Singleton is a newspaper man. His first reporting gig came as a teenager in Graham, Texas, and now he’s in charge of MediaNews Group, the nation’s fourth-largest newspaper company. So, of course, he knew that channeling Howard Beale was certain to find its way into every article and blog post about the speech. That’s why he said it, and that’s how most people learned of the AP’s supposed crackdown on piracy of its work. (Watch the meeting here, or listen to the magic words below.)

[See post to listen to audio]

Here’s what followed: Google was said to be a major target of the speech, even though Singleton didn’t mention the company or even the phrase “search engine.” News aggregators were also assumed to be in the crosshairs, although The Huffington Post, like Google, is a paying customer of the AP. Everyone was very angry, and nuance seemed to be lost amid all the saber-rattling. Since then, the AP has done little to clarify whom, exactly, its mad at or how it plans to address that anger.

Shift the tale to New York, three weeks later, at the headquarters of Thomson Reuters, where a slew of major news organizations — but not the AP — gathered to consider a new tact in combatting online piracy. Reuters and Politico were already on board. So was every member of the Magazine Publishers Association.

They proposed banding together as the Fair Syndication Consortium with an innovative approach to combatting the true tapeworms of the online news business: not Google, certainly, or Arianna Huffington, but wholesale copiers of content. The consortium is targeted, in part, at spam blogs — or splogs — that reprint news articles and posts in their entirety alongside cheap advertising. Splogs are typically automated, and the only human being involved is the one who gets a check at the end of the month.

What the consortium seeks to do is turn tapeworms into fungus. They don’t want to shut down splogs and their ilk, which would be a largely sisyphean task of enormous cost. Instead, the consortium is negotiating with the networks that serve ads against pirated content to negotiate a substantial share of that revenue.

Abusive sites, under this arrangement, could operate with legal cover and might proliferate as a result, so publishers would have to get used to the idea of their content appearing across the web, on servers they don’t control, amid page designs that only exist to sell cheap advertising. But it’s really just a cruder — or, you might say, more organic — form of traditional syndication. I hesitate to overhype this, but the concept, if not this particular application of it, has the potential to fundamentally shift how publishers conceive of distributing their content on the web.

There’s a company behind the consortium: Attributor, which crawls the Internet in search of copied content for a host of media companies (including, incidentally, the AP). At a meeting of newspaper executives in Chicago last week, Attributor CEO Jim Pitkow estimated that publishers are losing a total of $250 million annually to splogs and other sites that copy their content. (In a phone interview yesterday, he told me that estimate was based on a “conservative” CPM of roughly 25 cents, though for reasons we could discuss in the comments, I’m not convinced of their math.)

This is where Google, et al. enter the equation — in the role of partner rather than adversary. Attributor says that 94% of ads on splogs and other sites that pirate content are served by DoubleClick, Yahoo, or Google AdSense. Since Google owns DoubleClick, the consortium’s negotiations can focus on two companies with a strong interest in appearing supportive of intellectual property. But I should really stop explaining this because we obtained the slides that Pitkow presented in Chicago, and they make the consortium’s case pretty clear:

 
Nearly everyone I’ve spoken to with knowledge of the Chicago meeting, where newspaper companies were pitched on a variety of online business plans, says that Pitkow’s presentation of the Fair Syndication Consortium was by far the most popular. Attributor, which will be taking an undisclosed cut of the revenue, won’t announce who has signed onto the consortium for another few weeks, but expect it to include lots of major newspaper companies and blog networks. One reason the consortium has been so well-received is that publishers are taking on little risk.

“The worst-case scenario is that some publishers don’t make much money from this,” Pitkow told me. The best case? That not only do Google and Yahoo cooperate, opening up a new revenue stream for content producers, but publishers begin actively seeking wide distribution of their work with no compensation except a share of advertising.

The consortium’s negotiations with ad networks are ongoing, though Pitkow, of course, said they’ve been “encouraging.” I expect they’ll succeed, but a sticking point could be the share of revenue, which might vary from publisher to publisher. Pitkow said it could range from 25 to 75 percent, but it may not be his call.

