When the price of your digital product is zero, that’s about how much you learn about customer pricing. Now, both the pricing and the learning is on the upswing.

The pay-for-digital content revolution is now fully upon us. Five years ago, only the music business had seen much rationalization, with Apple’s iTunes having bulled ahead with its new 99-cent order. Now, movies, TV shows, newspapers, and magazines are all embracing paid digital models, charging for single copies, pay-per-views, and subscriptions. From Hulu Plus to Netflix to Next Issue Media to Ongo to Press+ to The New York Times to Google Play to Amazon to Apple to Microsoft (buying into Nook this week), the move to paid media content is profound. The imperative to charge is clear, especially as legacy news and magazines see their share of the rapidly growing digital advertising pie (with that industry growing another 20 percent this year) actually decline.

Yes, it’s in part a 99-cent new world order as I wrote about last week (“The Newsonomics of 99-Cent Media“), but there are wider lessons — some curiously counterintuitive — to be learned in the publishing world. Let’s call it the newsonomics of Pricing 101. The lessons here, gleaned from many conversations, are not definitive ones. In fact, they’re just pointers — with rich “how to” lessons found deeper in each.

Let’s not make any mistake this week, as the Audit Bureau of Circulation’s new numbers rolled out and confounded most everyone. Those ABC numbers wowed some with their high percentage growth rates. Let’s keep in mind that those growth numbers come on the heels of some of the worst newspaper quarterly reports issued in awhile. Not only is print advertising in a deepening tailspin, but digital advertising growth is stalled. Take all the ABC numbers you want and tell the world “We have astounding reach” — but if the audience can’t be monetized both with advertising and significant new circulation revenues, the numbers will be meaningless.

When it comes to dollars and sense, pricing matters a lot.

Let’s start with this basic principle: People won’t pay you for content if you don’t ask them to. That’s an inside-the-industry joke, but one with too much reality to sustain much laughter. It took the industry a long time to start testing offers and price points, as The Wall Street Journal and Walter Hussman’s Arkansas Democrat-Gazette provided lone wolf examples.

The corollary to that principle? If you don’t start to charge consumers — Warren Buffett on newspaper pricing: “You shouldn’t be giving away a product that you’re trying to sell.” — then you can’t learn how consumers respond to pricing. Once you start pricing, you can start learning, and adjust.

We can pick out at least nine emerging data points:

