The Newsonomics of Scripps' TV Paywall & the Last Man Standing Theory of Local Media
First published at Harvard’s Nieman Journalism Lab
How much would you pay for online access to Ron Burgundy — or at least the Ron Burgundys of Cincinnati?
In an industry-shaking move, E.W. Scripps’ WCPO.TV — that’s the website of Cincinnati’s ABC affiliate — is putting up a paywall Jan. 1. While it may not quite be the first TV broadcaster in the U.S. with paid digital access, it is the first toannounce the move. With another station, a Press+ client, preparing to go paywall before the end of the month, this mini-revolution in local TV news may be starting small, but its ramifications could be profound: Local TV news — itself facing a transitional struggle because of digital disruption — is re-orienting itself for a battle with local newspaper news — and therein will lie lots of drama over the next few years.
It was the news of a TV paywall — a hard paywall at that — that caught a few headlines two weeks ago when the news broke. But that isn’t even the most intriguing thing about the WCPO push. Scripps is investing in content and in engagement in Cincinnati. In total, 30 people are being hired, “the vast majority” of them in editorial, with multimedia producers, community-oriented staff, and digital sales people filling out that number.
How big an investment is that? WCPO, in the 34th largest U.S. market, started out with a newsroom of about 75. Adding more than 20 new people to focus on digital is a substantial increase.
“That incremental staff produces content for the digital platforms, but when a reporter breaks a story exclusively (which is happening almost every day) that information/coverage/story makes its way to on-air, though it might be written or wrapped in a different way, appropriate for that medium,” says Adam Symson, Scripps’ chief digital office. “Our digital reporters often end up interviewed on set as part of the tell. Bottom line, they aren’t producing TV stories because they aren’t broadcast journalists, but expansion of coverage as a result of the strategy is absolutely positively impacting the depth and breadth of our on-air product every day.”
What’s behind Scripps’ contrarian play, in an age of news cautiousness? “It’s about winning digital,” Symson says. “At the end of the day, there is room for one, two, or maybe three local dominant media brands. Winning the digital consumer will be the price of admission to being one of those winning brands.”
“Winning” is the optimistic spin on that strategy. The flip side to ponder: There just won’t be enough advertising and subscription revenue to sustain any more than one to three significantly sized news staffs in many metro areas. Call this the Last Man Standing Theory of Local Media. It’s painful to think about, but the last half-decade seems to have born it out year after down year.
What’s the business strategy behind the investment? It’s not just about new subscription revenue. Thinking about the numbers, it can’t be.
As a free TV station — TV wants to be free, right? — WCPO, unlike newspapers, has no legacy base of subscribers who can be upsold to all-access, digital + print subscriptions. Aggressive all-access pricing is what is behind most of the new half billion dollars in circulation revenue we’ve seen in the U.S.; broadcast can only dream about that. While The New York Times has built up a business on 727,000 digital-only subscribers (“The Newsonomics of The New York Times’ Paywalls 2.0″), the top regional dailies are topping out under 50,000 for digital-only subscriptions; most newspapers struggle mightily to see five figures.
So what might WCPO, without an existing paying audience, expect?
Let’s say it got 1 percent of its 400,000 monthly unique visitors to pay up. That would amount to about 4,000 paying customers. Let’s say they pay $100 a year, on average. That’s $400,000. Or, let’s say 3 percent, or 12,000 — a highly optimistic number, I’d have to say, given the habits here. That would be $1.2 million. Five percent, or 20,000, would bring in $2 million a year.
Compare that revenue to the $3 million or so in new costs of the WPCO expansion.
Paywall revenue may not be the main play here. Consider two other kinds of revenue the initiative hopes to goose:
- Digital advertising: Scripps hired 100 digital-only ad reps across the company in 2013, “the vast majority” of them in TV rather than newspapers, and plans to hire more in 2014. (As a a whole, the company now has 229 jobs open.) That’s a big part of the company’s stated $22 million annual investment in digital. At WCPO, the expansion is a lot about better monetizing new digital customers. (It may want to start with making it’s “Advertise with Us” page a tad friendlier.)