The Associated Press, meanwhile, is not joining the consortium. (Pitkow wouldn’t comment.) Instead, they seem to be striking out on their own with a system that, at least in its outlines, sounds awfully similar to what I’ve described here. The only problem is that, in the meantime, many of AP’s members appear to have defected to the Fair Syndication Consortium.

And if that’s the case, then Singleton is surely mad as hell.

Mutter and his business partner, Ridgely Evers, are pitching a targeted-advertising and e-commerce system that, in an intriguing twist, would be owned by the newspaper industry. They are, essentially, seeking venture capital from publishers “who would gain a permanent, preferred share in the future profits,” according to a two-page document distributed at the Chicago meeting. We obtained that briefing and called up Mutter to see what it was all about.

Behavioral targeting

“We just introduced this idea a week ago, and nobody really knew what we were doing until we got there,” Mutter told me in a long telephone conversation yesterday from San Francisco, where he has held camp since 1995. He described the core of their venture as an online advertising solution in which newspaper companies and other publishers would share data on the demographics and reading habits of individual users to serve highly targeted ads based on that information.

If that sounds familiar, it’s because plenty of ad networks do forms of behavioral targeting, which has long been considered a holy grail of advertising. Mutter readily conceded, “It’s not like we’re inventing electricity,” but said his venture, called ViewPass, would be different for several reasons.

Perhaps most importantly, if ViewPass is able to raise capital from newspaper companies, it would be an industry-owned company with higher profit potential. He contrasted that with Yahoo’s targeted-ad system, APT, which has gained popularity among local news sites but takes, according to Mutter, a roughly 50-percent cut of revenue. (In fairness, Yahoo provides a lot of its own traffic for those targeted ads as part of the arrangement.) “The industry needs to own its own data,” he said. (In a follow-up conversation after this post went up, Mutter noted he doesn’t view Yahoo as a competitor.)

Mutter also argued that by requiring readers to register with ViewPass, the system would have more and better information with which to serve targeted ads. ViewPass would then track reading behavior across all of its affiliated sites to learn more about individual users. Ads would be auctioned, so that companies could, for example, bid to serve an ad to a 33-year-old college graduate in Cambridge, Mass., who reads a lot of articles about politics and the New Orleans Saints. (Hi, Josh!)

In theory, that should cost more per impression than untargeted ads, but there are reasons to be skeptical. For one, there may not be enough competition for most targets (sorry, Josh) to achieve the kind of value that Google has created with its auctions for search keywords. Highly targeted ads on Facebook, for example, aren’t particularly expensive.

Seeking higher CPMs

I’ll stop there, however, because targeted advertising is not at all my expertise. It does seem that a system like ViewPass could have lots of potential for news sites that currently waste page views on extremely cheap remnant advertising. The random New Yorker who lands on the Wichita Eagle’s website is currently of little value to McClatchy, the Eagle’s corporate parent, but if the company knew more about that reader through ViewPass, it might be able to serve her a higher-priced ad.

“The ad would be relevant to the individual, not necessarily the content of the page that I’m looking at,” Mutter said.

Mutter told me that he and Ridgely have already assembled a technical team that could get the system up and running in nine months, but the first stage is raising capital. “We have been invited to come to see several publishers,” he said.

Charging for content

ViewPass will also include an e-commerce system for charging for content, although Mutter is skeptical of most paid-content models, like subscriptions and micropayments. He advocates charging for narrow pieces of content that have value to select readers. “Common sense says if people start getting charged for something that they used to get for free, that’s going to repel them,” he told me. “And if they can find something awfully close to that somewhere else, they won’t come back.”

He disputed the models presented at that same Chicago meeting by Brill, who claimed that newspapers could charge for parts of their websites while maintaining 88 percent of page views and 91 percent of ad revenue. “When a guy like Steve Brill says you won’t lose customers, I simply can’t replicate that math,” Mutter said.

I’m a big fan of Mutter’s blog and have previously turned to him for expertise on newspaper-industry finances. The options he and Brill presented in Chicago aren’t mutually exclusive, but it’ll be interesting to watch what kind of interest each one draws from the executives who were in that room.

