What happens when a reader hits the paywall?

Only a small percentage slap their foreheads, say “Why didn’t I subscribe earlier?” and pay up. Most go away; some will come back next month when the meter resets. A few will then subscribe; others just go elsewhere.

So what if there were a way to capture some value from those non-subscribing paywall hitters — people who plainly have some affinity for a certain news site but aren’t willing to pay?

Welcome to the emerging world of value exchange. It’s not a new idea; value exchange has been used in the gaming world for a long time. As the Zyngas have figured out, only a small percentage of people will pay to play games. So they’ve long used interactive ads, quizzes, surveys, and more as ways to wring some revenue out of those non-payers.

It’s a variation on the an old saw that says much of life boils down to two things: money and time. It also brings to mind the classic Jack Benny radio routine, “Your Money or Your Life.” If people won’t pay for media with currency, many are willing to trade their time.

Now the idea is arriving at publishers’ doorsteps. It is being tested mainly, but not exclusively, as a paywall alternative. Yet, as we’ll see it, there may be many other innovative uses of time-based payment.

In part, this is part of the digital generational shift we might call “beyond the banner.” Static, smaller-display advertising is increasingly out of favor, with both prices and clickthrough rates moving deeper into the bargain basement. But marketers want to market, readers want to read, and viewers want to watch, so new methods that combine the marketing of brands and offers and the go-button on media consumption are au courant.

That’s where value exchange fits. Publishers are seeing double-digit, $10-$19 CPM rates from value exchange, and that’s more than many average for their online advertising. Annual revenues in the significant six figures are now flowing in to the companies that have gotten in early on the business.

The big player in publisher-oriented value exchange is Google Consumer Surveys (GCS), a year-old brainchild born out of the Google’s 20-percent-free-time-for-employees program (and first written about here at Nieman Lab). GCS now claims more than 200 publisher partners, including the L.A. Times, Bloomberg, and McClatchy properties. It says it has so far exposed some 500 million survey “prompts” to readers.

GCS will soon have more company in the value exchange game. Companies like Berlin-based SponsorPay, which offers interactive ad experiences in exchange for access mainly to games, is beginning to pursue publisher possibilities, both in Europe and the U.S, where half of its current clients are based. SponsorPay emphasizes mobile and social in its business.

L.A.-based SocialVibe, newly headed by hard-charging CEO Joe Marchese, is an ad tech company. It’s mainly oriented to non-newspaper media, especially TV companies.

How does this value exchange exactly work? Typical is the implementation at one smaller paper, the Whittier Daily News in the L.A. area., one of some 35 Digital First Media papers (both MediaNews and Journal Register brands) that have deployed GCS almost since its inception. Upon reading their 10th, and last, free metered article of the month, readers get a choice: buy a sub for 99 cents for the first month — or take a survey. “Do you own a cat?” for instance.

Publishers get a nickel for each completed response. Response rates tend to fall between 10 and 20 percent. “Completion rates” improve by targeting specific questions to specific audiences. The nickels add up.

For publishers, then, we have a new acronym: PAM, Paywall Alternative Monetization.

Consider the innovation a by-product of the paywall revolution. If you haven’t created a barrier to free access, you have less leverage to force wannabe readers to choose the lesser of two choices to proceed with their reading. Now, publishers can say, pay me for access with money — or with time. The time is short — measured in seconds or maybe minutes, depending on a video’s length or a survey’s questions.

What does the consumer get for answering a question? It varies. Respondents can get as little as a single “free” article, or an hour, or a day of access.

These programs can offer side-by-side offers. For instance, someone like a Press+ (which now powers some 380 newspaper sites) may power a subscription offer in one box, and Google Surveys or a SocialVibe can offer up an alternative in a neighboring one.

Digital First Media, long a public skeptic of paywalls, is using value exchange as an adjunct to its paywalls, many of which were deployed before DFM took over management of the MediaNews papers. While it is using it successfully as a paywall alternative, says Digital First Ventures managing director Arturo Duran, it’s also finding a couple of other ways to wring money out of surveys.

At many of its digital properties, including The Denver Post, its photo- and video-heavy Media Center hub offers Google surveys as speed bumps for continued access. Readers perceive value; enough of them are willing to pay with a few seconds of time to keep getting access to visuals. Similarly, Boston.com’s The Big Picture “news stories in photographs” uses GCS.

This approach, putting up a speed bump — in the form of a survey — instead of paywall explores the nuances of differing consumer valuation of differing parts of news sites. The Texas Tribune has offered a similar approach, having used Google surveys on its extensive data section. How often a survey is deployed can be adjusted by the publisher, working with Google, to maximize both revenue and reduce traffic lost. The search here is for the magic sweet spots.

The Christian Science Monitor is also an earlier surveys adopter. “We don’t have a paywall,” says online director David Clark Scott. “So we tried an experimental speed bump.” Those bumps were installed first on a single section, and now have grown, popping up on much of the site. One CSM twist: If you come to the site directly, you won’t see the surveys. If you come via some search, social, or other referrals, you will.

Digital First is also testing survey deployment for a group notoriously hard for the news industry to monetize: international readers. “We can’t sell [ads] in Kenya, Japan, and India,” says Duran. Instead of fetching bottom-of-the-ad-network prices, as low as 25 cents, surveys can return money in the whole dollars. One lesson so far: “It’s a much better experience than an ad,” for many readers, says Duran.

Publishers are also finding other ways to get readers to “pay.” At the Newton (Iowa) Daily News, the paywall also provides these two alternatives: answer a survey question or a share an article (via Twitter, Facebook, or Google+) in exchange for continued passage.

“It wasn’t about market research at all — it was about trading time for content,” says Paul McDonald, head of Google Consumer Surveys. McDonald, who developed the product along with engineer Brett Slatkin, says they tested out what people would most likely be willing to do, in exchange for some good. They tested a million impressions at The Huffington Post and found that question-answering was the most likable activity. Hence, Google Consumer Surveys.

“Most research is stuck in old ways — paper, email, and phone. It’s a stagnant industry, ” McDonald says. The industry, of course, has responded, offering its own critique of GCS’ rapid-fire — surveys can be commissioned and deployed within a day, with complete results, broken down by customized demographics (at an extra cost to survey buyers) within 48 hours — disruption of the market survey space. Still, industry reaction is more than mixed, with the positives of Google’s new technique winning adherents among bigger brands and smaller businesses. It’s a self-service buying technique, borrowing from Google’s flagshipAdWords model.

Interestingly, Google itself is using Surveys to obtain consumer insight. Yes, the company that derives more data from our clicks than anyone still finds asking a human being a question can yield unexpected learning — which, of course, can be combined with clickstream analytics. YouTube is among the many GCS deployers.

It’s a new frontier, and one that I think offers a number of curious potentials.

• At scale, if there is scale to the business, it’s about significant new sources of revenue.
• As a paywall alternative, it may be a detour that leads back to the road to subscription. If a reader is engaged enough with a news brand over time — kept engaged in part through value exchange — maybe he or she will eventually subscribe. Does a value exchange-using customer have a higher likelihood of subscribing in the future? It’s too early to know, but we may have soon have sufficient data to see.
• Value exchange could expand the ability to gain customer data. Each time someone trades some time for reading, she or he could be asked for an additional piece of profiling information. Essentially “registered,” that new customer becomes more targetable for subscription offers or advertising.
• We can start to widen the idea of trading time for access. Remember the idea of the “reverse paywall,” espoused by then-Washington Post managing editor Raju Narisetti and Jeff Jarvis? Spend enough time with a news product, and get rewarded, they proposed. Value exchange begins to structure that kind of relationship, providing value both to readers and publishers. Rough equalization of value would be a painful process, but it may be doable through much experimentation.
• Let’s combine two things: the rise of mobile traffic and value exchange. Mobile may not be ad-friendly, but customers might be far more willing to watch a video or touch through a quick questionnaire on a cell phone — and that can ring a different key on the digital cash register. “Mobile is already more diversified,” says SponsorPay CEO Andreas Bodczek, explaining that it is moving beyond gaming companies for value exchange and will soon include publishers.
• GCS is an easily deployable tool for small- and medium-sized businesses. As such, it could be an interesting add-on for publishers’ emerging marketing services businesses  (“The Newson0mics of Selling Main Street“). That’s a line Google could allow newspaper companies to resell, just as many resell Google paid search.

Quietly, very quietly, NewsRight — once touted as the American newspaper industry’s bid to protect its content and make more money from it — has closed its doors.

Yesterday, it conducted a concluding board meeting, aimed at tying up loose ends. That meeting follows the issuing of a put-your-best-face-on-it press releasetwo weeks ago. Though the news has been out there, hardly a whimper was heard.

Why?

Chalk it up, first, to how few people are really still covering the $38.6 billion U.S. newspaper industry. Then add in the fact that the world is changing rapidly. Piracy protection has declined as a top publisher concern. Google’s snippetization of the news universe is bothersome, but less of a central issue. The declining relative value of the desktop web — where NewsRight was primarily aimed — in the mobile age played a part. Non-industry-owned players like NewsCred (“The newsonomics of recycling journalism”) have been born, offering publishers revenue streams similar to those that NewsRight itself was intended to create.

Further, new ways to value news content — through all-access subscriptions and app-based delivery, content marketing, marketing services, innovative nichingand more — have all emerged in the last couple of years.

Put a positive spin on it, and the U.S. newspaper industry is looking forward, rather than backward, as it seeks to find new ways to grow reader and ad revenues.

That’s all true. But it’s also instructive to consider the failure of NewsRight.

It’s easy to deride it as NewsWrong. It’s one of those enterprises that may just have been born under a bad sign. Instead of the stars converging, they collided.

NewsRight emerged as an Associated Press incubator project. If you recall the old AP News Registry and its “beacon,” NewsRight became its next iteration. It was intended to track news content as it traversed the web, detecting piracy along the way (“Remember the beacon”). It was an ambitious databasing project, at its peak taking in feeds from more than 900 news sites. The idea: create the largest database of current news content in the country, both categorized by topic and increasingly trackable as it was used (or misused) on the web.

AP initially incentivized member newspapers to contribute to the News Registry by discounting some of their annual fees. Then a bigger initiative emerged, first called the News Licensing Group (NLG). The strategy: harness the power of the growing registry to better monetize newspaper content through smart licensing.

NLG grew into a separate company, with AP contributing the registry’s intellectual property and becoming one of 29 partners. The other 28: U.S. daily newspaper companies and the leading European newspaper and magazine publisher Axel Springer. Those partners collectively committed more than $20 million — though they ended up spending only something more than half of that before locking up the premises.

Renamed NewsRight, it was an industry consortium, and here a truism applies: It’s tougher for a consortium — as much aimed at defense than offense — to innovate and adjust quickly. Or, to put it in vaudevillian terms: Dying is easy — making decisions among 29 newspaper companies can be torture.

It formally launched just more than a year ago, in January 2012 (“NewsRight’s potential: New content packages, niche audiences, and revenue”), and the issues surfaced immediately. Let’s count the top three:

• Its strategy was muddled. Was it primarily a content-protection play, bent on challenging piracy and misuse? Or was it a way to license one of the largest collections of categorized news content? Which way did it want to go? Instead of deciding between the two, it straddled both.
• In May 2011, seven months before the launch, the board had picked TV veteran David Westin as its first CEO. Formerly head of ABC News, he seemed an odd fit from the beginning. A TV guy in a text world. An analog guy in a digital world. Then friction between Westin and those who had hired him — including then-AP CEO Tom Curley — only complicated the strategic indecision. Westin was let go in July, which I noted then, was the beginning of the end.
• Publishers’ own interests were too tough to balance with the common good. Though both The New York Times Company and AP were owners, it was problematic to include feeds of the Times and AP in the main NewsRight “catalog.” The partners tried to find prices suitable for the high-value national content (including the Times and AP) and the somewhat lesser-valued regional content, but that exercise proved difficult, the difficulty of execution exacerbated by anti-trust laws. Potential customers, of course, wanted the Times and AP as part of any deal, so dealmaking was hampered.