• 33-45 percent of consumers who pay for digital subscriptions click to buy before they ever run into a paywall. That’s right — a third to a half of buyers just need to be told they will have to pay for continuing access, and they’re sold. As economists note that price is a signal of value, consumers understand the linkage. Assign what seems to be a fair price, and some readers pay up, especially if they are exposed to a “warning” screen, letting them know they’ve used up of critical number of “free” views. Maybe they want to avoid the bumping inconvenience — or maybe they just acknowledge the jig’s up.
• If print readers are charged something extra for digital access, then non-print subscribers are more likely to buy a digital-only sub. Why pay for digital access is the other guys (the print subscribers) are getting it thrown in for “free”? Typically, Press+ sees a 20-percent-plus increase in signups on sites that charge print subscribers something extra. That extra may be just a third or so of the price digital-only subscribers pay (say, $2.95 instead of $6.95), but it makes a difference. Consequently, Press+ says 80-90 percent of its sites charge print subscribers for digital access. The company now powers 323 sites and thus has more access to collective data than any other news-selling source.
• You can reverse the river, or at least channel it. The New York Times took a year, but figured it out righter than anyone expected. It bundled its Sunday print paper (still an ad behemoth) with digital, making that package $60 or so a year cheaper than digital alone. The result, of course, is that Sunday Times home delivery is up for first time since 2006. It’s not just NYT or the L.A. Times which have embraced Sunday/digital combos. In Minneapolis, the Star Tribune began a similar push in November. Now, of its 18,000 digital-only subscribers, 28 percent have agreed to an add on the Sunday paper, for just 30 cents a week, says CEO Mike Klingensmith (“A Twin Cities turnaround?”). So we see that consumers may well be more agnostic about platform than we thought. Given them an easy one-click way of buying even musty old print, and they will. Irony: If you hadn’t charged them for digital access, you probably wouldn’t have sold them on print.
• New products create new markets. 70 percent of The Economist‘s digital subscribers are not former print subscribers, says Paul Rossi, managing director and executive vice president for the Americas. That’s surprising in one sense, but not in another. Newspaper company digital VPs will tell you that they’re surprised to see how little overlap there is between their print audience customer bases and their digital ones. The downside here: Many print customers seem not to value digital access that much. The Star Tribune is finding a low take rate of 3 percent of its Sunday-only print subscribers willing to take its digital-access upsell. One lesson: The building of a new digital-mainly audience won’t be easy and will require new product thinking; it’s not that easy just to port over established customers.
• The all-access bundle must contain multiple consumer hooks. Sure, readers like to get mobile access as well as desktop and print, and maybe some video. Yet some may especially prize the special events or membership perks they are offered, as the L.A. Times is banking on (and start-ups Texas Tribune, MinnPost, and Global Post have applied outside the paywall model). Some will like the extras, like The Boston Globe telling its new 18,000 digital subscribers, as well as its print ones, that they now get “free” Sunday Supper ebooks (“The Newsonomics of 100 Products a Year“). Sports fanatics or business data lovers will find other niches to value — and ones that make the whole bundle worthwhile. Archives — and the research riches they offer — will prove irresistible to some. In 2012, a bundle may offer a half dozen reasons to buy, casting a wide net, with the hope that at least one shiny lure will reel in the customers. By 2013, expect “dynamic, customized offers,” targeting would-be buyers by their specific interests to be more widely in use.
• While pageviews may drop 10-15 percent with a paywall, unique visitors remain fairly constant. We see the phenomenon of those who do hit a paywall one month coming back in subsequent months, rather than fleeing forever. “It may be the second, third, or fourth month before someone says, ‘I guess I am a frequent visitor here, and I’ll play,’” says Press+’s Gordon Crovitz.
• Archives find new life. Archives have lived in a corner of news and magazine websites for a long time. They’ve been used, but not highly used or highly monetized. Now, courtesy of the tablet, and a new way to charge, The Economist is finding that 20 percent of its single copy sales are of past issues. Readers will pay for the old in new wrappers, whether back e-issues, or niched ebooks. The all-access offer can be much wider than cross-platform, or multi-device. It can extend across time, from a century of yesterdays to alerts for tomorrow.
• News media is probably underpriced. Take the high-end Economist. CEO Andrew Rashbass — speaking to MediaGuardian’s Changing Media Summit 2012, in a recommended video — said that a survey of its subscribers showed that a majority didn’t know how much they were paying for the Economist. When pressed to guess, most over-estimated the price. At the Columbia (Missouri) Daily Tribune, an early paywall leader in the middle of America, a recent price increase to $8.99 from $7.99 has so far resulted in no material loss of subscribers. At Europe’s Piano Media, early experience in Slovakia and Slovenia is that price isn’t a big factor, says Piano’s David Brauchli. “Payment for news on the web is really more a philosophical mindset rather than economic. People who are opposed to paying will always opposed to paying and those who see the value of paying don’t mind paying no matter what the price is.” That suggests pricing power. It makes sense that publishers, new to the pricing trade, have approached it gingerly. Yet the circulation revenue upside may well be substantial.
• Bundle or unbundle — what’s the right way? Mainly, we don’t know yet, and the answer may be different for differing audience segments. The Economist started with print being a higher price than a separate digital sub. Then it raised the digital price to match that of print — to assert digital value. It now offers all-access: one price gets you both. Next up: You can buy either print or digital for the same price, but if you want both, you’ll pay more. It’s an evolution of testing, and so far, it’s been an upward one.

Overall, this is a revolution in more than pricing. It’s a revolution in thinking and, really, publisher identity.

The Boston Globe’s Jeff Moriarty sums it up well, as his company aims (as has the Financial Times before it; “The Newsonomics of the FT as an Internet Retailer“) to emulate a little digital-first company called Amazon:

I think overall publishers have to start thinking more like e-commerce companies. More like Amazon. You can’t just throw up a wall or an app and expect it to just sell itself. We’re still building that muscle here at the Globe, and some of our colleagues in the industry are even farther along. We have extensive real-time and daily analytics and are employing multivariate testing to try offers and designs to refine the experience that works best for each type of user.

Honk if you still love newsprint enough to pay $700 or more a year for a seven-day print subscription to The New York Times. Of course, you have many other choices.

You can try one of several print/bundled options for considerably less money. Or if you want to be parsimonious, you can get 10 free article views a month, or more if you want to work the social and search on-ramps to NYTimes.com. Maybe you want to be among those who pay Ongo $1.99 a month, and get 20 Times news stories a day, among lots of other news content.