- TV audience: The expanded website and mobile products offer brand promotion for that legacy product on-air. Push up its ratings points some — WCPO is now in second place in the market to WKRC — and TV revenues will increase.
So, the revenue strategy here is three-fold: more digital ads, higher TV ratings, and paywall revenue. We’d have to think this is a long-term strategy; Scripps execs like to talk about the company’s innovative roots and point with pride to the WCPO push as the latest example of it. The WCPO test will likely not pay for itself within 18 to 24 months — but as a long-term investment, it could pay off, especially if the Last Man Standing Theory is true. If Scripps stays the course, and maybe continues to expand WCPO over time — and Gannett continues to chisel away at the city’s remaining daily, The Enquirer — how will the two compare in audience and in digital revenue in, say, 2017?
We can ask versions of that same question in many metro areas. What if broadcast builds digital slowly, and print continues to fade away? Or, to frame it a different way: If you’re a company that owns both newspapers and TV stations, which seems better suited to be a base for the mainly digital age to come? Scripps seems to believe it is TV.
Why? The legacy costs are smaller; while TV production has its own old-world cost structure, it doesn’t compare to the Big Iron costs of presses, plants, and trucks required for print. And while print ad losses have made newspaper revenue growth largely a pipe dream since 2006, broadcast keeps managing to sustain itself. Odd-numbered years (non-election, non-Olympics) are always lower than even-numbered ones, and 2013 is no exception. So even with massive consolidation in the broadcast industry this year (Sinclair buying Allbritton, Tribune buying Local TV, Gannett buying Belo, among others), TV’s prospects are arguably more manageable than print’s.
That realization can be seen in Scripps’ own share price. It’s up 95 percent year over year, largely on the basis of its broadcast fortunes — which now supply the great majority of the company’s profits, though just a little more than half its revenues. That increase is surpassed only by Lee among publicly owned “newspaper” companies.
The Cincinnati Enquirer, which pushed Scripps’ own Cincinnati Post into oblivion in 2007, is, like most Gannett papers, cutting back, not adding to its content creation. August layoffs further reduced its staff, as bureaus were reduced, critics packed up their notebooks, and reporters were laid off. Gannett, like most owners of dailies, is retrenching to maintain profitability, as print advertising loss can only be evened out by increased subscriber pricing and cost cutting.
Dailies, which had come to think of themselves as monopoly dailies, may be the only big print game left in Cincinnati and cities throughout the country. Those cities, though, often sport three to a half-dozen TV news outlets. What if one of those outlets decided to compete — digitally — with the local paper? That’s one of the big questions we’ll see answered as the battle moves forward in Cincinnati. Already, a top broadcaster may lead the local daily in a quarter to a third of the U.S.’ top 50 markets. If broadcasters invest while newspaper companies disinvest, how much and how quickly could those numbers flip?
Check out the latest (October) Nielsen numbers for a sense of the competitive urgency in the Cincinnati market. While Gannett’s Cincinnati.com (which barely whispers the word “Enquirer” on its homepage) pulls in the most unique visitors, at 582,000 to Fox19′s 531,000 and WCPO’s 391,000, the engagement numbers already tell a different story. WCPO averages 13 minutes per visitor per month, more than double Cincinnati.com’s 6 minutes and a little less than twice Fox19′s. In the important engagement metrics, from total minutes to sessions per person to web pages per person, WCPO is a clear leader.
Now, with a paywall and its attendant marketing only weeks away, how will those numbers change?
Since most of the new editorial staff has already been hired (10 jobs now open), the results of Scripps’ content investment have already borne fruit in traffic. Consequently, it’s hard to know how much more upside the company will gain. Conversely, the nature of WCPO’s hard paywall could drive down engagement. Sure, lots of content — the kind of relatively commoditized breaking news, weather, traffic, and sports that are staples of TV news — will still be free. And yes, WCPO’s Ron Burgundys should still be largely accessible for free. But readers will run into the hard paywall when they try to read the only-on-WCPO stories, the kinds of stories for which Adam Symson’s research shows a hunger. Stories on education, religion, or health — you know, the kinds of stories that newspapers have long been known for. The new staff hired will focus much on that non-traditional TV coverage.