Further, all publishers take in steady revenue streams — collectively in the tens of millions — from enterprise licensors, like LexisNexis, Factiva, and Thomson Reuters, as well as education and copyright markets. NewsRight’s owners (the newspaper companies) didn’t want NewsRight to get in the way of those revenue streams — and those were the only licensing streams that had proven lucrative over time.

Long story short, NewsRight was hobbled from the beginning, and in its brief life, was able to announce only two significant customers, Moreover and Cision, and several smaller ones.

How could it have been so difficult?

It’s understandable on one level. Publishers have seethed with rage as they’ve seen their substantial investment in newsrooms harvested — for nothing — by many aggregators from Google to the tens of thousands of websites that actually steal full-text content. Those sites all monetize the content with advertising, and, save a few licensing agreements (notably with AP itself), they share little in the way of ad revenue.

But rage — whether seething or public — isn’t a business model.

Anti-piracy, itself, has also proven not to be much of a business model. Witness the tribulations of Attributor, an AP-invested-in content-tracking service that used some pretty good technology to track pirated content. It couldn’t get the big ad providers to act on piracy, though. Last year, after pointing its business in the direction of book industry digital rights management, it was sold for a meager $5.6 million to Digimarc.

So if anti-piracy couldn’t wasn’t much of a business model, then the question turned to who would pay to license NewsRight’s feed of all that content, or subsets of it?

Given that owner-publishers wanted to protect their existing licensing streams, NewsRight turned its sights to an area that had not well-monetized: media monitoring.

Media monitoring is a storied field. When I did content syndication for Knight Ridder at the turn of the century, I was lucky enough to visit Burrelles (now BurrellesLuce) in Livingston, New Jersey. In addition to a great auto tour of Tony Soprano country, I got to visit the company in the midst of transition.

In one office, older men with actual green eyeshades meticulously clipped periodicals (with scissors), monitoring company mentions in the press. The company then took the clips and mailed them. That’s a business that sustained many a press agent for many a decade: “Look, see the press we got ya!”

In Burrelles’ back rooms, the new digital monitoring of press mention was beginning to take form. Today, media monitoring is a good, if mature, industry segment, dominated by companies like Cision, BurrellesLuce, and Vocus, as social media monitoring and sentiment analysis both widen and complicate the field. Figure there are more than a hundred media monitoring companies of note.

Yet even within the relatively slim segment of the media monitoring space, NewsRight couldn’t get enough traction fast enough. Its ability to grow revenues there — and then to pivot into newer areas like mobile aggregation and content marketing — ran into the frustrations of the owner-newspapers. So they pulled the plug, spending less than they had actually committed. They decided to cut their losses, and move on.

Moving on meant making NewsRight’s last deal. The company — which has let go its fewer than 10 employees — announced that it had “joined forces” with BurrellesLuce and Moreover. It’s a face-saver — and maybe more.

Those two companies will try to extend media monitoring contracts for newspaper companies. BurrellesLuce (handling licensing and aggregation) and Moreover (handling billing and tracking) will make content available under the NewsRight name. The partnership’s new CAP (Compliant Article Program) seeks to further contracting for digital media monitoring rights, a murky legal area. If CAP works, publishers, Moreover, and BurrellesLuce will share in the new revenue.

What about NewsRight’s anti-piracy mandate? That advocacy position transitions over to the Newspaper Association of America.

NAA is itself in the process of being restyled into a new industry hub (with itsmerger and more) under new CEO Caroline Little. “As both guardian and evangelist for the newspaper industry, the NAA feels a tremendous responsibility to protect original content generated by its members,” noted Little in the NewsRight release.

What about the 1,000-title content database, the former AP registry that had formed the nucleus of NewsRight? It’s in limbo, and isn’t part of the BurrellesLuce/Moreover turnover. Its categorization technology has had stumbles and overall the system needs an upgrade.

There’s a big irony here.

In 2013, we’re seeing more innovative use of news content than we have in a long time. From NewsCred’s innovative aggregation model to Flipboard’s DIY news magazines, from new content marketing initiatives at The New York Times, Washington Post, Buzzfeed, and Forbes to regional agency businesses like The Dallas Morning News’ Speakeasy, there are many new ways news content is being monetized.

We’re really in the midst of a new content re-evaluation. No one makes the mistake this time around of calling news content king, but its value is being reproven amid these fledgling strategies.

Maybe the advent of a NewsCred — which plainly better understood and better built technology to value a new kind of content aggregation — makes NewsRight redundant. That’s in a sense what the partners decided: let the staffs of BurrellesLuce and Moreover and smarts of the NewsCreds make sense of whatever newer licensing markets are out there. Let them give the would-be buyers what they want: a licensing process to be as simple as it can be. One-stop, one-click, or as close as you can manage to that. While the disbanding of NewsRight seems to take the news industry in the opposite, more atomized, direction, in one way, it may be the third-party players who succeed here.

So is it that NewsRight is ending with a whimper, or maybe a sigh of relief? Both, plainly. It’s telling that no one at NewsRight was either willing or able to talk about the shutdown.

Thumbs down to content consortia. Thumbs up to letting the freer market of entrepreneurs make sense of the content landscape, with publishers getting paid something for what the companies still know how to do: produce highly valued content.

It’s a season of new product launches, but you have to roam around the country and the world to find them. You have to look for the niches they’re trying to serve. These launches tell us a lot about the emerging digital news economy and the new building blocks that form its foundation.

Our journey takes us from Washington, D.C. to Singapore to Raleigh and back again to D.C. Publishers — and broadcasters — are basing these new businesses on a set of surprisingly similar features.

In D.C., Atlantic Media — in the beehive of activity that is its headquarters in the Watergate Building, overlooking the Potomac — is putting the finishing touches on its latest launch: Defense One. The new digital-just-about-only product will debut this summer, Atlantic Media president Justin Smith told me last week.

Defense One aims to disrupt a set of incumbent defense-oriented publications: Jane’s, Gannett-owned Defense News, and Breaking Defense, among them. Atlantic Media believes it’s found an opening — a wide one — to exploit.

“We saw a gap,” says Tim Hartman, president of the Government Executive Media Group, the Atlantic Media brand under which Defense One will take flight. The company believes It may offer a market as much as three to seven times greater than Government Executive itself, a 40-year-old title that has largely made the transition to digital.

Hartman says the understanding of the opportunity popped out of strategic planning that began two and a half years ago. Quartz, the business site launched last fall (“The Newsonomics of  Quartz’ Business Launch“) was the first new product to come out of the work. Defense One is the second. A third one will likely launch within the next two years, says Hartman.

If analytics derived from Government Executive’s audience and usage provided the notion, in-depth interviews with 40 defense sector players filled in a roadmap. The company conducted initial hours-long interviews with them, and then returned to a number of them for second or third talks as plans solidified.

Over time, Hartman says Defense One’s staff size will be similar to that of Quartz — about 18-20 in content creation and production. While the company is looking for a top editor, Hartman says its editorial mandate is clear: “an orientation for the future.” That’s what industry leaders want, a sense of what is more likely than not to happen tomorrow, and why.

Much of Atlantic Media’s sales, marketing, analytics and financial functions can be leveraged to support the new product, minimizing what would be similar expense for a one-off start-up. Also like Quartz, it is going free, looking to marketers to make it profitable. It isn’t just an ad play. Rather, it looks to an emerging model of higher-end sponsorship and content marketing — with the important adjunct of events marketing — to propel it forward.

Its offer to marketers will follow the playbook of what Atlantic Media’s half-dozen other publications (The Atlantic, The Atlantic Wire, The Atlantic Cities, Quartz, National Journal, Government Executive) now offers. It’s on-site sponsorship/share-of-voice placement, content marketing, and marketing services (“The Newsonomics of Recycling Journalism“) aid and placements and sponsorship of physical events.

That events business rides right alongside inclusion on its websites, providing marketers with a brand association that fluidly moves from online to off and back. It’s a strategy now well-employed in D.C. — also exploited by Politico and The Washington Post — and among events leaders like The Texas Tribune. Atlantic Media has turned events into a potent, higher-margin revenue source, now accounting for around 16 percent of revenues.

Even before Defense One’s product launch, it is well along in lining up speakers for its first event in November.

Atlantic Media targets influentials. It is a term you hear often in conversation with the company’s president, Justin Smith. Quartz targets business influentials. Government Executive and National Journal target government influentials. Now Defense One targets national security influentials. It’s a spin on the Meredith marketing positioning I noted a couple of weeks ago, as that company morphed from a women’s magazine company to a company expert at marketing to women.

“It’s really a B2B model,” says Smith, explaining in a few words much of Atlantic Media owner and chairman David Bradley’s plan to double company revenues and profits within five years. The best B2B companies deeply know their audiences and then plan numerous touchpoints to yield revenue. If they are number one in their field, they reap the benefits.

There are a lot of influentials in this world. The trick is in picking the right targets.

Seeking influentials across Asia

That’s who HT Media, publisher of a leading national Indian daily (the Hindustan Times) is targeting in Singapore. Mint is HT Media’s business newspaper, now six years old and published in eight Indian cities. The paper was cofounded by Raju Narisetti, who has since done stints at The Washington Post and The Wall Street Journal and was recently named senior vice president and deputy head of strategy for the emerging, separate News Corp.

For Mint and its digital Livemint, a highly readable, authoritative business news source, finding growth included finding influentials abroad and expanding upon its mission to be “a fair and clear-minded chronicler of the Indian dream.”

One month ago, it launched MintAsia in Singapore. Its targets: the large Indian expat business community. There are 4,500 Indian-owned companies in Singapore, which is fast becoming the multinational business center for its region. MintAsia is also aimed at those multinationals, for whom better knowledge of India, its economy, and its policies are central to their own growth plans.

The new MintAsia is both a weekly newspaper published on Fridays and a website. About a quarter of the weekly content is originated for the Singapore market — largely produced by Mint’s India-based staff of 140, with stories like “Top 10 Indian Health Startups” targeted for the strong health care business sector of Singapore. The rest of MintAsia’s content is chosen from Mint’s stream of web-first and daily print content. HT is sending a former head of ad sales to head up the MintAsia operation, and has employed a handful of Singapore locals to deal with circulation and logistics.

“The whole idea is to leverage our strength,” Sukumar Ranganathan, Mint’s editor, told me in Delhi. “For Singapore, it’s marginal costing.”

So, its costs are small, and its potential gain — in revenue, in branding, and in influence — is large.

Its business model is au courant. MintAsia is an all-access, print + digital product. It’s printing 3,000 copies to start, with a goal of reaching 10,000 within a few years. By branching out of its home market, it is not only testing a pay strategy; it’s a pay strategy that greatly exceeds what it can charge in its home market. India is just about the only major nation not suffering from the worldwide newspaper turndown. Advertising is growing robustly, and circulation is holding as well. That’s what adding millions of literate, better educated, striving-into-the-middle-class citizens a year will do for you.

But Indian dailies are among the cheapest in the world. Mint daily costs four rupees per copy — seven cents American! An annual subscription will set you back 500 rupees, or about $9.26.

In Singapore, Mint Asia costs six Singapore dollars, or US$4.87. Buy a year of print with access to the LiveMintAsia, and the price is 180 Singapore dollars or US$146. (Its paywall is now a hard one, but will go metered, powered by Press+, next month).

So we see minimal costs, good ramping all-access circulation money, and two other familiar streams of revenue: advertising targeting the financial and other needs of Singapore-based Indian influentials and events. MintAsia’s formal launch comes on May 28, when it hosts a conference in Singapore that includes the head of the Indian equivalent of the U.S. Securities and Exchange Commission. That event already has two paying sponsors; more sponsored events are in the works.