Love the Guardian, and want to follow each tick of the U.K.’s Murdoch saga? If you’re in the U.S., you can subscribe to the lively iPad edition for $13.99 a month — or access it for free via the Safari browser on the tablet. In the U.S., its smartphone app is free, but in the U.K. and Europe, it requires a subscription. Of course, it’s quite successful Facebook app gives you access for free as well, anywhere.

If you’re shopping the Ongo news kiosk, look at wide spectrum of prices individual publishers are charging for access through that product: The Guardian is 99 cents a month, The Christian Science Monitor is $3.99, while the Chicago Tribune is $9.99 and The Boston Globe $14.99.

It’s not just newspaper companies that offer a patchwork of buying (or not buying) choices.

Are you a late-arriving fan of AMC’s series “Breaking Bad”? If you want to catch up and subscribe to Netflix streaming, you’ve got a good deal at the $7.99 a month rate. Cram in the first three seasons’ 37 episodes in a single month (where did that month go?), and you’ll pay just 21.5 cents per show, and anything else you have time to watch is gravy. Ah, but if we want to watch Season 4, which you can’t yet see on Netflix streaming, you have to upgrade to those red envelopes and get Season 4 DVDs — but it’ll cost you another $7.99 a month, and you’ll have to wait until the DVDs are released in June. (Ah, maybe that’s one of the reasons Netflix’s maladroit move to streaming is pushing it to a loss.)

Or you can turn to Amazon VOD and get the episodes for $1.99 each (or $2.99 in HD!), or $25.87 for the season. Or why stream when you own the DVD in a few weeks for $29.99 (or add an extra 10 bucks for added Blu-ray clarity). But wait — I’m an Amazon Prime customer. Can’t I watch it for free? It’s not part of the Prime free streaming offer, but I can watch a whole lot of other stuff as often as I want for nothing. Or maybe I can access “Breaking Bad” through Comcast’s Xfinity $100-a-month plus service. Nah, no deal — “Breaking Bad” isn’t available.

One more try: on the AMC site itself, there’s quite highlights, blogs, and more on the series, but no full episodes.

Let’s add in music.

Take Tristan Prettyman. It’s $9.99 (or 83 cents a song) for her last CD on iTunes. Through my $36 annual ad-free Pandora subscription, I can listen to dozens of her songs, her musical soundalikes, and thousands of other tunes in a year, bringing down the cost to pennies per song. Or there’s Spotify, where her songs are available for either zero, five, or ten bucks a month, depending on what devices I want to use and whether I can stand ads.

Magazines, of course, are offering their own split-screen experiments. The U.S. magazine industry (“The Newsonomics of Next Issue Media’s All-You-Can-Eat Kiosk“) is testing the all-you-can-eat, cross-title buffet, bringing some its titles down to as long as 37 cents a month (if you consumed all 27 “basic” titles) through the kiosk, but $39, or $59, or $79 a year if you buy a single title directly through a publisher.

How much to charge?

It’s a fool’s paradise of pricing out there in the digital world, right now, at least for wily consumers. The Department of Justice’s ebook suit and related settlements only complicate things. Five and ten years ago we were wondering whether people would ever pay for digital media — Newsweek’s Steven Levy took us into the terra incognita in “Meet the Napster Generation” back in 2000. But now the question isn’t whether people, young and old, will pay — it’s how the hell to figure out how much to charge them throughout what we politely like to call our multi-platform world.

Content no longer demands to be free. It wants a fee — but how much of one?

Consumer pricing is not a core competence of many media companies. For decades, media pricing was on automatic. Newspapers picked a quarter or fifty cents, and then re-programmed the coinboxes. Magazines kept prices low enough to build audiences to reap substantial ad rewards. Book publishers did some minor stratification. Music companies picked a couple of price points, and let the vinyl and CDs fly.

In the digital era, though, pricing is confronting — and confounding — media companies. Just what in the digital world of vanishing manufacturing costs is digital media worth? Now with those 20th-century costs — printing, manufacture, distribution, shipping — passing into the night, the question of price, and value, is making itself loudly heard.

We can certainly identify the wrong-headedness of the Department of Justice’s price-fixing suit against book publishers and/or point out how the DOJ had little choice in pursuing the case, neither of which is a surprise. The law has struggled unsuccessfully to keep up with business changes wrought by the Internet, from fair use to antitrust to media monopoly. Oft-earnest American regulators find themselves falling farther and farther behind, trying to track technology’s dominating nature and make new sense of it. Often, European Union regulators take a more forthright stab but end up retreating.