UPDATE, 1:07 p.m.: Mutter has confirmed this news and offered his own explanation of ViewPass in a post at his blog.

For the meeting, the American Press Institute also prepared a “Newspaper Economic Action Plan” that detailed “models and recommendations” for charging for online content. Our friend Rick Edmonds has already summed up the report and its findings well, but we got a hold of the actual report so you can see it for yourself.

Download a copy here.

You can evaluate the ideas within for yourself; I like some of them more than others. But I must give an ever-so-tiny ding to API for using again (on page 4) the old cliche that “the Chinese symbol for risk…combines the characters for danger as well as opportunity,” which is not precisely true.

As these paid-content models develop, a key question is how the broader news ecosystem — of blogs, radio, TV, and mediums still unknown — will react to the opportunity. That subject came up in my conversation with Brill on Monday:

Me: There’s certainly a working theory out there that the minute any of those big-city papers start charging, they’re going to encourage competition that they don’t currently have. That the free blogs that are much derided now for not providing reporting will, in fact, you know, begin to put up much, much more competition—

Brill: Why? Why will they be able to? How are they going to pay for it?

Me: Perhaps by starting with a model that is, you know, that isn’t a 150-person newsroom, and so even if the end product is not as good, it’s free, and that’s sort of the hardest thing to compete with.

Brill: But again, if what you’re striving for is to get the 5 or 10 percent of your most committed readers to pay, then you can afford to have that happen. And you can’t afford not to do it.

That’s just a taste of our 23-minute chat, which you can listen to below (or download here). Much of my interview with Brill focused on slides he presented to newspaper executives last week, which I’ve embedded again after the jump. There’s also a full transcript of the conversation with some references explained by links.

[See post to listen to audio]

 
Previously: “How Steve Brill pitched newspaper executives on charging for online content” and “Micropayments? Steve Brill isn’t optimistic on per-article fees.”

Zach Seward: My, my eyes immediately dart to the 88-91 formula. Seems interesting. I wondered what the calculations are behind that. You know, that, or where is that coming from?

Steve Brill: Well, it’s part of a rather complicated set of models that we’ve been using and testing, and that my partner Gordon Crovitz has some experience with at The Wall Street Journal, although those aren’t the exact numbers that I think characterize the Journal. I think their numbers are actually better than that.

But so it’s based on a lot of different calculations of, for example, how much, how many more page views subscribers engage in than non-subscribers because they’re much more avid consumers of whatever. And it also has to with whether you’re, you know, is the last the last 10 percent of your advertising— you know, if you lost the last 10 percent of your advertising inventory, would you lose 10 percent of your advertising revenue? Obviously you wouldn’t because that’s the stuff you’re selling as remnant space, et cetera.

So the key is to figure out how to optimize your ad inventory and at the same time that you’re targeting your most avid readers as the people who you’re asking to subscribe— at the same time that you’re offering lots of samples and lots of, in effect, you know, free circulation to more casual readers, which keeps your page views up and keeps your ad revenue up.

Seward: Sure. Does the Journal then become a model of what you’re talking about here?

Brill: No, the Journal’s numbers are different.

Seward: Sure. Then maybe not a model so much for the, specifically the 88-91 numbers.

Brill: It becomes the one of many case histories of publishers that have successfully been able to do this.

Seward: Fair enough. And in all the cases, we’re talking about leaving much of the site open to anyone and essentially picking what content can be charged for?

Brill: Yeah, and I think there are several operative dynamics there. One is, people who— the most avid users will pay for the convenience of knowing that any page they look at, anything they want to see, they’re not gonna get a wall that confronts them.

And second, that there are lots of different ways to skin that cat. For example, if you made the headline and the first two paragraphs of everything free, you’d get a lot of page views out of that, even at the same time that you were charging people who wanted to read further. So that would be one type of method to do it.

Seward: And that comes into play in calculating 88-91?

Brill: Yeah.

Seward: Sure. How do you, I guess, how do you even begin to make that calculation without knowing what a paper’s strategy would be for how much content they charge for?