As with Atlantic Media, the niche strategy is more than a one-off. Hong Kong may be the next logical market, with other Asian markets farther down the list. If Mint moves into those markets, it will likely proceed much as it has in Singapore — checking its data for critical masses of likely readers and then following up with in-person visits to new cities, talking to to the influentials about influential publication potential.

Seeking influentials in North Carolina

Back in Raleigh, North Carolina, the WRAL’s TechWire product isn’t new, but its paywall is. It is certainly one of the first paywalls put up by a broadcaster, though in this case, Research Triangle (Raleigh/Durham/Chapel Hill) digital market leader WRAL isn’t putting one up on its main site — it erected its paywall on its technology vertical about a month ago. It follows the paywall paradigm, with a couple of twists.

TechWire charges $24.99 for an Insider annual membership, which includes numerous industry events and other discounts. Until May 16, the annual price is discounted by half. It also offers monthly passes for $2.49 and day passes for 99 cents.

So far, WRAL general manager John Conway says he happy with the early results. Most subscribers are opting for the annual plan; unique visitor and pageview loss has been minimal for the site that’s recently averaged 125,000 unique visitors a month, the majority of whom are local. His goal: get 5-10 percent of those uniques paying for something.

The paywall is powered by Amsterdam-based Cleeng, a paywall provider whose clients include Epicurious, DailyMotion, and now, TEDMED, and which offers an architecture that works well with video content access control.

TechWire offers a hard paywall, with first paragraph offering for free on staff-written stories. (AP, Bloomberg and other non-local content makes up 50-60 percent of the site, and that remains accessible.)

Seeking influentials in D.C. politics

Up the road and back in D.C., Politico continues to build on its impressive Pro line of products (“Politico Pro grows into 1,000 organizations, moves into print”) — following the influential methodology. Roy Schwartz, the company’s chief revenue officer, now counts seven Pro products. Three of these — finance, tax and, interestingly, defense — debuted last September. They followed energy, health care, and technology, all launched in February, 2011, and transportation, which followed a year later.

These Pro products, too, borrow from the same marketplace understandings that drive Atlantic Media and Mint. In Politico’s case, it’s working richer veins of revenue. Politico Pro now claims more than 7,000 users, across more than 1,000 organizations.

Politico sells institutional subscriptions, on a largely per-seat basis, to groups within each niche that want an insider’s time and knowledgable view. Politico takes in mid-four digits a year for each subscriber, with pricing variable by niche and what the market will bear. It also sells sponsorships into the Pro products, the same kinds of marketing that funds its free Politico site. Then those sponsors’ reach is further extended — at an additional price, of course — into events. Last year, Politico hosted 90 events. On its roadmap, it makes sure that each of the Pro verticals will host an event a quarter. It’s sponsorship-fueled, value-added-to-membership relationship marketing.

Schwartz says the events are free to attendees and strive to match the allure of the Pro coverage. “It’s about convening thought leadership. What we find interesting, our audience finds interesting.”

So what do you do when you’ve bound together targetable groups of influentials? You put together an Influencer Upfront. On Wednesday, Politico hosted its first Influencer Upfront.

The upfront was a day of presentations, editorial and advertising, to significant advertisers. Politico is borrowing a page from the long-standing TV network upfronts, events held to showcase shows and sell fall ad campaigns in the spring. Digital upfronts are becoming all the rage, as this spring saw several in New York City’s, including one sponsored by Digiday.

Lessons learned

It’s no accident that each of these four newer products all touch business audiences and markets. The truism hold: It’s easiest to make money where money is changing hands. Make yourself an effective intermediary, and you can grab a little of it as it moves. It’s easiest to see these opportunities, clearly, in and around business. It’s an in-the-know kind of market, and it’s one — because of scale — that national publishers are now tending to exploit first.

Can it work regionally? Can regional newspapers find big enough niches to replicate this model? If I were a regional publisher, I’d be doing a whiteboard exercise bouncing off these emerging influentials models.

Among these four newer products, we can see the emerging new rules of publishing creation. Among them:

• Critical mass enables growth. Niche product creation that builds on existing company infrastructure, knowledge and marketplace learnings is the cost-effective way to go. Each of these companies adapted what they learned to these new launches. Politico’s seven Pro products illustrate this most clearly; Atlantic Media’s cousin-by-cousin launches put a parallel spin on the notion. (Intriguing side note: Politico owner Robert Allbritton put his once-core TV station holdings on the market last week, saying he wanted to further invest in and around Politico. The “around” could include replicating the Politico business model in a new coverage niche.) This is a new power of incumbency. It’s not the ownership of a printing press, as it was for newspaper publishers in the old days.
• Analytics leads the way; in-person follow-up seal the deal. You may have an intuition about a new market, but checking it out — doubly — is essential.
• Help your audience deal with future and present shock. Covering a sector is one thing; covering in a way that embraces — and tries bring a bit of order to — the multiple change issues of any audience is another. That’s an aspirational and competitive editorial positioning, but we can see ongoing examples of it in the work that Mint, Quartz, and Politico already produce.
• Events are emerging as both a vital new revenue source and an almost counterintuitive high-touch part of the mostly digital business mix. HuffPost Live, Google Hangouts, and assorted other ways to assemble online community are great experiments and promising tools, but old-fashioned in-person events are gaining strength as we all go more digital. That’s an important learning about the value of relationship, and how to reinforce it, even in the age of MOOCs.
• It’s not print or digital. It’s digital and print, suited to audience reading habits — which of course are a moving target. Influentials, like all of us, toggle between the two.

What are we to think when the aggregators start getting aggregated?

That’s what’s happening in the mobile aggregation space. Put those two little words — mobile and aggregation — together, and you’ve got intrigue. Aggregation as in the long-debated snippetizing, curating, synthesizing, and more of the voluminous news content created by legacy companies — the kind of aggregation that once drove U.S. publishers mad and still drives German ones into a tizzy. Mobile as in the newest new, the landscape to which we’re all going — the untethered, Steve Jobs-powered Internet without cords.

So mobile aggregation is the hottest thing around. Ask Akshay Kothari and Ankit Gupta, the cofounders of tablet aggregator Pulse. Their three-year-old company just exchanged its independence for $90 million in fast-climbing LinkedIn stock. Ask 17-year-old Nick D’Aloisio, the English teenager who was the face of smartphone aggregator Summly and traded it to Yahoo in March for about $30 million. Ask Mark Johnson, CEO of Zite, which CNN snapped up last summer for a little less than what D’Aloisio got. All of that leaves the mobile aggregation leader, Flipboard, alone in its independence. It also makes it a greater object of affection. As Google and others eye Flipboard, its price tag has now reached $400-500 million.

So what we can make of this spate of deals, and what do they mean to news companies? As the unhealed wounds of the first round of web aggregation still chafe, what did publishers learn from it and how are they approaching this next mobile round? What are the newsonomics of this great mobile roundup?

It’s absolutely clear why companies are (over-)spending on mobile aggregator plays. Mobile is the greenest field around. We — news consumers — are flocking there. The speed of our migration is breathtaking. About a third of all traffic to news sites now comes from mobile, up from just 25 percent a year ago. Tablet usage, as early adopters are joined by legions of others, keeps growing, and smartphones (which just officially passed dumb phones) are markedly increasing news audience consumption worldwide. (The New York Times debuted a new mobile site yesterday, with the promise of more mobile movement to come.)

The common belief: Mobile traffic will exceed web traffic within two to three years.

But mobile monetization still gives everyone fits. Match up the 33 percent usage number for news publishers against ad monetization that amounts to no more than 10 percent of their overall digital advertising; for most, it’s considerably less than that.

Google and Facebook are, of course heavily investing in mobile ad plays; with Facebook’s last financial report viewed favorably because of its mobile progress. Neither are there yet; even as the tablet holds immense ad potential, the small screen of smartphones bedevils marketing muscularity. If you compare time spent on various platforms to ad money spent, mobile time is the most underrepresented. That will change, and the smartest digital ad players know today’s game is all about positioning, being ready to benefit from the flow of ad dollars, euros, and pounds as money moves more quickly from print, and yes, even web to mobile.

Mobile’s great ad growth is captured in the mid-April IAB (Interactive Advertising Bureau) report:

For the second year in a row, mobile achieved triple-digit growth year-over-year. The past year saw the mobile category surge 111 percent to $3.4 billion, pivoting off of 2011’s record-breaking 149 percent year-over-year rise to $1.6 billion. Mobile accounted for 9 percent of total internet ad revenue in 2012.

So in pursuit of Google and Facebook, Yahoo is clearly playing catchup — there as elsewhere — and Marissa Mayer’s acquisition of pubescent Summly, is just one small step in that pursuit. LinkedIn’s mobile strategy has been seen as lagging; Pulse’s tablet presentation — the conveyor belt, or the Automat of the last century brought to the new — helps it further position itself as a news stop for its business influential audience.

Design is an important part of these acquisitive moves. One reason these companies have value on the market is that they stand out. It must be said: For the most part, news companies have once again missed a chance to innovate, to make something new of a new platform. Flipboard, Pulse, and Zite each saw the potential of tablet news and magazine feature reading early and set to work to present it harnessing the glowing touchscreen. Now Flipboard 2.0 (build your own magazine) and Zite 2.0 are moving to a next generation. The best newspaper sites have mastered the utilitarian basics, but they hardly break new presentation ground. They also emphasize a single brand, where plainly many readers relish cross-title variety and a bit of serendipity. Innovation on tablet news design has been minimal, and it’s outsiders who largely deserve the credit for it.

One noteworthy exception: AP Mobile. While it lacks the finesse of Flipboard, it delivers a national and local experience, bringing in hundreds of local news feeds into its tablet and smartphone products, and is one of the top news apps downloaded in Apple’s App Store. AP Mobile is a rare case of newspaper cooperation, building a single customer experience; now it’s up to AP to deliver the next-generation mobile experiences.

By contrast, the magazine industry has gone another direction. Its Next Issue Media consortium stands as a first-of-its-kind compact among the Big Five magazine publishers and offers a great deal ($14.99 a month for unlimited access to 80 top titles) for consumers who want access to multiple titles. But it’s still a 1950s read-title-by-title paradigm in a partial Flipboard world (“The Newsonomics of Next Issue’s All-You -Can-Eat Magazine Newsstand“).

Yes, a partial Flipboard world. Let’s return to the place of aggregation in a more mobile world. Web aggregation snuck up on news sites worldwide. At one point, Google was just a funny word. But within a few quick years, news companies saw that Google had become the web’s primary destination and that they were dependent on it for 20 to 40 percent of their traffic. They railed about the company’s unfair use of fair use, a legal doctrine born in the pre-digital age, but have been unable to do much about ceding their central place in the digital world to the search giant.

As the world’s moved mobile more quickly than anyone — including Google — expected, everyone’s trying to figure how news will be found on the smartphone and the tablet. If you’ll recall, in announcing his mobile breakthroughs, Steve Jobs declared the obsolescence of search: In an app world, who needed it? It sounded like great hyperbole, but it’s become unevenly true.

Think about how you access CNN or the Times or Slate or Fox News on your phone or tablet. There’s a good chance it’s through a tap on an app, either a native app, or one you’ve created out of the mobile browser. That’s quite different from the use of a browser’s address bar or search box we’re accustomed to on desktop and laptop.  While Google still provides 20 to 40 percent of web referrals to news companies, its referral potency on mobile devices is reduced. By how much? The data is too disparate to measure precisely at this point, but the change in behavior is clear. (Just yesterday, BuzzFeed reported a significant drop in search traffic across its tracking network — although others dispute their math.)