Create a new legal framework that better balances producers, distributors, and consumers? Forget about that in this age of politics where stalemate and status quo is the order of the day.

Publishers of all media are on their own, then, and they’d better make sense of pricing. It’s core to their survival and future sustainability. Sure, the Amazons of the world will try to monopolize book pricing, returning closer to its pre-”agency pricing” market share of 90 percent from its current paltry 60 percent. Yet, publishers — especially of news and feature media, news organizations and “magazine media” — have many pricing plays to try as customers discover content near and far from traditional outlets.

The magic of a good price point

I’ll call this the newsonomics of 99-cent media because that’s the world into which we have moved. Today let’s look at that 99-cent model, and next week we’ll delve into the early lessons that pricing’s practitioners have stumbled across as they’ve moved into paid content.

At first, it looks like a tyranny of 99-cent pricing (or the parallel expected tyranny of $9.99 Amazon book pricing). Will 99-cent pricing cause brand damage? Will it last? If the U.S. follows Canada and forsakes the penny, then the 99 cent pricing may fall into history. For now, though, it’s got a certain consumer magic.

“Ninety-nine-cent introductory offers have done wonders for take rates,” says applied economist Matt Lindsay, president of Mather Economics. His company has worked with more than 200 titles — about 75 percent of them newspapers — on pricing and related strategic issues. Take a look across media pricing, from The New York Times to Hulu Plus, and 99 cents (or its derivatives of $1.99 to $7.99 to $9.99) are everywhere.

Take rate is simple: What percentage of customers click yes — and provide precious credit card data — when confronted with an offer. Offer readers the ability to start a “trial” for 99 cents, and you’ll see results two to three times any other number, says Lindsey. At 99 cents, readers “take that as a signal. They understand that you want them to adopt this product. By setting the full price at a high number, you are basically saying, ‘This is the true value of the product.’”

Steve Jobs understood signaling in a parallel way. As Chris Anderson described well in Wired last November (“The Magic of 99 Cents”), one of Jobs’ great successes with iTunes and the iPod was that 99-cent pricing for songs. He could get the hardware and software right, but in the not-quite-post-piracy age, 99 cents was the third leg of the value equation. It worked as a signal: somewhere in between free and too much.

Start with 99 cents and you can conquer the world. As they set off on that quest, what are some of the pricing guideposts for publishers?

• 99 cents is a beginning and not an end. For newspapers used to being paid $200 or $400 a year, 99 cents seems like a declaration of cheapness. Put some round 0s on pricing; it just seems more honest. The oft-cited example of Louis CK’s $5 video is a case in point. Five bucks says authenticity. Yet media that answer thousands of reader questions every day aren’t comedians. Just because you set an intro price of 99 cents, the down-the-road price sends thatother important signal to value. Ultimately, says Lindsay, it’s true that “people take price as a signal to quality.”
• If you have lots more to sell, then 99 cents isn’t a price, it’s a price of admission. Responding to my recent column about ”small things” adding up, Rob Pegoraro asked, on Twitter, how The New York Times’ earnings results related to the notion. “I think NYT 454K dig subs become great market for ‘small things’ like ebooks, events+,” I responded. David Johnson then added, “You pay to be in a market. These business plans resemble theme parks and non-profit fundraising strategies.” That thought fits perfectly here: it’s not about the money, large or small, an even buck or 99 cents — it’s about establishing a new relationship. Or, to use the vernacular, 99 cents is gateway-drug pricing.
• Get ready to sell lots of stuff. So if you are Six Flags, or The New York Times or the L.A. Times, you’d better be able to leverage that new relationship by selling lots of stuff. Maybe not yet 100 products a year, but at least a half dozen to start. Ebooks, of course, fit perfectly here, as add-on products offered to members or subscribers. Sure, use some, as The Boston Globe is doing with Sunday Suppers, to reinforce subscriber/member value. But price others to match potential value. A guide to Boston-area colleges from, who else, the Globe, could be a $19.95 solid seller, given the $100,000-plus parental investment ahead. “Ebook,” though, is much too limited a name to put on it, and sounds like something not current. Wonderfactory founder and creative director David Link made this basic but hugely important point when we talked last week: There really isn’t a fundamental difference between an app and an ebook. “From an agency and a technology’s point of view, it’s only in how you create them. Talking about a recent product Wonderfactory worked on, “You go to the ebookstore, and it’s just text. You go into the app store and it’s got the text with 50 percent app-like sauce.” So, right now, publishers and their creative people are having to create multiple forms, but essentially the same product is both an app and an ebook. The technologies, and the costs, will clarify, as will the marketplaces for all the digital paraphernalia of our lives. The point for publishers selling more stuff is clear though: solve audience needs better than someone else, create products for the devices of the day, and price accordingly.
• It’s not just the content we’re paying for. That’s a tough, tough lesson for literal newsies. As with the music revolution Apple wrought, it was the combination of convenience, ease, presentation, pricing, and wonder that rationalized (for good and bad) the digital music industry. Today’s first batch of digital news subscriptions rely as much on convenience and mobility values as they do on the words and pictures.
• We’re all in the same business. Think of your own media purchases. A little music, more and more video, selective news and magazine subscriptions, increasing numbers of ebooks. Yes, the marketplaces for ebooks and apps, alongside this kiosk and that e-store, are confusing. Media, though, is media, and the pricing schemes are forming in a remarkably similar way across movies, music, newspapers, and magazines. We all like, for instance, the notion of All Access; we’ll pay once and get our stuff everywhere. So news and magazine publishers must look through the assorted lessons of the music and movie industries, those lessons still in much progress. News pricing is not an island.