Brill: Well, part of it is we help them develop that strategy to get them toward that kind of goal. Now, that could be different— The danger of looking at any of those slides in isolation is, as we try to explain there, that’s a generic model. But, for example, just take the most obvious example. If your advertising is yielding not a whole lot of money, and yet you think you can charge a lot for your circulation, then you wouldn’t care as much about losing even 20 percent of your ad revenue if 20 percent of x is a low number—

Seward: Mmhm, sure.

Brill: —than you would if 20 percent of x is a high number. So these were meant to be, you know, illustrations of how you could apply the most important principle, which is, this is a hybrid model, and it’s not an either-or proposition.

Seward: Sure.

Brill: Because what, I mean, basically, we developed those slides because in the first conversations we were having at the very beginning — and now this has changed dramatically ’cause I think everybody understands this — but in the first conversations, you know, publishers who were saying, alright, I get $10 million a year in online advertising revenue, so you have to show me where I’m going to get $10 million a year in online circulation revenue because if you don’t, I know I’m going to lose my $10 million in online ad revenue. So if you say to them, well, actually, you may lose a $1 million in online ad revenue—

Seward: And the ad revenue on the subscribers, you’re assuming, is a higher CPM?

Brill: Yeah. So you may lose that, but you’re going to gain circulation revenue online and, equally important, you are going to improve your bottom line on your print side because your cost-per-acquisition for print subscribers is going to go down because you’re suddenly going to be able to order, to offer bundles. So you’ll be offering me, if I subscribe to the print model, a discount on my online subscription.  

Now, there are two things going on when you do that. The first is, I’m seeing I’m getting a discount for doing something, which is always a way to help, you know, you know, to improve sales.

Seward: Sure.

Brill: Second, underlying that whole thing is the message, by the way, if you don’t buy the print, you’re not getting it for free online. So stop thinking of that as your alternative. And that’s a, you know, that is a really kind of suicidal alternative. At the same time that newspapers are declaring, well, we have to charge more for our print subscriptions, and yet we’re still free online.

You take someone like, you know, my 25-year-old daughter, who might be intrigued by Jon Meacham’s new version of Newsweek, and she might even be willing to pony ’cause she has such a generous father, you know, the increased newsstand price of the new Newsweek. But all of that will stop her in her tracks when she says, Oh, wait a minute, Meacham’s giving it to me for free online so why do I have to do any of this?

Seward: Sure, sure.

Brill: And as a 25-year-old, she’s just as comfortable, if not more comfortable, reading it online than she is getting it at a newsstand.

Seward: Right, well, I’m her age group, so I get that [inaudible], for sure. In the, in your examples, you refer both to annual and month-to-month subscriptions as well as micropayments.

Brill: Yeah. We’re, our e-commerce engine is going to offer all of those things so that publishers can experiment and decide what works best.

Seward: Sure. So when you refer to micropayment [inaudible], obviously we’re talking hypothetically here, but if it’s a micropayment of a quarter per article, and then you say, with a total of 6 per subscriber per month. What does that mean?

Brill: That was just meant to quantify ’cause we were saying 5 percent of the paying customers will be micropayers. We wanted to figure out, well, what kind of revenue can you ascribe to that. So we said, alright, let’s say they do an average of 6 per month, or whatever we said there. Now, it could be that it’s 10 percent, and they do an average of 2, but we were just trying to get to some numbers.

Seward: Sure, okay, fair enough. I just wanted to—

Brill: Yeah, and our view, as you can tell from that, is that we don’t think micropayments are going to be a huge part of this deal, but who knows? That’s the whole point of trying everything.

Seward: Sure. What, what’s your skepticism there?

Brill: I think that people really want — especially given that the, you know, they way we’re gonna have a common password across all platforms, all newspapers and magazines — that they’ll go for the convenience of just having a subscription as opposed to stopping and buying something. Even though, in our case, when they have to stop and buy it, they’ll just have to do it with one click because they’ll have a password. They won’t have to set up an account every time they want to spend for an article.

Seward: They’d essentially be told this is, this costs you whatever, and you’re already signed in—

Brill: Click here, put your password in, and you’ll just get charged whatever it is, if it’s 25 cents.

Seward: Sure.