So where do news companies find themselves, as desktop/laptop reading flattens in minutes and mobile increases? Are they concerned that Flipboard, Pulse, Zite, Summly and the rest will do what Google did to them on the web — get between them and their direct relationships with reader customers, reader customers who are now increasingly being asked to pay for digital and all-access? Not really. There are a couple of reasons why:

• Flipboard may be the big dog, but’s it’s no Google — yet — in reshaping the publisher/reader relationship. Publishers say that while mobile may make up 33 percent of their traffic, Flipboard and other mobile aggregators only send a low single percentage point of readers to their sites. Their site traffic is heavily social and somewhat more direct, especially with those emphasizing native apps. Yet publishers can’t really quantify how much traffic may be going to Flipboard and not clicking through to publishers’ mobile sites. Indeed, in its latest numbers, Flipboard claims 53 million readers, and points to Flipboard 2.0′s inspired growth over the last couple of weeks. Those readers “flipping” 6 billion pages monthly have got to be spending less time elsewhere.
• Publishers have taken a new tack with the new aggregators. They’ve been much more aggressive testing partnerships with the mobile aggregators than they were with web aggregators early on. Atlantic Media, Forbes, and Vanity Fair are among the more than 50 publisher partners who provide full-text feeds for Flipboard’s design optimization — and sell advertising shown next to that content on Flipboard. They give Flipboard about a 30 percent revenue share of those ads sold. That’s a join-’em-rather-than-fight-’em (or buy-’em) strategy for now. In a positive light, we can say that publishers have ceded much of the mobile aggregation play and the cutting-edge presentation technologies to startups, using those platforms to extend their audience and ad reach. In a questioning light, we can wonder whether Flipboard will become the Google of mobile aggregation and able to drive its own deals.

Given the roaring adoption of paywalls, the intersection of mobile aggregator and publisher interests reach a new crossroad. So far, Flipboard has agreed to only two full integrations, with The New York Times (allowing its paying customers full access within the app) and with the FT, which is still in progress. Flipboard tells me it is reluctant to commit to many more such integrations, especially with regional news publications. That’s understandable; it’s a lot of work, and without the scale of NYT/FT global news interest, Flipboard’s own return is smaller.

For its part, Pulse has tested a paid content niche test with the Wall Street Journal; both it and Zite have done ad sharing deals as well, but not on Flipboard’s scale.

Yet in a world in which all-access circulation is the leading core strategy, we’ve got to wonder if a distributed content strategy — such as partnering with Flipboard — is sufficiently served by simply selling advertising — even high-priced tablet ads. It may be. But much sooner than later, publishers will have to tote up their scores and see if they mastered the second round of aggregation much better than they did the first.

It almost makes wary Tribune watchers pine for Rupert Murdoch.

In what is shaping up to be the biggest sale of metro U.S. newspapers in history, with six of the top 50 newspapers about to change hands, a new player is finally increasing public awareness of what’s coming. It’s been a torturous process to watch, as all of these top nameplate papers — the Chicago Tribune, the Los Angeles Times, the Baltimore Sun, the Orlando Sentinel, the South Florida Sun Sentinel, the Hartford Courant and The Boston Globe — have been pulled on and off and back on the market, in the case of the Globe, or subject to four years of bankruptcy limbo in the case of the others, all Tribune Company titles (“The Newsonomics of  Tribune’s Metro Agony“).

If public attention to the meaning of the ownership transfer has waxed and waned over the months, one piece of news has now galvanized it. Credit the Koch brothers.

First reported by Hillel Aron of L.A. Weekly, who has doggedly covered the Times sale, and then expanded upon by both Reuters and The New York Times, it’s now clear that the Koch brothers are interested in — and maybe now the Tribune Company’s lead choice to buy — some of most well known papers in the country. That’s the Koch brothers of political fame or infamy, depending on which way your Tea Party leanings lean. (Good CBS News tour of their lightning rod impact on American politics.) The fourth and fifth wealthiest Americans ($31 billion each) according to Forbes, Charles and David Koch are credited with nurturing the Tea Party movement from grassroots to barn-burning. They bankrolled much of the movement, with contributions in the tens of millions of dollars.

The Kochs’ twin aims of both political influence and business gain — their advocacy against regulation in general and climate change legislation specifically fits neatly with the oil and gas interests that built their fortune — make their candidacy noteworthy. It’s a business/political mix that’s also taken root in San Diego’s newspaper ownership, and one that threatens to become a new model for press ownership. (More on the San Diego experience below.)

How did we get here? How did we get to a place where a half dozen of the top newspaper nameplates in America could fall into overtly political hands? What does it tell us about the reshaping of the U.S. daily landscape? How might the Koch brothers’ ownership fare, a lesson applied here that may both confirm worst fears and offer counterintuitive lessons about the nature of local press power in 2013? Finally, what are the newsonomics of the Tribune sale, as its new board ponders its options?

Sales of newspaper properties long used a common script. If someone wanted out, they priced their paper and called up the usual suspects, almost all of whom were already owners of newspaper companies. It was a fraternity: first, families selling to other families, then public and private newspaper companies selling to other public and private newspaper companies. Newspapering from the 1980s on was a greatly profitable trade, and if you knew how to “operate” — how to keep train on the track — buying more newspaper properties just meant more profits.

Then digital disruption and the Great Recession hit. Too much debt, much of it the result of buying other newspapers at what turned out to be the top of the market, forced 14 bankruptcies of newspaper companies. Nobody in the business wanted to buy more properties; besides, they no longer had capital to spend. Emerging out of all the bankruptcies: new financial owners. Some of the financial owners — banks and private equity — became owners as bankrupted debt was turned to equity; others bought into the industry cheap, post-bankruptcy. In the Tribune’s case, Sam Zell’s one-year-ownership and four-year-bankruptcy resulted in the new (newest?) Tribune finally emerging in January as company majority owned by Oaktree Capital Management, Angelo, Gordon & Co., and JPMorgan Chase.

The Koch potential brings us hard against the reality of what a U.S. metro daily is really worth these days, and what value it has to its community.

The financial value is clear. It’s a small multiple (3-4x) of Tribune papers’ annual earnings, plus whatever premium the buyers can drive from competitive bidding. Figure $550-800 million for all eight papers.

It’s the non-financial value that’s intriguing. I’m thinking about the agenda-setting, what-we-think-of-ourselves value of a daily newspaper. Newspapers have always been both centers of and reflections of their communities.

A few journalistic watchdogs have sounded alarms about the Kochs, but there’s been no wider outcry. It’s America, with freedom of the press a right for all. Or, as A.J. Liebling famously observed, “anyone who owns one.” And that’s the odd thing here: Make all the arguments you want about how the Internet has liberated free expression from the Big Iron of the printing press. These points have been pressed by everyone from Jeff Jarvis to FCC commisioners arguing that the cross-ownership (TV and newspaper) rules are outmoded by the ability of anyone to publish. In the age of monopoly newspapers, even in their reduced state, most dailies still have a major impact on the heart and soul of their regions, even as mismanagement further diminishes that impact in some cities.

For the Kochs, clearly, the would-be newspaper acquisition isn’t a financial investment; it’s an deeper opening into the body politic of major U.S. cities.

Why would the Kochs possibly become the Tribune board’s lead buyer? In a word, simplicity. The board has made it known that it prefers a single buyer of all eight properties. It’s much messier to do three or five or eight separate deals. The timeline would be longer; the separate transaction costs greater.

Find a buyer who is willing to buy all the properties, and Tribune can go on its merry way wholly becoming a TV and entertainment company. If that buyer wants to unload some of the properties immediately — as McClatchy did when it swallowed Knight Ridder’s 30 dailies in 2006 — or down the road, so be it.

While there are groups of local buyers clamoring for individual Tribune papers (most notably the Beutner/Broad/Burkle group in L.A.), a single sale would preclude such deal-making. The likeliest buyers of all eight: the Kochs and then — maybe — Rupert Murdoch’s News Corp. or Aaron Kushner’s 2100 Trust, which bought the Orange County Register and has kicked the wobbly tires of The Boston Globe.

The Kochs’ interest, and Tribune’s reciprocated murmurs of affection, force a reappraisal of the potential of Rupert Murdoch’s as lead buyer in the Tribune transaction. Owner of the largest newspaper company on the planet, he’s been assailed for the broad abuses of Hackgate and for bending his papers to his will. But he’s a businessman and a newspaperman. He did not, as feared, turn The Wall Street Journal into a Fox News-like attack dog. Rather, he invested in the paper when most of his peers were cutting back. He knows the difference between his own political and business interests and what makes publishing a newspaper successful, and, as in the case of the Journal and The Times of London, has opted more for the latter.

In that regard, Murdoch emerges as the relative friendly in this auction. In fact, you couldn’t ask for a better scenario for Rupert: serving as the white knight saving the Times and Tribune from the clutches of those far right-wingers! (Indeed, Rupert’s preparation for taking on the headaches of Tribune is literally mind-boggling. That’s right: He recently tweeted his embrace of Transcendental Meditation. After all, he’s just an (older) child of the 1960s.)

In a single-sale scenario, the Los Angeles Times is the biggest prize, with the Chicago Tribune more appealing to some than others. The smallest papers, in Allentown and Newport News, will be offered up to Warren Buffett’s Berkshire Hathaway Media, while Baltimore, Hartford, and two Florida papers may fall into a new limbo.

Tribune’s new board members, L.A.- and  entertainment-experience-heavy, represent the financial interests of their financial owners, bound to do their fiduciary duty in maximizing the value of any assets sold. That’s what boards do. But big deals often take into account factors other than absolute top dollar. Will community gain or loss be a part of the board’s thinking? Will the 100-year-old public service traditions of these papers play any part in their decision?

We’ve got to wonder what those board members — all smart, successful, sophisticated people — want to read themselves. How would they feel waking up to the news, print or digital or whatever, that was a version of what Doug Manchester’s crew has done in San Diego?

Ah, Papa Doug and the San Diego Union-Tribune. Local developer Doug Manchester bought the Union-Tribune from the turnaround equity company Platinum Equity, which it bought at for a fire-sale price from the Copley family.

San Diego is our best cautionary example about what Koch ownership of the Los Angeles Times may mean. We can do more than imagine a partisan ownership of the L.A. Times and other Tribune papers; California’s second-largest city provides an 18-month lab on what it looks like.

Scott Lewis, CEO of eight-year-old online news startup Voice of San Diego, offers a nuanced view.

“On a day-in, day-out basis, daily news coverage is the same — some better, some worse.” Lewis, whose site has consistently done the best coverage of the U-T’s many travails, credits editor Jeff Light for even keeping the paper on a relatively even keel, despite the pro-development passion of its owner and the front-page editorials (three in the recent mayor’s race, alone) that make major waves. He notes how the new owners have invested in a much-needed site redesign and made an investment in a 24-hour cable news station, U-T TV. There’s still investigative reporting, even if it’s overly oriented toward the uncovering of government waste.

But that doesn’t mean traditional journalistic lines aren’t being crossed. Take U-T TV, for instance. As the service launched, the paper greeted it with a special section, seemingly editorial and written as news, touting “a new frontier in news.” That’s just one example of many, of how the paper has tried use its influence to support Manchester’s political beliefs and his own business interests, well-covered in this Media Matters rundown.

Last fall, the U-T bought Lee’s North County Times, its main competitor, and largely shut it down. “The second newspaper in San Diego County is just gone,” says Lewis.

Significantly, Manchester’s mayoral candidate lost.

How is the community of San Diego responding? Circulation is off in mid-single digits — about average for other metros. “There’s quite a bit of blowback,” says Lewis. “People are dismissive of the U-T. ‘That’s just Manchester,’ they say.

“I think I’ve seen the humbling of Papa Doug,” he says. “CEO John Lynch thought he could tell people, ‘This is how it is going to be.’ They are humbled in what they can achieve. It’s a lesson in how newspapers are not that powerful anymore. It’s like a journalist who writes a front-page story and thinks the world is going to change, and nothing happens. We all go through that.”

