Nieman Foundation at Harvard
How a titan of 20th-century journalism transformed the AP — and the news
ABOUT                    SUBSCRIBE
July 24, 2015, 10 a.m.
Business Models

Trouble in paradise? How the struggles of two Hawaiian paywalls reflect larger industry trends

The Honolulu Civil Beat and the Honolulu Star-Advertiser both introduced paywalls a couple of years ago. Now their strategies are showing signs of stagnation.

It was billed as the Pugnacious Polynesian Paywall Punch-Up.

Honolulu Civil Beat, a local news site backed by eBay founder Pierre Omidyar, launched in 2010 with an ad-free business model built on digital subscriptions. About a year later, the Honolulu Star-Advertiser put up a paywall of its own. The move set up a showdown between the two news organizations as they competed for subscribers.

The fight, however, is fizzling. The trajectory of each publication’s paywall appears to be mimicking industry-wide trends of slow paywall growth: It looks as if there’s a limit in the number of people who are willing to pay for news online.

The Star-Advertiser and Civil Beat are privately held companies, so it’s difficult to get a full picture of their finances, but publicly available information indicates that their paywall efforts are stalling.

When Civil Beat launched in 2010, it charged $19.99 per month for a subscription. It offered a launch discount and occasional special deals, then in 2013 lowered the cost of a subscription to $9.99 per month.

Earlier this year, Civil Beat dropped its price again. A monthly subscription now costs $4.99, and the site is heavily promoting the new price.

Civil Beat wouldn’t disclose how many subscribers it has, but Heidi Pliszka, the company’s director of business operations, told me in an email that the site continues “to grow [its] readership year over year.”

Meanwhile, at the Star-Advertiser, the number of digital subscribers has fallen slightly after remaining flat for the past couple of years. At the end of 2014, the paper had an average of 20,257 paid weekday, non-replica digital subscribers, according to the Alliance for Audited Media. That’s a slight decrease from 22,714 digital subscribers in 2013 and 22,469 in 2012, according to AAM’s report.

A digital-only subscription to the paper starts at $4.17 per month for readers in the continental United States and abroad. But Star-Advertiser digital subscriptions in the paper’s delivery area are more expensive: $10.42 per month on Oahu and $6.25 in the rest of Hawaii. (If you live in Oahu, you can get unlimited digital access and print delivery for $8.95 — a recognition of the fact that print advertising is still crucial.)

These subscriber trends are being felt on the mainland as well. Just look at The New York Times, which is on pace to reach 1 million digital subscribers this year but is finding that there may be a limit to how many people are willing to pay for digital access. Last year, the Times killed its paid opinion app due to lack of interest, and this spring, it made its NYT Now app free after struggling to attract subscribers for the lower-priced digital product.

That hasn’t stopped others from trying to launch reader-supported news sites. In Tulsa, Oklahoma, Robert E. Lorton III, whose family used to own the Tulsa World, debuted the Tulsa Frontier, a for-profit investigative site that’s charging subscribers $30 per month. The Frontier aims to sign up 1,000 subscribers in its first year, and wants to have 2,500 total by the end of its second year.

The Winnipeg Free Press also introduced a paywall this spring, becoming the first newspaper in North America to offer readers the option of paying by the article instead of buying a monthly subscription.

A 2013 study from the University of Missouri found that 70 percent of daily newspapers in the United States charge for content online. That same Missouri study found that newspapers rarely conducted user research before implementing paywalls. University of Texas professor Talia Stroud, director of the Engaging News Project, wrote about the study for the American Press Institute last fall:

Less than three in 10 dailies conducted focus groups, fielded audience surveys, or tested paywalls with a subset of site visitors prior to moving to paid content. Academics, one possible resource for modeling the financial effects of paywalls, were consulted by 15 percent of publishers. The most common practice employed by publishers was to solicit advice from their peers. According to Jenner and his colleagues, 85 percent consulted with other newspapers.

While large general-interest publications have struggled with paywalls, some niche sites have seen some success with the model. Outlets such as technology site The Information and Atlantic Media’s National Journal membership program seem to be succeeding because professionals in Silicon Valley and Washington, D.C. are willing to put down significant cash (a subscription to the Information costs $399 annually) for information that’s relevant to their work. Similarly, high-end publications such as The Economist have been able to find audiences willing to pay for their content. The Economist’s circulation grew to 1.6 million print and digital subscribers last year, and Economist deputy editor Tom Standage told me in March that a majority of The Economist’s revenue comes from subscriptions:

The proportion of revenue that’s coming from subscriptions is going up, and will probably continue to go up. So I’m very, very happy that that’s our business model, because I think that’s sustainable. People do seem willing to pay for our journalism, and our digital subscriber numbers are going up very nicely.

National Journal has, in fact, doubled down on its paid services. Earlier this month it said it would kill off its print magazine to focus more on its paid strategy. National Journal’s membership program provides members with access to its research arm, which puts together unique reports and presentations for them.

“It’s a more strategic relationship than when a media company is producing lots of content for them to read,” National Journal Group CEO Tim Hartman told the Lab recently.

Photo by Andie712b used under a Creative Commons license.

POSTED     July 24, 2015, 10 a.m.
SEE MORE ON Business Models
Show tags
Join the 60,000 who get the freshest future-of-journalism news in our daily email.
How a titan of 20th-century journalism transformed the AP — and the news
“If one man fails to file a story of a millionairess marrying a poor factory hand because that man understands such a story is not properly A.P. stuff, such an error of news judgment ought to be generally made known to other employees.”
The New York Times launches a free, geo-targeted extreme weather newsletter
Readers can opt in to receive morning emails explaining the level and type of extreme weather risk in up to four different places. The newsletter is free for everyone, not just subscribers.
Gannett journalists across the U.S. will strike on June 5
Gannett has around 200 newsrooms, and editorial employees at around two dozen of those will go on strike.