Brill: So it will eliminate that piece of it. But still, my gut is that subscriptions will win the day, but I don’t want to bet on it—

Seward: Sure.

Brill: —because I could be completely wrong.

Seward: So the assumption here that’s not written in the side is 95 percent are annual or—

Brill: Or monthly, yeah. And 5 percent come from micropayments.

Seward: Sure. Is that the assumption on all the slides? Just if I’m—

Brill: Yeah.

Seward: After we get off the call, I’ll just run the numbers in my— or not in my head, unfortunately.

Brill: Yeah.

Seward: For setting a price point, I again I know we’re talking hypothetically, but does a $60 online subscription for one year of a regional newspaper seem like a decent point to start at?

Brill: We just put that in as a hypothetical model, and when we were asked, when I was asked that at the newspaper meeting, I said it’s purely hypothetical, and in some of our models it’s 50, in some it’s 70, and in some it’s less than.

But it’s just, especially in a group, I mean, I think it was, you know— I don’t think it’s a great idea for us to be making these presentations in groups — and we might not even make any anymore — because we just prefer dealing with publishers individually, stressing that they are gonna make individual decisions about whether to charge, how to charge, what to charge, monthly, daily, annually, three samples before you charge, five samples. And that’s not a conversation we feel comfortable having in a group.

Seward: Sure. I guess there’s paradox, right? You want to negotiate individually, but it, but the plan only really works if there’s some sizable group that allows you to have a—

Brill: No, I don’t think that’s right, actually.

Seward: OK, go ahead.

Brill: The reason I don’t think that’s right— I mean, someone at a, we were meeting with the publisher of a major, you know, city newspaper, not a national newspaper, but a big city newspaper. And he said, well, what do you think you need to achieve critical mass? I said, in this town, I’m looking at it. Which is to say, this thing that, you know, if you’re the publisher of a newspaper, you know, in a major city, one assumes your, your reporting, especially on local issues, is really the critical mass, especially if you’re the only newspaper in that city.

Seward: At this point, I guess it’s fair to say in most cities, that they’re unrivaled, but there’s certainly a working theory out there that the minute any of those big-city papers start charging, they’re going to encourage competition that they don’t currently have. That the free blogs that are much derided now for not providing reporting will, in fact, you know, begin to put up much, much more competition—

Brill: Why? Why will they be able to?  How are they going to pay for it?

Seward: Perhaps by starting with a model that is, you know, that isn’t a 150-person newsroom, and so even if the end product is not as good, it’s free, and that’s sort of the hardest thing to compete with.

Brill: But again, if what you’re striving for is to get the 5 or 10 percent of your most committed readers to pay, then you can afford to have that happen. And you can’t afford not to do it.

Seward:  So, what are we talking about, 5 or 10 percent of monthly uniques?

Brill: Yeah.

Seward: OK, ’cause also, and again, I’m playing devil’s advocate, pushing back on this. The, you know, most of monthly uniques are kind of junk, right? It’s the reader who lands on the site once, maybe, because they came through a referral—

Brill: Yes, that’s why I’m saying 5 or 10 percent.

Seward: Right. But we think if— So what’s that based on, that it could be that portion?

Brill: Well, for example, the Journal’s experience, it’s more than 10 percent. Much more.

Seward: OK, sure.

Brill: And some local newspapers that have done this have been able to attract more where they’ve done it gradually, and gradually turn the faucet. So, but that’s why we’re starting low.

Seward:  Hmm. Right, OK, alright, fair enough. I think, ’cause one of the things people bring up is, if you looked at, instead of monthly uniques, a statistic like how many people come to a news site even just three times in a month that suddenly, I mean, that’s a much smaller number, obviously. Are you using any of those metrics to determine the 5 or 10 percent?

Brill: Yeah, I mean, again, that is the way we get to such a small fraction.

Seward: OK.

Brill: It’s all of those things. I mean, and then, you know, there’s another piece that actually cuts both ways. There are some newspapers — for example, some overseas — that have a ton of monthly uniques. But only like a third of them actually live in the country where the newspaper’s published.

Seward: Sure.