The TV station foray is an expensive and ambitious investment, says Lewis, and “doesn’t appear to have any influence” — now just starting to earn measurable ratings against the TV incumbents.

Manchester, ironically, has also said he’d like to buy the L.A. Times and maybe other Tribune assets. The notion of a southern California alliance between the Kochs and Manchester would appear to be a natural one, politically and geographically, should the Kochs win the Times — although Manchester has denied any working relationship.

If Papa Doug’s impact on San Diego has been mixed, we’ve got to wonder how the Kochs buying Tribune papers would go. It’s hard to imagine the Kochs respecting the traditional division between news reporting and the opinion pages. They’re using to having their way — a way paved by wealth — but the San Diego experience shows how that can be problematic. There are always those pesky journalists and paying readers that may get in the way.

With all the nameplate and civic value of these newspapers, any new owners will a profound choice in front of them. They inherit the gales of fundamental newspaper change. They inherit newspapers that diminished in newsroom capacity, in circulation reach, and in ad revenues. (A new data point there: The New York Times Co.’s drop of 13.3 percent in print ad revenue, reported in today’s quarterly numbers.) The Tribune papers have suffered more than the average daily for two reasons. First, six of the eight are metros, and metros have seen the deepest revenue declines and newsroom cuts. Second, the mess that Sam Zell’s five-year odyssey hath wrought is incalculable. Despite the sometimes heroic efforts of the surviving top managers and rank and file throughout the company, the Zell hell further damaged the papers’ ability to meet the digital future. Some are near hollowed-out and will be a tougher to rebuild.

So, here we are, on the brink of that biggest metro sale-a-thon in U.S. history. At this point, it looks like the Tribune and Boston Globe sales offer two alternative paths forward. The New York Times Company plans to wrap up its options for selling the Boston Globe soon. So far, its focus is on two buyers, both the kinds of wealthy, civic-minded buyers who appear to be on the outside looking in on the Tribune sale.

It’s in the Tribune story that we best see the sorry journey of part of the American daily industry. First we saw that rupture of the Old Boys Club, that fraternity that kept newspaper properties within a tight knot of traditionalists, for all the good and bad that meant. Then we saw the rupture of the business model, as the advertising that fueled the industry was cut in half over the last seven years.

Then we saw an uneven rupture of public service, as newsroom cutbacks — cutting more than 15,000 jobs — have meant far less community service over a decade.

Now we may be seeing the rupture of public trust. If the Tribune board places its supposed fiduciary responsibility above that trust, a new line will have been crossed. It’s one thing to see it crossed in San Diego; it

That’s the Times’ loss in print ad revenue, and it’s a number — if it continues into the year — that could be devastating to new CEO Mark Thompson’s turnaround efforts. The Times Company’s decline in digital ads was 4%. Those two numbers have pushed the company back into the loss column. It reported a 2% loss in revenue for the quarter, after chalking up a Rubicon-crossing .3% gain for all of 2012. It had passed the magical zero line (“The Newsonomics of Zero, and the New York Times“) and didn’t want to go back — especially one quarter later.

At a 2% decline,the Times almost managed to balance that precipitous ad decline with another gain in reader revenue, up another 6.5% for the first quarter. That compares well to its 8.5% increase in circulation revenue for all of 2012, though it begins the paint the picture of the economics the Times is now facing.

Its quarterly profit: a meager, on the line, $3.1 million.

In a nutshell, its reader revenue strategy, built atop the smart paywall system it erected two years ago, is working well, but is in danger of plateauing. The Times itself (more on the Boston Globe below) is is up to 676,000 digital subscribers, and it’s doing a good enough job of holding onto print-based, All-Access subscribers. Yet, its growth is plainly slowly. It added just 36,000 digital subscribers over the last three months.

As Thompson “Announces New Strategy for Growth,” we see the next-step, call it Paywalls 2.0, an effort gaining steam among many of the first-generation adopters of paywalls, to spur reader revenue growth.

We knew that Mark Thompson had to make a mark after announced strategy, after five months on the job. His first stake in the ground in this next-gen paywalls strategy, in three parts, from the release:

• A lower-priced paid product designed to allow access to The Times’s most important and interesting stories in a convenient, media-rich package for consumers looking for an efficient way to stay informed. Consumer research has suggested very strong demand for such a product.
• Other new products, also at lower price points, that would offer deep access and additional content and other new features in specific content areas such as politics, technology, opinion, the arts and food.
• An enhanced tier that would offer extras at a higher price point to “all digital access” and print subscribers. Subscribers will likely be offered access to Times events and the ability to gift subscriptions and provide full family access, among other incentives.

The goal: to find new growth in reader revenue — revenue that has surpassed ad revenue at the Times, and then to more than make up for what will undoubtedly be continuing declines in advertising. The Times, like its peers in the newspaper and magazine business, is finding that its gasping for breath in the long-distance race with Google, Facebook, Yahoo, Microsoft and AOL for fast-growing digital ad dollars, even as those print dollars accelerate their movement to digital.

We’ll take apart the Times’ various new paywall strategies, long in the planning, as they hit market.

The focus on segmenting customer groups, with differing products at differing price points, is a positive step, though largely terra incognito. The Wall Street Journal has tested three niche products with tablet aggregator Pulse; the results haven’t yet convinced the Journal to multiply that strategy.

The third idea — the “enhanced tier” — is an idea borrowed in part from the Financial Times, whose metered model was the basis of the Times reader revenue strategy. As I’ve reported (“The Newsonomics of a News Company of the Future“), about the FT’s premium product is priced at 113% of its All-Access price, and it has gotten good response. What is in the new tier is critical; membership is an easy word to offer and far harder to fulfill in a meaningful, market-changing way.

Perhaps the biggest challenge of niching new products: Minimizing leakage of higher-paid to lower-paid ones.

Two other points pop out of this morning’s report:

• As the Times Company readies its sale of the Boston Globe (at the Nieman Lab today, I further explore the sale of the Globe and Tribune metro properties), it’s clear the Globe is under-performing the Times. It was down 6.7% in overall revenue, as its reader revenue lost 1.9% and advertising declined 10.1%. Two takeaways here: 1) the new owners of the Globe face a tough challenge in getting back to growth, given those numbers; 2) as the Times emerges as essentially a standalone entity, its own reader revenue strategy looks better. Without the Globe, it was up 8.2% in circulation dollars.
• The national ad market movement from print to digital may be faster than the regional one. As Gannett, the largest newspaper company reported yesterday, it announced a 4.5% decline in ads. Gannett’s ad revenue is more heavily tilted to retail advertisers,, whose movement from print to digital is slower than either classifieds (largely gone) and now national. Significantly, Gannett, also reported a 14.5 percent increase in local market circulation revenue.

In sum, paywalls are working, but will they be enough to turn the industry from red ink to black?

Noteworthy in the 2013 Pulitzer announcements are the multiple winners. The New York Times won four and the Star Tribune two. Having just wrapped up a session on paywalls at the NAA mediaXchange conference in Orlando, one that included discussion of both the Times and the Star Tribune, I wondered about a few connections.

Was it a coincidence that two of most successful all-access digital circulation strategies in the country belonged to the multiple winners? What could the relationship be? How could we think about those links between Pulitzers, paywalls, and investing in newsrooms?

The Star Tribune’s two Pulitzers were generated out of a newsroom of 260. That number has stayed fairly steady in the last three years, though it is down from an all-time high of about 400. Amid the kind of expense cutting that swept almost the entire industry, in both the recession years and the aftermath, the Star Tribune is one of a relative few that made a point of keeping its reporting staff as whole as possible. It disproportionately made its newsroom cuts in copy handling and middle management in order to do that.

So while the cuts at the Star Tribune have been significant, its remaining core is stronger than that of many metro dailies. Its reporting capacity tracks very favorably, for instance, compared to the more than 50 percent cuts endured by some Tribune metros. (In fact, as the Tribune sale is set to proceed — as early as this week, according to sources — the task of re-inflating those torn-apart newsrooms will be an early, serious business challenge for buyers.)

“Newsroom costs as a percent of total for us have risen [since its 2010 bankruptcy],” says publisher Mike Klingensmith, a statement that becomes more intriguing as we look at the overall industry’s trends.

Daily circulation is now at 302,000 and Sunday at 510,000, both up three years in a row.

(With the Star Tribune prize wins, we must now cede the Twin Cities title of “Newspaper of the Twin Pulitzers” to the Star Tribune. The St. Paul Pioneer Press, of which I am an alum, proudly claimed that title after two wins, in 1986 and 1988. At that point, Knight Ridder owned the paper. Our newsroom staff total hit about 235 in the next decade. Today it is less than 120.)

Similarly, The New York Times — winners of that quartet of Pulitzers — has persevered through the toughest take-Carlos-Slim’s-money-and-hope-for-the-best times.

Today, it counts 1,150 newsroom employees. While it has regularly, and sometimes painfully, pruned through the last five years, it says the 1,150 number matches its total of 10 years ago. “There have been cuts, yes, but we have also added to our ranks, particularly in the areas of multimedia producers, videographers, graphics editors, etc.,” says Times spokesperson Eileen Murphy. “That hiring has kept the number relatively stable.”

The Times won’t divulge the percentage of overall expense devoted to its newsroom, but you can figure it’s close to 20 percent. That percentage is closely guarded by many newspaper companies, though I’m not sure why. Maybe too many are embarassed by how low it may seem to the public.

How many are in the closer-to-20-percent club? We don’t know, but we can surmise they’re a small number of America’s 1,380 daily newspapers, including some family-controlled papers like The Washington Post. I believe that the Star Tribune is also in that neighborhood.

While winning Pulitzers is great, those wins certainly won’t in and of themselves sustain these companies on the edge of profitability and revenue growth. One thing that is sustaining them for now is reader revenue. The Times now takes in more reader revenue than ad revenue. The Star Tribune sees 44 percent of its revenue coming from readers, as it plies all-access and digital circulation.

Let’s look then at the newsonomics of Pulitzers, paywalls, and investing in newsrooms, and think about whether our intuition has any basis in provable fact.

If even 20 percent of expense devoted to newsroom seems like a low number, consider that the industry average is about 12.7 percent for the largest dailies. That’s the average newsroom expense, of total expenses, for papers above 100,000 circulation, according to Inland Press Association, the industry’s acknowledged leader in much benchmarking work.

Interestingly, those with smaller circulations spend a bit more, and we know their business results over the last 10 years — less decline in ad revenue and in circulation — have been better.

We can also see in the data that newspapers overall are spending a smaller percentage of their overall expenses on their newsrooms than they were 10 years ago. (The comparisons are 2011 to 2001; 2012 data will be out soon. The survey annually samples between a few hundred newspapers “across the circulation size spectrum.”)

The downward turn, even as small as it is, is glaring. Given how much less all newspapers spend on printing and newsprint, given circulation declines, one might expect that newsroom expenditures’ share would have risen a bit, as they have in Minneapolis. Instead, they’ve declined.

Simply put, publishers — on average — have cut their newsrooms more deeply than other parts of their operations. They haven’t believed that smart readers will respond positively to better coverage or negatively to cutbacks. (Thirty-one percent of Americans have fled a news outlet that has underserved them, according to Pew.)

For their part, editors and reporters have always wanted to believe their work had value — but they were the last ones to impute financial value, especially since so many over time have flouted their innumeracy.

If the people who are supplying most of your revenue — not yet the case for most dailies, but it likely will be within three to five years — are happy with the product, they’ll keep paying. If they are delighted, they may pay for subscriptions and for new products to be created and sold. If they’re not satisfied, newspaper business fortunes will have squandered their greatest opportunity in a generation.

