borrowed so much — he had had a chance to learn the details of Znak it! technology and plans from our earlier correspondence.
Yes, print publishers need to figure out a new business model. No, charging for content is not the answer. There are more than two business models out there (paid and free). I hope publishers will opt to develop new ideas, rather than follow the same “old media” tactics that have failed before.
As a consumer of news I think the proposed models are too complicated.
If I understand correctly, in the proposed models I would pay an annual fee, a monthly fee, and another fee if I consume more than X stories per month. I get unlimited cable for one monthly price. I visit my gym as many times as I like for one monthly price.
It’s got to be simple.
The second point is advertising. If I’m paying for content I DO NOT want to see advertising. This is a deal breaker for me. In the past I paid for yahoo’s premium mail service but when they refused to remove the text ads I canceled promptly.
Here is what I want.
Charge me the subscription price for the print edition. You keep the paper. Give me ad free online access. I’ll save you printing and distribution costs.
Deal?