Brill:  Now, what that tells you is, is the advertising that they’re getting from those visitors is probably next to nothing because most advertising online is not thinking about the fact that if I’m a English newspaper, you know, I have all these people in New York.

Seward: Yeah.

Brill: You know, it’s British Telecom advertising or Sky News or something.

Seward: Sure.

Brill: So, the reason I say it cuts both ways is, those are likely to be casual visitors who just found something in a search.

Seward: Yeah.

Brill: That’s the bad news. But the good news is that if you sacrifice them, you’re not giving up any advertising revenue. And the better news is, if they really want to read your paper in London, and they’re in New York, they’re obviously going to buy it online, ’cause it’s not like you can go down to the newsstand and buy it.

Seward:  Yeah. That’s funny, ’cause I don’t know if we’re talking about The Telegraph, but I know, in their experience, that they do so well on like a site like Digg, but then like you’re saying, those readers are just not—

Brill: I’m not talking about any particular—

Seward: Sure, but they’re not. If someone coming from Digg, the threshold to pay, even if it’s a micropayment, is very high.

Brill: But if someone’s coming from Digg who already has an account—

Seward: Sure, it makes it a little— It lowers the threshold, certainly.

Brill: Yeah.

Seward: Right, OK, fair enough. In terms of the micropayments, in your account, I mean, do you envision it, if it were to catch on or work, that you’d essentially have some amount in the bank? Or, you know, sort of an E-ZPass sort of system?

Brill: Could be. Yeah, I mean, there are several alternatives we’re looking at, and we’re probably going to adopt all of them. You wait a month before you charge their credit card, or they have a PayPal-like account. You know, we may even use PayPal to do that, though there are lots of possibilities.

Seward: Sure. A few more questions about other slides, but before I ask that, I just, were there other— Did you get pushback at the meeting in any way that, you know, made you come back— Or were there other particularly interesting questions you got that might help explain some of these slides?

Brill: Not really. The only, again, the only thing that gave me hesitation was I, I’m just not comfortable with the idea that there’s going to be any kind of a group decision.

Seward: Sure.

Brill: 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.

Seward: Right, right. Not a good idea, I mean obviously there’s got to be antitrust concerns but also because?

Brill: Well, it’s a combination of antitrust concerns and the fact that groups making decisions take a notoriously long time.

Seward: Sure. So just briefly on the other slides, there’s reference to, or how did you put it, “restoring the balance of power” with search engines, and then you just sort of, I assume you’re referring to some news aggregators as well?

Brill: Yeah.

Seward: What are we talking about there? I mean, is that through legal avenues?

Brill: Through legal avenues, perhaps, but it is more through just the ability to, you know, level the playing field by negotiating from strength.

Seward: That sounds like something that maybe, where being a group is much more of an advantage than what we were previously talking about.

Brill: Yeah, but that’s a different kind of group. That’s not a group deciding what they are doing vis-a-vis the consumer.

Seward: Sure. I was interested, I hadn’t seen — maybe it had been reported, but I’m not sure — David Boies and Ted Olson’s names. Are they on as, I presume, as legal counsel?

Brill: Yeah, they’re both old friends of mine, and when I started thinking about this a month or two ago, I decided — well before the, their current effort together—

Seward: Oh, right, sure, in California?

Brill: —they wanted me to just to get them involved in this.

Seward: In what sort of role?

Brill: Well, in part — smaller part than the larger part — in part, to give us antitrust counsel, which we’re operating under, and second— We want to make sure, we don’t even get close to a line, let alone go near a line. And second, to formulate negotiating strategies with some of the third parties we’ve been talking about.

Seward: Alright, and so when I get off the phone and crunch the numbers again with some of the assumptions we went over, anything, are there any other assumptions that were sort of built into these slides but not written out here that I should keep in mind?

Brill: Well, there are a lot built into them that aren’t written out, but they’re more sort of subsets of how much, what’s the current CPM someone is getting, how much will that rise among, you know, how much, how different will the CPM for subscribers be, how many more page views disproportionately will they provide. I mean, all that stuff is sort of baked into that.

Seward: How ’bout on the page views, what is, is their a working assumption in these slides at least on what—?

