What We Know About the Business of Digital Journalism

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Columbia Journalism School | Tow Center for Digital JournalismThe Wall Street Journal sees it differently and has consistently charged printsubscribers extra for digital access. And the difference between those strategiesis manifested in the publications’ number of digital subscribers: WSJ.com hasaround 1.1 million subscribers (including those who also get the print edition),or a bit more than half of its print base. The Democrat-Gazette has around 4,400subscribers to its “electronic edition”—about 2 percent of its daily circulationbase. Its print circulation, though, has remained remarkably steady while that ofother papers has declined precipitously. In 2006, the Democrat-Gazette’s dailycirculation was 176,910. Daily circulation now is listed at 186,962, though someof that strength is due to a merger of operations with some small Arkansas paperswhose subscribers are now counted in the Democrat-Gazette’s total. 6But how replicable are these two models? The Wall Street Journal providescontent geared toward financial decision making and reaches a more elite andaffluent audience than most news organizations. The Arkansas paper is the dominantnews organization in its state.To see how news executives figure out whether to charge online, we examinedthe decision-making processes at two large metro newspapers—the DallasMorning News and the Miami Herald. Each thought about the same issues,relied on similar data—and then embarked upon completely different strategies.Both papers have histories as journalistic powerhouses in their home markets.The Herald, which has been owned by McClatchy since 2006, has won 20 PulitzerPrizes, on subjects ranging from local election fraud to the Iran-Contrascandal. The Morning News has won nine Pulitzers and has dominated the Dallasmarket since its parent company, Belo, bought and closed the rival TimesHerald in 1991.But both have experienced significant declines in their print circulation, andboth had reason to believe that their free websites might be partly to blame.At the Herald, circulation had been steadily declining for years. The Herald andits Spanish-language sibling, El Nuevo Herald, fell from a combined daily circulationof 393,382 in 2005 to 261,657 in 2009. Most of the decline was outsidethe Herald’s “city zone”—its core in Miami-Dade County. The Herald has alsocut back discounted bulk circulation to schools, hotels and other institutions. 7Paywalls: Information at a Price 69
The Story So Far: What We Know About the Business of Digital JournalismThe trend has been similar in Dallas, where the Morning News has droppedfrom 373,586 daily circulation in 2007 to 264,459 in 2010. In part, that is alsobecause the paper began to focus on its most loyal print subscribers a few yearsago. The News trimmed back most of its delivery beyond a 100-mile radius ofDallas, though it still circulates in Austin, the state capital, which is 200 milesaway. “We reduced footprint in the state,” says John Walsh, senior vice presidentfor circulation at the Morning News. “Advertisers were saying they’re not interestedoutside the core market.” That helped eliminate some extraneous expenses.It took so long to get newspapers to Odessa, about 350 miles west of Dallas, thatthe delivery person “had to spend the night in a motel after delivering the paper,”Walsh says. “It was like the Pony Express.” The Morning News also eliminatedmuch of its single-copy sales effort, removing 9,000 of its 10,000 newspaperracks around the metro area.A few years ago, the News began doing studies about the price sensitivity ofits subscribers. Executives wanted to know if the remaining readers were now acore of the faithful who would be willing to pay much higher prices for homedelivery. One study indicated that a 40 percent hike in the price of a subscriptionwould result in a loss of around 12 percent of its subscribers, says Publisher JamesMoroney. That emboldened executives to raise the price of a monthly subscriptionaggressively, from $21 to $30 in May 2009 and then to $33.95 in 2011—oneof the highest prices for any metropolitan paper in the country.In those days, Moroney was convinced that free digital access was the wayto go. In May 2009, he told a U.S. Senate committee holding hearings on thestate of the newspaper business that “if The Dallas Morning News today put upa paywall over its content, people would go to the Fort Worth Star-Telegram.” 8Within a few months, though, Moroney began reconsidering his aversion to apaywall. In remarks in the fall of 2010 to a small group at the Carnegie Corporation,Moroney provided this analysis: “The Morning News does 40 million pageviews a month. If we could sell out three ad positions on every page every day ata $7 CPM, we would yield $10 million” a year. 9 That, he noted, would cover lessthan a third of his editorial costs—even as those costs have dropped as newsroomstaffing has fallen from 660 at its peak to around 400.70
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