Beyond the Inland numbers, we have some data on the financial value of newsroom investment.

Since the 1990s, Esther Thorson has been studying the linkage between investment in newsrooms and advertising and circulation results. “Money in, money out,” she calls it, suggesting that considering the newsroom as a simple “cost center” is short-sighted.

With credentials in both psychology and mathematics, she’s now associate dean of graduate studies at the University of Missouri’s School of Journalism. Along with her colleague, marketing professor Murali Mantrala, she has long worked with the Inland data and with individual newspaper companies as well.

Her conclusion: “Input into the newsroom in dollars had far and away the greatest impact on all sources of revenues — both advertising and circulation.” Citing a case history that Thorson says is more widely indicative: “For every dollar invested in the newsroom, you create 21 cents of direct impact on circulation revenues, plus 56 cents of indirect impact from print ad revenues, plus 32 cents of indirect effect online ad revenue.” Investments in ad sales and circulation sales directly yield less, she says.

Her econometric models may find new life in the all-access circulation age.

Press+ cofounder Steve Brill has made this plain-spoken point: “If you want to sell journalism, you have to do journalism.” It’s colorful — and his company is building data behind it. Press+ is beginning to track the correlation between content volume and sales.

A mid-2012 study, soon to be updated and broadened by Press+, shows a wide variation, depending on news volume: “One newspaper site with an average of 82 stories posted to the site each day had first month subscription sales of approximately $36,000, while a site with similar traffic but only an average of 21 stories had first month sales of less than $400. A third, similarly-trafficked site with an average of 50 stories had first month sales of approximately $3,000. A fourth site, with an average of 55 stories had sales of slightly more than $3,000.Over time, the site with 82 daily stories sold 10 times as many subscriptions per month as the site with 50 stories a day and sold 15 times as many subscriptions as the newspaper with 20 stories a day.“

It must be noted that the initial survey only used four papers. But it’s another useful datapoint and one to watch as it is expanded. Further, it gets to the major connection everyone in the news industry — whether in newspapers or sites like The Daily Beast, considering a paywall — should be talking about: How does content itself best maximize the revenue coming from readers in the paywall age?

Further, Brill tells me that the company is beginning to track the linkage between “engagement and actual content quality.”

Is 20 percent the magic number? No, but it sure is a great plateau.

If we look at the fledgling success of the dedicated enterprise/investigative online startups — California Watch, ProPublica, Texas Tribune, MinnPost, and The Lens, for instance — we find a different kind of arithmetic. Pro Publica’s Dick Tofel says 85 percent of the site’s cost go to “program,” essentially content creation. Evan Smith reports that 73 percent of his Texas Tribune expenditures go to content creation. For all of the new companies, it’s by far their largest expense.

The surprise national reporting Pulitzer winner, InsideClimate News, pays out 80 percent of its total expense, to its seven full-time staffers.

Of course, these digital-only startups have neither the legacy costs — printing, distribution, etc. — of newspapers, nor their billions of dollars in print ad revenue. Their model, though, is instructive.

These newbies paint a picture of the modern news company in 2023. All publishers, as they work toward their mainly digital businesses ten years in the future, will focus on two big expenses: content creation and commerce development, including but not restricted to advertising. Many of the other expenses that consume newspaper companies — Big Iron, trucks, massive office buildings — will be memories. (The Mercury News decision to sell its San Jose-iconic offices is indicative.) The big challenge for the legacy news companies, broadcasters included, is how much they can move to that kind of cost structure in the interim.

To be sure, there’s not a straight line between newsroom size and editorial quality; the role of active, challenging newsroom management is key in how to use resources, no matter how large or small.

But it certainly looks like one of the best predictors of it, and not just because of the numbers. It’s taken a real commitment, through the budget traumas of the past decade, to preserve as much newsroom capacity as possible. Those companies that have striven to do that tend to place more value on the editorial quality overall.

Further, newsroom size is a proxy to community commitment, thinks Orange County Register publisher Aaron Kushner. “When you cut newsrooms, when you cut days of the week, these are symptoms that you are not woven into the fabric of the community,” he told the NAA Orlando crowd this week. In his on-stage conversation with Ken Auletta and Terry Kroeger of Berkshire Hathaway’s media group, Kushner won a strong round of applause as a trailblazer in the industry.

For Kushner, you can’t create business success — getting readers to pay a dollar a day (“The Newsonomics of  the Register’s Contrarian Paywall“) for all-access — if you’re not meaningfully part of the community.

For all news companies, it’s time to change the tired conversation of editors fighting for every last FTE against a tired-of-hearing-it business side. If we can start to understand how editorial quality and quantity play into the very revival of the newspaper business, we can break new ground.

Which brings us back to content — call it journalism if you like — as a businessimperative.

We’ve got big experiments, such as the Orange County Register’s hiring of 108 new newsroom staffers since the new owners hit town last year. We have a number of smaller, less public, ones. Some newspapers have held on to more newsroom capacity than others — how will their fledgling paywall plans fare? What further correlations can we draw now that we increasingly have lots of numbers at our fingertips? How do the new ways to present news, like the Pulitzer-winning Times feature Snow Fall, spark or reinforce sales?

Whodathunkit? The age of Big Data may actually support old-fashioned (and newfangled) journalism excellence.

There’s an important number in his week’s first-of-its-kind Newspaper Association of America report — The American Newspaper Media Industry Revenue Profile 2012 — on the evolution of revenue sources. That number: 8 percent. Eight percent of 2012 newspaper revenues came from something otherthan advertising or circulation. It’s a squishy number at best, incorporating a grab bag of newer initiatives. But it’s directionally right (“NAA’s New Revenue Report: Been Down So Long Looks Like Up to Publishers”).

All-access circulation revenue is spinning upward, leading to a 5 percent gain in overall circulation revenue in 2012. Print advertising is whirling downward — 9 percent last year — in a seeming death spiral. Digital advertising is growing tepidly at 5 percent. Put those circulation and ad trends together and you end fairly flat on your back. So NAA’s number is that dailies lost 2 percent of revenue overall; I’ve made the point that their big goal, as nothingburger as it may sound, is to get back to zero revenue growth (“The Newsonomics of Zero, and the New York Times“).

Which brings us back to that non-ad, non-circ number. If local news organizations are going to regain growth — and hire — they must find new revenue. They have plumbed marketing services, events, and print-insourcing. Now some are putting a new category on the board: content marketing.

No, not content marketing, you say! It’s already a hackneyed phrase, seemingly identical to “native advertising” and “sponsored content,” both now much-recognized and already much-maligned techniques that bigger brands are using to break through the digital clutter and get to potential customers. Yes, content marketing (and we’ll narrow some definitions below). As news companies rediscover the power of their own content, there is new revenue to be gained. How much, not whether to seek it, will be the major question.

Meredith Publishing, the old-timey Des Moines-based publisher of Ladies Home Journal and many other brands, practically invented the content marketing trade within magazines and among B2C advertisers. The ideas, first applied as part of Meredith Integrated Marketing, are simple:

• Editors and publishers know to create engaging content-based experiences;
• Big brands — and many smaller merchants — need better engaging content-based experiences if they’re going to do anything with all the growing number of potential customers their advertising and search/social (Google, Facebook, Twitter, etc.) can draw.

So Meredith turned itself from being a magazine publisher to a high-end marketing agency. In its case, it works the markets that answer the commercial edge of the age-old question “what do women want?” It’s thriving, re-using Meredith content and creating tailored content for Kraft, Acura, Jeep, Coke, Bank of America, and the NFL Players Association. The recently re-named Meredith Xcelerated Marketing now makes up a good share of Meredith’s non-ad, non-circ revenue, producing about a quarter billion dollars a year.

Make no mistake: Though largely untalked about in the consumer news and feature world (outside Meredith) until recently, content marketing is a hugebusiness. By one estimate, it’s a $40 billion business in the U.S., with about $24 billion of that spent on print. Within that huge number is content produced for brands’ own sites, their email marketing, webinars, and more. My sense is that as brands find the ability to license useful content, they’ll spend less on custom creation and more on cheaper-to-them, high-quality, branded licensed content. So it’s a big — and we’d think — sustainable market.

If Meredith built on lots of experience in the B2B trade — where publishers have long used content to lure new customers through targeted email and like methods — then its magazine peers and the newspaper industry are starting to learn from Meredith. Consider the emerging global-to-local breadth of content marketing initiatives, and as we do, let’s be sure to differentiate between two basic kinds of content marketing.

The first — and where most traditional news brands are playing — is about usingcontent already published. That’s the repurposing of what has traditionally only had a second life on birdcage bottoms and as fish wrappers.

The second — now embraced by the leading edge of digital-only, or digital-mostly companies, and lately The Washington Post with Brand Connect — is about creating or customizing content for specific brands’ purpose. The former is easily understood: Use it whole, no changes, and with full attribution. The latter, custom content, then gets into the thorny questions of who produces the content and how it is presented to readers.

The movement in content marketing:

• NewsCred is the new big gawky kid on the content marketing block for news and magazine companies. It works with publishers two ways. Most importantly, so far, it acts as a middleman to the brands craving richer content-based experiences. (Secondly, it acts as a more-or-less traditional, if better tech-aided, syndicator of content — as in The New York Daily News creating a site for South Asians in its region and beyond, or Rafat Ali‘s leveraging NewsCred content to power his new Skift B2B travel site. That innovative use of non-local content to build new products is noteworthy, but tangential to our content marketing topic.)When it started out a few years ago, the venture-backed New York City-based company looked like just another aggregator, licensing top-branded news content and working the old syndication business, selling content in multiple forms to multiple clients. That’s been a web dream from the beginning. It never scaled that well for early players like Screaming Media and iSyndicate through Mochila and Voxant. The problem: Publishers thought they had all the content they needed. If they couldn’t sell out the ad inventory against their own content, why buy more? Those companies may have been looking in the wrong place for demand.NewsCred’s big insight — recently supported by a next-round investment — is that while most traditional publishers won’t pay for content, brands like Pepsi, AIG, Johnson & Johnson, General Electric, and Overstock.com will. So now, more than 60 percent — and growing — of NewsCred’s revenues are coming from brands. Big brands have found great success at using social media to bring many more interested eyeballs to their sites. Their big problem: giving those eyeballs something to do when they get there. After all, we don’t click through to those sites to get a hard sales pitch. So Pepsi offers a Gawker article on ’60s advertising as Mad Men returned to the air. It’s the soft sell of the digital era — content experiences are the come-hither perfume.The company licenses stuff from 2,500 content providers, ranging from APto Bloomberg and The Economist to Gawker, Getty and Forbes. It recently added The New York Times. The Times’ addition illustrates how content marketing revenue can work, even in a paywalled world. Some might have seen channel conflict between paying readers and brand use of selective Times’ stories; the Times, and others, have decided that’s not worth worrying about.Thirty-two-year-old CEO Shafqat Islam says that last year his company provided “six figure” annual sums to its top content providers, a range confirmed by several suppliers. “By the end of this year, our top 10 publishers should be entering the seven-figure range.” Those payments — largely on a flat fee, not just revenue share, basis — were fed by the company’s 2012 overall growth: an 11-fold increase in revenue and a 570 percent growth in new customers, he said. The new investment is intended to facilitate further growth, helping he and his co-founders (co-CTOs 29-year-old Iraj Islam and 31-year-old Asif Rahman) expand both in the US and internationally, adding non-English language content.

  Technology — really nuanced categorization of content — enables the business. What makes it really click though is people. It’s that mating of great content and big brand need that is crucial to content marketing success. Ten of NewsCred’s 75 staffers do the matchmaking, and their editorial backgrounds include stints at The New York Times, The Atlantic, and Slate.

  The work is figuring out what kind of audience experience a brand (say, Johnson & Johnson) wants for a new mother’s campaign and finding appropriate content, “just as any other editor would do,” says Stefan Deeran, NewsCred’s content sales director.