Try this: Call up your local newspaper or online news organization. Tell them you want to buy something and ask them what they can sell you? Of course, at first, they’d be non-plussed: Sell you something? Then, after giving it some thought, they’d say you can buy a newspaper or a subscription or a membership — or, maybe, an ad? Would you like one of those?

Those days — mark it — are coming to an end. We’re on the brink of news companies producing hundreds of products for sale each year. While digital technology hath taketh (the easy ability to make money on news distribution), digital technology also giveth back, with the ability to create hundreds and thousands of newsy products at small incremental costs. The bonus: News organizations will be able to satisfy groups of readers and advertisers (often disguised thinly as sponsors) better than ever before. Double bonus: The let-a-hundred-products-bloom revolution fits neatly with the all-out embrace of all-access circulation initiatives, which news companies in North America, Europe, and Asia now can’t seem to implement quickly enough.

Can we call this the ebook revolution? Maybe, but that’s probably too narrow. Delivery of new products to new audiences can take several forms. A text-only ebook, a shinier iBooks-enabled product with video, or an app with all the glorious functionality apps offer. It’s not the form; it’s the content, content that satisfies niches rather than serves masses with one-size-fits-all newspaper or magazine products.

Call it the newsonomics of 100 products a year, or just one way to envision a much bigger future.

The 100-product-a-year model is a much-needed growth model. We can see how it fits nicely with all-access subscriptions, and together we have two interconnected Lego blocks of a new sustainable news model. We have two essential parts of a crossover model  (“The Newsonomics of Crossover“)  that I detailed here a few weeks ago. The big, hairy challenges of accelerating print ad loss and onerous legacy costs remain, but at least we’ve got a couple of building blocks we didn’t have two years ago. By we, I mean those of us who care about news and great professional content.

Is it a big moneymaker? We don’t know yet, though we can extrapolate some numbers below.

It’s directionally right, though, for at least a couple of strategic reasons. The notion of 100 smaller products reminds us that so much of the new world is based on volume. Google has built a monstrous advertising business on hundreds of thousands of smaller advertisers, while daily newspapers reaped huge profits on relatively few bigger advertisers. Even as movie watching by streaming surpasses DVD watching, more money is still in the old medium. Streaming will monetize at a lower rate, but end up generating bigger dollars over time. The same thing is true in the digital music business. Selling lots of stuff to lots of people at smaller price points is something the Internet enables superbly.

Yes, there are definitely new winners and losers in movies and music, as there will be in news. Those who transition best and fastest will win.

Second, it’s in line with the strategic push to satisfy the hell out of core customers. As publishers have figured out that it’s the top 15 percent of site visitors who make the big difference in building the new digital business — perhaps paying for subscriptions, consuming many more pages than fly-by users sent by Google — core customer satisfaction is key. Ebooks deeper the relationship to that reader customer.

This 100-product-a-year model may fit as well with the new California Watch/Bay Citizen combo (“The Newsonomics of the Death and Life of California News“), finalized Tuesday, as its does with The Wall Street Journal, The New York Times, the Charlotte Observer, GQ, or Conde Nast Traveler.

Let’s take one example. On Wednesday, the Boston Globe launched “Sunday Supper & More.” It’s a cookbook. It’s New England. And it could be the beginning of a new franchise: Expect summer, fall and winter editions each year to join this spring debut. The Globe’s staff built it with Apple’s iBooks Author tool, so it offers video within it.