Scripps may be grafting a newspaper model on a digital TV platform. If it is, is that old-fashioned or a brilliant streak of genius? It’s a mind-bending set of media metaphors in search of the digital future.
WCPO is going with a hard paywall rather than a meter. It’s closer to many European “plus” paywall models, especially those popular at tabloid newspapers. Those papers, like local TV news, believe that when offering much of the same news as their competitors, it’s better to keep that stuff free and segregate the proprietary stuff. While the meter is all the rage among U.S. newspapers, 2014 will tell us a lot about the success of these plus models in Europe and, maybe, newly in the U.S. In the meantime, WCPO will see how much the paywall limits the crucial sampling of digital content, key both to maintaining high digital traffic and improving subscription conversion. Scripps uses Digital Paymeter, developed by Syncronex and NewsCycle Solutions (formerly DTI) to power both its TV and newspaper sites; the newspaper sites use a meter, though one that is time-, rather than article-, based.
Think of the WCPO test in part as R&D for the rest of the company.
“Scripps is not a holding company,” says Symson. “It is a consumer products business. You’ve got to get the the product right first.” If it gets that product right — along with the paywall model and the pricing (which is still TBA, but likely below the $9.99/month threshold) — then Scripps can export the model to others of it 19 TV markets, joining its 16 newspaper paid sites. Going into 2014, though, there’s no timetable for doing so.
Soon there will be other local TV experimentation to watch. As Press+ (which this week announced its 500th customer) launches its first local TV metered paywall, we’ll see how that experiment progresses as well. The nuances of metered TV sites will be worth watching for newspaper sites as well. In Press+’s TV model, the video meter is a clock — giving, for instance, 10 minutes of free viewing, before watchers hit warning and pay-up screens. The text-story meter is still article-based, so the TV model is a hybrid.
The WCPO expansion raises many more questions for the news business. Among them:
- How will the interplay between on-air and digital work with the new staff?Broadcast has struggled with the same issues newspapers have in integrating or separating digital from the traditional product. Similarly, how well will the segmentation of video — given stations’ traditional orientation to block-programmed TV — move forward? It’s been painfully slow at many broadcasters.
- Where does mobile fit into the picture? Some broadcasters tell me that as much as 60 percent of their traffic is now mobile; that’s well beyond the 35 percent commonly reported by newspaper sites. WCPO is in the newspaper range — 25 to 35 percent — and has readied a new set of apps as well as responsive design. Across the broadcast industry, work is being done at the company level and through industry consortia (“The Newsonomics of Breakthrough Digital TV, from Aereo to Dyle and Mundo Fox to Google Fiber“), and TV too faces near-infinite opportunities and challenges in mobile.
- How much of the TV pay experience will be mass and how much niche?WRAL’s TechWire, built in association with paywall provider Cleeng, is approaching its first year of paid experience (“The Newsonomics of Influentials from D.C. to Singapore to Raleigh”). Constructed around a membership model, the site is growing and retaining its subscribers, and John Conway, general manager of WRAL.com, suggests that the station’s investment, too, is a long-term one. At this point, it’s all about finding ways to put more people into the top end of the audience funnel and improve the conversion rate; that’s the nuts-and-bolts of the pay trade. Raleigh’s WRAL is one of the strongest local broadcasters in the nation, but don’t expect it to put up a full-site paywall any time soon.
- Is membership an answer here? Adam Symson isn’t yet disclosing details of the WCPO subscription offer, but he uses the term “membership.” That’a a term in wide and diverse usage in the digital sub trade, from WRAL to the Chicago Tribune. What might be part of a local TV membership bundle that could make you buy?