• On a local market basis, The Dallas Morning News’ Speakeasy startup is aiming to help merchants with their web and social presences. It uses content marketing — in the form of Morning News features — as a lure. About a third of Speakeasy’s early clients — who are spending an average of $3,600 a month and ranging from $1,300-$12,000 — use newspaper content. “Most of our clients require original content,” says Speakeasy president Mike Orren (a city site pioneer with Pegasus News in Dallas). “We have pitches out in categories where current content from DMN makes sense — like realtors. I suspect most of them will use DMN content.”
• The hipper digital-only companies have fully embraced content marketing — usually custom content marketing — over the last year or two. Count OnionLabs, Studio@Gawker, Atlantic Media Strategies, and BuzzFeed’s internal team, among them.
• Meredith’s fellow magazine peers are moving on content marketing faster than most newspaper companies. Time Inc. is focusing on custom content initiatives with startups, while Conde Nast has innovated The Studio to work the new landscape.
• Press associations in Britain and Austria are among those figuring how to intelligently and responsibly make double and triple use of the great volumes of wire-based news they create and catalog.

So let’s quickly tackle some of the basic questions here:

— Why can’t all publishers do content marketing themselves? NewsCred’s Shafqat Islam told me he thinks publishers themselves can — and should — on their own, in addition to working with his company for greater reach.

Local newspaper companies can do that, but it requires at least four well-tuned competencies that determine success in the marketplace: inventorying and categorizing content, identifying customer goals, creating custom news products or feeds, and checking in on how well the content is performing and adjusting campaigns. Publishers can make that investment (as the Morning News is doing), or they can work with a company like NewsCred, or both. Most will work with aggregators.

— Is this a business mainly for national and global brands? Yes and no. NewsCred licenses content from McClatchy and “several hundred” local sources, in addition to magazines. It’s the evergreen features content — think relationship, sports, arts, and health content — that may work well for a variety of brands. Clearly, the big marketing services push (“The Newsonomics of Selling Main Street“) provides a wide potential on-ramp for content marketing, as the Morning News is now testing out.

— So, what is content marketing exactly, and how does it relate to native advertising and sponsored content? So definitionally, what is and isn’t “content marketing”? Well, content marketing is simply using content — news, feature, or otherwise — to commercial advantage. “Providing content that people are actively interested in reading,” sums up NewsCred’s Deeran.

So, then, what’s “sponsored content?” Simply, it associates a brand with a piece of content, and it’s content that, by definition, goes beyond the simply pitching of a product or a service — what we commonly call advertising. The sponsored content can be created by the brand, or its agency, or conceivably could be licensed from a NewsCred. It can also be custom-created for the brand by a newspaper or magazine. Sponsorship is an old broadcast TV standby, also called share of voice. As The Atlantic’s Scientology debacle showed, it can be a minefield. It all depends in my view on who’s creating the content and how it is presented.

What’s native advertising? According to Mashable’s parsing of the term, native ad pioneer Dan Greenberg, the CEO of Sharethrough (which now calls itself a “native advertising platform”) defines it as “a form of media that’s built into the actual visual design and where the ads are part of the content.” So, that would say it look more editorial content, blending more seamlessly into the reader’s editorial take — with all the attendant problems journalists will intuitively point out.

There’s no shame in employing people to satisfy the needs of advertisers and brands, gigantic or otherwise. That’s not journalism, though. Journalists, especially in the tradition of newspaper journalism, write for the readers, operating in one form or another on the “without fear or favor,” in Adolph Ochs’ enduring words. We write to inform and not to pitch, openly or stealthily, goods or services. Especially in an age where publishers are asking readers to pay for more of the cost of news creation than ever before, integrity of content should become an even greater bedrock principle.

Good content marketing and integrity of news brands can go hand-in-hand, but it’s a courtship that demands the attention of both editors and marketers now. It’s easy to say that content marketing is just a new-fangled form of (hateful-to-journalists) advertorial. Alas, that’s too easy.

Content marketing can blur the lines between “without fear or favor” news and market pitches — and there will be heavy pressures to do so. It’s easy to maximize staff efficiency by having a staffer write for the readers on Monday, Wednesday, and Friday and for marketers on Tuesday and Thursday.

That won’t work.

Tapping the abilities of journalists, whether the stuff they’ve already produced or stuff they produce on demand, makes a lot of sense. It’s all in these details. Who’s producing it? What else are they doing for the company? How has it presented or labeled? The bedrock — integrity, trust, disclosure — must remain even if unforeseen new innovations, like content marketing, now arise from it.

The State of the News Media (SOTNM) 2013 report offers the kind of annual encyclopedic look at the U.S. news industry to which we’ve become accustomed, chockful of useful data. Yet, it offered a sense of requiem this year, as two numbers, ones not tied closely together in the report, were featured. The first  number — 30% — is the decline in newsroom size,  since its 2000 apex, with the 2013 total dropping below 40,000 full-time professionals “for the first time since 1978.”

The second noted, in an accompanying Pew study, that “31% of people say they have deserted a particular news outlet because it no longer provides the news and information they had grown accustomed to.”  While only a third of the respondents in the survey indicated much awareness of the financial downturn affecting news media, of those “people most acutely familiar with the economic struggles are the most likely to lose their patience with a news outlet: 43% of the people who said they heard a lot about the financial troubles stopped turning to a news outlet because they were dissatisfied with what they were getting.”

America’s best readers to news media: Get yourself together, regardless of your problems. Newspapers and other media don’t get graded on a curve. As consumer media, you simply have to satisfy consumers.

Within that context, let’s look at what we learn from the new NAA study. The report details the changing structure of U.S. newspaper revenue. It provides better and more granular data on how the industry is now morphing.

While it provides few revelations, the data ratifies key trends — the revolution of reader revenue, the big investment in marketing services — and begins to pick apart the old two-step ad/circulation model that we’ve lived with for so long. It’s a new baseline for the industry. It’s a baseline that will become more useful each year, as we track whether the rate of business model change is really fast enough to propel any growth in this much-shrunken industry. We’ll see whether talk of a turnaround is real, whether Warren Buffett and Aaron Kushner really bought in at a bottom, or not.

Here’s what the data reminds us:

• All-access circulation is indeed the brightest light on the horizon. NAA, which has long tracked circulation revenue notes that it grew in 2012 for the first time since 2003.  Circulation revenue grew 5% in 2012, and revenue is the key metric here. Forget all the scrutiny given to digital-only subscriptions; it’s overall circulation revenue that counts. Digital-only circulation revenue accounted for a relatively small percentage (1%) of total circulation revenue, and even that number seems high to me. It is the All-Access, get-more-money-from-those-price-insensitive-core-readers push — now in place at more than a third of U.S. newspapers — that has made that first-time-in-a-decade circ gain possible. Revenue from digital/print circulation rose nearly five fold (499%) from 2011. Recall, though, how small that base was in 2011.
• Marketing services is hot. It showed a 91% increase. (“The Newsonomics of Selling Main Street“). So much of that growth is start-up that the increase is less significant than the fact that of the survey’s 15 companies (mostly multi-title chains), nine are investing in the new business line.
• Print advertising is in free fall. The industry sustained just less than a double-digit loss in 2012, down 9% And the pain is across all categories:  Retail advertising, 8%; national advertising, 15%; and classified advertising, 9%. Within the classified category, automotive, 9%; real estate, 12%; recruitment, 8%. All those numbers paint a worsening decline — and this in a time of American economic recovery. Smaller community-sized papers have generally fared better than the metros, struggling with advertising, but often holding losses to low single digits or finding a little plus business. So, an overall 9% decline shows us just how deep the print ad decline is, and how much circulation gains will struggle to overcome that deficit. The NAA survey — which covers 40% of the weekday print circulation, with data from 330 papers — is representative of both larger and smaller papers, Tom Rosenstiel, new executive director of the American Press Institute, tells me. Rosenstiel worked on the report’s data.
• The industry is still heavily ad-dependent. 65% of all revenues are ad-related, including “print, digital, niche and delivery of preprints.” Within that figure, traditional print newspaper advertising (down that 9%) now makes up 46% of total revenue. There’s the issue in a nutshell: the category, with the down arrow — ads — still makes up two-thirds of all revenue. The one with the up arrow, circulation, accounts for only a quarter (27%). That makes the business transformation difficult.
• The industry is still far away from a digital crossover point. Only 11% of overall revenues are now classified as digital, including the beginnings of digital circulation money. That number may become less useful over time. All-Access circulation revenue – built on not separating print and digital readers or their subscription payments – will cloud “digital” attribution. The big issue with the 11% number is that with the dependence on print for income, publishers must maintain so much of the costly apparatus that supports it, while digital-only competitors can operate on a far lower cost basis.
• Three billion dollars in new revenues — including marketing services, events, printing and more  – now make up about 10% of the total revenues, a function both of new revenue experimentation and dramatic print ad decline.
• Too many categories of newer revenue are so inconsistently defined as to make data comparison less than useful. Even in digital ads and “pure play digital ads,” NAA tried to get methodologies in place, but had to note “Yet the data suggest there is a wide variation in performance. At the low end, one company saw pure-play advertising account for just 1% of digital ad revenue. At the high end, one company now derives 67% of its digital advertising revenue from pure play—a sign that management strategy and market are important factors here.”  Yes, market factors and strategies do play a part, but how revenue is counted more greatly accounts for the disparities. If the industry really wants to benchmark new revenues well, it will have to adopt better standards.
• Zero is still the aspirational number (“The Newsonomics of Zero, and the New York Times“). The industry was down 2% in overall revenues, year over year, a marked improvement over recent years. That’s the key positive of the report, prompting my borrowing of Richard Farina’s long-ago-published counterculture classic “Been Down So Long It Looks Like Up to Me,” which Rick Edmonds recently pointed out as well.  It is still inching toward the black, with many obstacles ahead. All-Access reader revenue has legs, and let’s remember that two-thirds of the industry hasn’t yet begun to capture it. So zero is in reach for the industry, and for individual publishers. One aggressive regional publisher recently put it to me this way: “We’re not there yet, to zero, but we hope to be there by the end of 2013.” One more note on the magical zero: it’s still below the rate of inflation, even now running at about 2%.
• Overall, the industry is now down 35% from its height, to $38 billion in total revenue from a height of about $58 billion about a decade ago. It’s refreshing to see NAA step out from its long-held focus on audience (and how the digital age has expanded it) and acknowledge revenue as the core issue, bringing some better focus to what’s happening. Still, unless the industry will agree to common standards of revenue recognition, it’s going to remain tough to compare meaningful metrics of non-circ, non-ad revenue sources. I’d like to see a parallel survey of expenses. How newspaper companies spend their money is probably more important in a no- to low-growth time. Will they invest in content to further fuel the reader revenue revolution? When smart businesses find a winner, they double down.

It’s incredibly sobering to remember that three of 10 readers have abandoned news outlets. That’s a reflection both of those newsroom reductions, which have removed three of 10 journalists, and how newspapers still spend way too much money in ways that don’t improve the product. Newspapers spend 10-20% of their overall budgets on content creation. It’s not enough; readers are voting with their feet. In a time when reader revenue is what’s working — that number one bright spot — publishers have got to figure out how to spend more on the single source of growth, readers.

As new NAA CEO Caroline Little puts it, “America’s newspaper media are transforming themselves.” “In virtually every community they serve, newspapers have the biggest newsrooms, the best-known brands and significant audience market share. Now they are building on those to find new ways to serve audiences and local businesses.” All true. That said, this profound and long-required transformation has been profoundly slow. In 2013, we finally see more innovators and innovation, but the overall numbers in the NAA survey point to relatively glacial change.

Get your hot dogs. Get your beer. Get your newspaper. Step right up.