Brill: I don’t have it in front of me, but the, I mean, the assumption is that the people who end up subscribing will on average provide a significantly higher number of page views per month than those who are, who had been getting it for free and are going forward getting it for free.

Seward: But tenfold, a hundredfold?

Brill: Nah, that’s probably, you know, a conservative, you know, 30 or 40 percent. Something like that.

Seward: OK.

Brill: It’s much lower than the reality that anyone’s experienced.

Seward: OK, fair enough. And did you get skeptical looks, encouraging looks on some of these assumptions?

Brill: I’d say we didn’t get really any skeptical looks at all. I think by the time we— By the time I was in that room, I had met with at least half of the people— You know, 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, they’re just trying to decide what to do. I just don’t think they should be deciding it as a group.

Seward: Sure. Are you at a stage of signing with anyone or—?

Brill: Yeah. I mean, 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.

Seward: Sure. When we talk, when we say signed, that’s, I mean, signed a deal deal, not just — I see the steps slide — so not just a non-disclosure agreement but a, but a contract?

Brill: Signed a letter of intent.

Seward: OK. And we’re talking about big city newspapers or—?

Brill: I’m just not going to go any further.

Seward: Fair enough, fair enough. And so—

Brill: Good try.

Seward: [Laughter] I have to try. The timeframe, then, is announcing some of those in three to four weeks?

Brill: Probably, yeah.

Seward: And for you guys, what’s the next, what comes after that?

Brill: Well, what comes before that is we’ve got a lot more talking with them to do, and we’ve, we’re talking with some potential partners. There’s a lot of moving pieces going on, but then, I mean, what comes after that, as that slide indicates, is with the ones who’ve signed as affiliates, we sit down with them and really device a model using their real numbers and our real assumptions, so that they get comfortable with a plan for, fo starting to do this.

Seward: Sure. Find out what their current CPMs are—?

Brill: Yeah, exactly.

Seward: What they think the price point is in their particular market?

Brill: Yeah. I mean, there are all kinds of assumptions in there such as their cost per print acquisition.

Seward: Oh, yeah, that seemed very high to me. I know, that’s not something I’m very familiar with, the cost, the print acquisition cost but—

Brill: If you do the all-in circulation costs of a newspaper, it is not that high.

Seward: Which is, by which you mean, so not just the—?

Brill: Television advertising, radio, call centers, the whole thing.

Seward: Fair enough. Well I guess that’s— It worked when it worked, and I guess—

Brill: Yeah. [Laughter]

Seward: Alright, well, Steve, thank you very much. I really appreciate this, and I just wanted to say I was a Brill’s Content subscriber back when, when did, what years were those?

Brill: 1998 to 2001.

Seward: All right, so I was—

Brill: Well, thanks.

Seward: So I was in middle school when the first issue came out, but I have a complete set back at home.

Brill: You really lowered our demographic.

Seward: [Laugher] Yeah, I’m sure.

Brill: Take care.

Seward: I appreciate it.

Brill: Sure enough, bye-bye.

Seward: Bye.

“I think that people really want…the convenience of just having a subscription as opposed to stopping and buying something,” Brill said, later adding, “My gut is that subscriptions will win the day, but I don’t want to bet on it because I could be completely wrong.”

In the slides we presented earlier today, Brill’s calculations assume very little business from micropayments: just 5 percent of paying readers purchasing six articles a month at a quarter a pop. For a site like The New York Times, given some of Brill’s other assumptions, that would generate $900,000 to $1.8 million a year in revenue — before Journalism Online and perhaps a third-party vendor like PayPal take their cuts. “We don’t think micropayments are going to be a huge part of this deal,” Brill told me, “but who knows? That’s the whole point of trying everything.”

A common platform like the one under development at Journalism Online could help micropayments catch on since readers would need just one account to buy news across many sites. “They’ll just have to do it with one click because they’ll have a password,” Brill said. “They won’t have to set up an account every time they want to spend for an article.” On the other hand, there’s little overlap between the markets for paying readers of, say, The Philadelphia Inquirer and The San Francisco Chronicle. And while the 25-cent-per-article price point in Brill’s slides is just hypothetical, it’s worth noting that you can usually pick up the entire Boston Herald for a quarter at most commuter hubs around here.