As Opening Day comes to the Big A in Anaheim on Tuesday, you can now expect to hear that barker’s call in Orange County. In what is fast becoming one of the most-watched experiments in newspapering (to use a quaint term), the Orange County Register innovates in a new way, aligning one hallowed American pastime with another.

Hundreds of newspapers have announced paywalls, as the Register is doing and a smaller subset is embracing “membership” as a way of redefining subscription. The Register, though, is making membership more meaningful with a just-completed deal with the many-named Los Angeles Angels of Anaheim. Starting tomorrow, “Register Connect” members — that is, seven-day subscribers — get a perk unlike any other in the newspaper world: free tickets to Angels games. That may be an actual game-changer — giving new meaning to the idea of “all-access.”

The new offer is just part of the Register’s aggressive, contrarian approach to paywalls, which is a central piece of its readers-first, invest-in-content staffing strategy (“The newsonomics of Aaron Kushner’s virtuous circles“).  It’s a strategy that reaches beyond the groupthink that has long characterized much of the industry. Let’s look at its approach, including the ticket giveaway — its pros and the cons, its potential brilliance and what could dull the strategy. Let’s look at the newsonomics of the Register’s new paywall, one run by younger, sure-of-themselves non-newspaper people. Let’s also consider how much the Register’s new approach reminds us how first-generation, how 1.0 the current pay systems in fact are. Over 2013, we’ll see twists, turns, and nuances, as even paywall stalwarts like the Columbus Dispatch and Dallas Morning News tell us about previously unannounced changes in their own paywalls.

Aaron Kushner and Eric Spitz, CEO and president respectively of Freedom Communications, which they bought out of bankruptcy last year, have diverse business backgrounds. You’ll find a smattering of greeting cards, beer, unfast food, horse-racing technology, and moving services on their resumes, and they bring that experience to the problems and opportunities of the modern newspaper company. You get the sense that they love to zag when others are zigging — which helps explain their pride in announcing their paywall.

“We’re doing four things that are totally unique,” Spitz told me this week. Those four are interesting, certainly, but they bury the Register paywall lead. The Register is doing two things that others have done, but are doing differently — putting up a hard paywall and making much more of the membership idea than peer pioneers have yet done with it. First, though, a quick run-through of Spitz’s four unique forays:

1. A paywall without discounted digital access

The Register will charge one price — a dollar a day or $365 a year. Get digital or print or both. “We are truly agnostic. It’s our job to get you the content anyway you want. It’s kind of like HBO GO.” Why one price? “You are not paying for the paper — you are paying for the content.”

Most papers charge less for digital-only access, often 50 to 70 percent of the print price. Many have found that non-print readers won’t pay print-like prices for digital-only; some, like The Dallas Morning News, have actually lowered their digital-only prices, as they’ve found low incidence of fully paid print readers “trading down” to digital-only.

In the abstract, the Register’s reasoning makes sense. In practice, expect that few non-print readers will fork over that much money, initially, for tablet and smartphone reading. In the long term, of course, publishers want readers to pay for the content, not the package. In the long term — with production, printing, and distribution costs largely gone and subscription rates close to what they were in print — news publishers would be greatly more profitable. That’s the long term, though, and the path there is foggy. Yes, The Wall Street Journal can charge 83 percent of its print price for digital, and the Financial Times 87 percent (or 113 percent), but those are business-specific anomalies in the print trade.

2. Time-based digital access

If you pay $2.40 for Sunday print only, you get digital access only on Sundays. The Register, true to its agnosticism, is literally matching print and digital access. (You can also buy Thursday-Sunday for $5.60 a week, with matching digital access.) It’s agnostic — and it’s literal. One could argue that The New York Times’ scheme — cheaper for Sunday print + digital access seven days a week — better meets its business needs and consumer psychology. But the Register’s approach is a great test to watch.

3. Day passes

For any 24-hour period, you can pay $2 for access — access that gets you, in effect, two days worth of Register stories. The daypass idea is one that hasn’t much been tested in the U.S., with the Memphis Commercial Appeal trying but apparently dropping it. TinyPass, the company powering Andrew Sullivan’s Dish paywall, says daily access is more popular overseas and for video, selling live events and sports videos. The idea: sampling. Potential upside: day-passers move to full subscriptions. Potential downside: Comparing a $365 commitment to a $2 commitment, many readers opt into day passes.

4. All archives open to the public

The last 90 days of the Register’s content is considered current and covered by the paywall. Any content older than that is open to the full public. Why? “It’s the current content that readers most value,” says Spitz. Undoubtedly true, but it seems to me that archives — a continually undervalued asset by most news companies — have more value that can be exploited.

But it’s the membership program — one that’s not unique in the industry — that will catch the headlines.

Most newspaper membership programs offer free ebooks (The Boston Globe), coupons (The Day in New London, CT) and retail discounts (Los Angeles Times). Some invite members to community events or to visit the editorial staff. The Register wants to go bigger. It approached the Angels, located 10 minutes away, with the idea of better using the empty seats the Angels couldn’t sell. The Angels found themselves sitting on almost 600,000 empty seats last year over 81 games. Put another 7,000 butts in those seats each night, even without getting paid for the ticket, and the club is pulling in another 10 bucks or so on Chronic Tacos, garlic fries, and overpriced Corona.

The perk is available on a first-signed-up, first-served basis to the Register’s 124,000 seven-day subscribers, beginning 72 hours before each game. Forty-eight hours before the game, the Angels, through Ticketmaster, release available seats. Register Connect buyers can nab four tickets, for a service charge of $5. Within a year — subject to going to the end of the electronic queue after landing some tickets — fans can claim as many as 96 tickets a season.

“We’re looking to execute at scale,” Spitz explains, noting that lots of membership perks are good, but few are likely to move the needle of buying and retention. The Angels’ ticket program is that touch of likely brilliance. It is a scale play — and one I’ve been looking for as I’ve heard about the various membership initiatives rolled out over the last two years.

Further, it acts on the power of media. The Register, though shrunken in circulation like the rest of its metro brethren, still throws a lot of weight around town. It retains the power to pull off a big deal with the local baseball franchise — and one that comes at relatively low cost to the newspaper. (The high value/low cost here parallels the Register’s precedent-setting “golden envelope” program, in which it gave those same seven-day subscribers a $100 “check” for “free advertising,” a check they could endorse over to their favorite charity. That program will now be offered “at least twice a year” as well.) A couple of decades after airlines embraced variable pricing — selling off commodities whose value was destroyed by time — the practice is getting to be standard in lots of industries. Newspapers, with their market power, then are well positioned to create a variable pricing marketplace — with their member-subscribers at the center — and the Angels deal leads the way there.

“For your $400 a year, we’re going to deliver you far more than $400 in value,” says Spitz, underlining the allure of “membership.” To make membership more than a card-in-the-wallet afterthought, Spitz says Register Connect will include a key fob — a literal “key to the city” — to facilitate greater use.

Finally, there’s that hard paywall. It’s the biggest enigma of the Register plan. Come to the Register site, and you can get any non-staff-written story — wires and syndicated content, which makes up 40 percent of the content overall — but you won’t get more than “a headline and a sentence” of local stories.

It’s been the meter — with its flexibility and open site sensibility — that has fueled the paywall movement. Yet the Register, two years into modern paywall history, is going with the hard wall. Why?

Spitz says the Register wants to be clear that paying customers get everything — all access on all devices — and that others don’t. You are a customer — or you’re not. You’re on the Register bus, or you’re off it. There’s a certain purity to the thinking; it certainly slams shut that loophole we’ll come to see as plain weird — readers paying several hundred dollars for print or nothing for online. The metered model has largely closed off that stark choice for real readers of any publication. The Register, though, wants to make it even clearer: Pay your $365 a year — either for print or digital or both — and you get the content. It wants to reinforce its buyers’ smart choice.

The move means that the Register will surely lose more pageviews than if it went with a meter. Figure that it will lose 20-30 percent of them, where new metered paywalls lose about half as much. “We don’t care about monetizing eyeballs,” says Spitz, talking about the small incremental ad value newspaper sites get from marginal readers.

I asked Spitz if he had talked with The Dallas Morning News, one of the few U.S. sites to go hard paywall, and he said he had. “The number one thing we take away from them is the most significant value of the paywall is that if someone signs up — a print subscriber who signs up for the paywall — they become 50 percent less likely to attrite [drop their subscription]. The most important value of a paywall as it turns out is you are telling your customer that they are not stupid for buying something their neighbor is getting for free.”

Ironically, publisher Jim Moroney of the Dallas Morning News tells me that his paper is likely moving to a metered model: “We’re pretty certain that’s part of our strategy. How do it is the question.” Today, the Morning News does what the Register is about to do, offering for free access all the non-staff content, but making local stuff inaccessible to non-payers. Why the likely change? In a word, sampling. Moroney believes that he’s secured his core readers — at a high price of $36.95 a month for seven-day print + digital — but knows he needs to crack a code to bring in new, and younger, readers. The hard paywall is a barrier to sampling.

Phil Pikelny, the Columbus Dispatch’s CMO  (“The newsonomics of pressing innovation“) is even blunter about the need for a meter:

Pre-2006, we had a hard wall at Dispatch.com. “It was an unmitigated disaster. While other news sites offered all free content, we [who only offered a free home page, free classifieds and free obits] were only able to attract 6,000 paying subs at the height of our ‘success.’ I’d say that thinking retarded our digital growth by three years. No matter what ‘we wish would happen,’ the simple fact is that people only pay for the value they perceive in a product. A website visitor looking at eight pages a month obviously derives little value from the site visited that infrequently. Obviously no pay scheme will win them over. I personally think a hard wall is so restrictive that the website immediately falls into the no-perceived value pile for too many people in the market.

Pikelny, like Moroney, is among those now looking at second-gen paywall notions: “We’re working on a dynamic paywall. Our thought is to eventually move to five free pages a month [from 10]. However, on those webpages where we have the heaviest revenue from advertising (and some of our most robust traffic) we are considering dropping the paywall altogether during certain dayparts. In other words, our home page and OSU sports pages might be without metering from 8 a.m.-10 a.m. and again from noon-2 p.m. The rest of the website would stay metered at all times. When we lower the meter to five pages a month, we might not lose those who don’t see ‘value’ in paying for our site since they will turn to us for headline or breaking stories without hitting a paywall.”

(At the Newspaper Association of America’s April 15 “Strength of Digital Subscriptions” session, Pikelny, the Star Tribune’s Mike Klingensmith, Gannett’s Laura Hollingsworth, and Press+’s Gordon Crovitz will join me for a session I’m moderating.)

Spitz says he, too, believes, in sampling, and that the Register will do that three ways: (1) the $2 day pass; (2) by providing seven days of free access with any fresh email signup; and (3) by pushing five to ten local stories in front of the wall at any one time.

Maybe, that will work. I’m dubious. Hard paywalls, no matter their intent, create a psychological barrier for readers, as The New York Times’ TimesSelect proved years ago. It doesn’t matter how clever you are; readers don’t like running into walls. That’s going to be especially true as news publishers confront the next challenge of paid digital readership. Properly, they’ve focused on their core print readers, extending them into higher-priced all-access.

That makes sense, but doesn’t provide enough growth, and those readers are averaging almost 60 years old. How are they going to convince younger, not-habituated-to-paying readers to join the paywall revolution?

For the Register, that’s a huge question. It’s down to 124,000 seven-day subscribers, with its official audited reporting pointing to 160,000 daily circulation. On Sunday, that number is 280,000, but it’s unclear how many of those are fully paid. Kushner and Spitz inherited a crazy-quilt of pricing when they took over the Register in June 2012. Their ability to weave a new rational pricing structure will make or break their out-of-the-box strategies.

Their all-in approach is refreshing, and as long as they’re prepared to quickly fix the moving parts that squeak, their model has a chance of success.