For a comprehensive background on micropayments, see the arguments in favor by Scott McCloud and, more recently, David Carr as well as the ultimate micropayment takedown by Clay Shirky. Steve Outing also generated a lot of buzz in February with his piece on a micropayment system called Kachingle. He provided a quick update on that and a few similar platforms in a comment at my earlier post. (Thanks, Steve!)

Photo of newspaper box by Steve Rhodes, used under a Creative Commons license.

“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.

1. Newspaper companies that attempt a pay wall imperil their value. Sorry to put on my French cuffs here, but this is an important point: With so many local newspapers on the brink, it’s fair to assume they have only one more chance to find a revenue stream in online subscriptions. And until they make that last attempt, investors can all be hopeful about the prospects of charging for news online.

That hope is currently priced into the stock of Gannett Co., The New York Times Co., News Corp., McClatchy, and every other publicly traded company with hobbled newspapers on their hands. If they try and fail to erect a pay wall, their already-flimsy valuations could evaporate as investors decide there’s no hope for newspapers to find a new business model.

And keep in mind that many of these companies would still like to unload some properties on private investors who are more bullish about the newspaper business (the Sam Zells of 2009). That’s a lot harder to pull off if it’s plainly evident the papers won’t be able to wring any subscription revenue from their onine readers.

2. Pay walls aren’t necessarily intended to generate revenue. It’s counterintuitive, but charging for the website may be an effective way to protect the print edition, which still provides 80-90 percent of income at most newspaper companies. In fact, MediaNews Group’s president, Jody Lodovic, recently told Editor & Publisher that while the company plans to erect pay walls, it doesn’t expect a windfall from them. “The whole idea is to stop the erosion from print to online and encourage people to become print subscribers,” she said.

It’s obviously not a great longterm strategy. But when we consider whether pay walls will work, it’s important to realize that newspaper executives may have a different definition of success here.

3. “It’s not pay wall/no pay wall.” That’s a quote from Alan Murray, executive editor of The Wall Street Journal Online, whom I interviewed last month on this topic. Murray’s point is that an effective model — or, at least, the Journal’s model — for charging online pinpoints exactly what content readers are willing to pay for and leaves the rest free. And in that sense, “pay wall” is a total misnomer. Not a serious suggestion, but maybe we should call it a pay window?

Last month, Times Co. CEO Janet Robinson said this about pay walls: “Our goal is to add substantial new revenue from our users, without materially affecting our leading display advertising business.” To me, that means the Times is not planning to charge for much or any of the content it currently produces but will ask select readers to pay for extra services that don’t yet exist. That’s like pay molding.

4. Even if pay walls are the future of newspapers, they aren’t the future of news. Newspapers face a very specific financial situation that’s driving their choice to charge for content or not. These companies are giant ships with dim prospects for quickly turning around in this economic tempest, so naturally they will turn to stopgap measures. It would be a mistake to read much more into it than that.

Why so cautious? Well, surely the executives discussed ways to charge for content online, but they can’t appear to be coordinating a move to erect pay walls around their sites. That’s illegal. The industry would like an antitrust exemption, and House Speaker Nancy Pelosi supports the idea, but the Obama administration is opposed.

Today’s meeting was first reported by The Atlantic’s James Warren. The NAA wouldn’t initially confirm its involvement when I asked this afternoon. Sturm’s full statement is after the jump.

Newspaper industry executives met in Chicago today under the auspices of the Newspaper Association of America to discuss how best to support and preserve the traditions of newsgathering that will serve the American public.

Following hearings in committees of both the House and Senate, the group discussed business topics such as protection of intellectual property rights and approaches to the Congress and Administration to address these and other issues.

With antitrust counsel present, the group listened to executives from companies representing various new models for obtaining value from newspaper content online. The participants also shared success stories in driving new revenue to their newspapers products.

UPDATE, 6:26 p.m.: The AP reports, “Thursday’s meeting was called ‘Models to Lawfully Monetize Content,’ according to an agenda obtained by The Associated Press.”