Want to buy it? Not so fast. Today, Sunday Supper & More is only available to Boston Globe print, all-access, and digital subscribers. So subscription — think “membership” (the recent riff of the L.A. Times new paywall intro) — is gaining new benefits. Surprise, says the Globe, you not only get our paper, our spiffy new replica-plus edition, if that’s what you want, and our mobile apps — you also get our cool cookbooks, with more to come.

The Globe will sell the book to non-subscribers — probably at $4.99 — but will decide the timing of that sale after next week’s Globe confab at which execs and editors will plot an ebook plan for the company.

“Events and ebooks will be the two biggest perks” of the new Globe subscription push, says Jeff Moriarty, the Globe’s VP of digital products. Beyond Sunday Suppers and a new spin on the Fenway 100 historical Red Sox book, we can picture the Globe soon mining its archives in both sports and features to provide new value for customers and a new leg of revenue. It experimented early with three books on its Whitey Bulger stories, and learned some lessons in pricing, distribution, and the technical creation process along the way.

The Globe has plenty of company in this push. We see Canada’s National Post committing to a couple of dozen ebooks in the coming year, again from hard news to features (“To learn what works (quickly), Canada’s National Post dives into ebooks”). Guardian Shorts is an early innovator; Politico is churning out four campaign ebooks this year.

Magazine publishers, faster than newspaper publishers to embrace the tablet as the next-gen platform, are also ahead of most newspaper publishers in ebooks. Vanity Fair’s done more than a half dozen, and its parent Conde Nast is hosting an explosion of more single-purpose apps in the iTunes Store, some unrelated to Conde’s magazines. Hearst’s Cosmopolitan is embracing ebooks, and now partnering, along with ProPublica — an early tester of ebooks — with Open Road Integrated Media . Open Road Integrated Media?

Well, it’s a book company, an ebook company juiced on the possibilities of our age. Headed by former HarperCollins CEO Jane Friedman, the company is prototypical of a new group of middlemen. With book marketing savvy (cover design, marketing, distribution+), these companies are now feeding the emerging ebook marketplace. They are also partnering back for that old standby, print, as Open Road has done with book services company Ingram. In Canada, it was Harper Collins Canada that became the National Post’s partner in bringing news ebooks to market.

Just as the web has knocked many middlemen for a loop, it creates openings for new ones.

If you talk to publishers about ebooks, they are farther along in experimenting than they were a year ago. Yet some basic issues — producing the books, marrying them to commerce engines, placing them prominently in e-stores and more — are giving them headaches as they push forward. “How do we make the right offer to the right person at the right time?” one experienced exec asked.

The marketplace has been exploding (recall that Amazon announced last spring that its ebooks were now outselling its paper books), but those issues are setting the stage for a new group of companies, many staffed with graduates of the book industry, offering their help. Newspaper and magazine publishers are looking to the Open Roads for guidance.

Some are turning to their digital circulation partner, Press+. That company, which is powering more than 280 titles’ subscription commerce, says its system can handle the commerce and even help with identifying likely customers, based on tracked content usage, so its customers are just beginning to ply the ebook trade.

ProPublica general manager Dick Tofel opted for Open Road for the non-profit investigative publisher’s fifth and sixth books. He says the company will start producing a half dozen or more a year now and is now fielding calls from other publishers eager to get the benefit of his early ebook experience.

So far, ProPublica has put 90,000 ebooks into the market. The first couple were free downloads, but with the addition of new original introductions to work ProPublica had already published free online, Amazon and ProPublica agreed on test pricing of 99 cents and $1.99, and new revenue is rolling in. It’s small, but “pound for pound, it generates more than advertising,” notes Tofel, who is a Wall Street Journal veteran. And, of course, the incremental cost of creating ebooks is closer to zero, with most sales cost able to be a commissioned cost of sale.

As assistant publisher, Tofel oversaw the print books business that’s been a good Dow Jones sideline for a long time.

Those books — personal investing and more — are naturals for the ebook revolution now. Look for the Journal to experiment more with those titles, perhaps niching by life stage.

As news and magazine publishers look to this new revenue stream, here are six points to ponder:

It’s about product development: Yes, it’s editing, but fundamentally, it’s a mindset change for many publishers stuck in the one-size-fits-all world. Publishers either need staffers with new product chops or partners wanting to license publisher content and create the products for the marketplace.

Free the archives!: Digital archives have never been a big business for publishers, caught somewhere between Google and musty library connotations. Packaged archives — for specific audiences — can offer new life for older content.

Don’t think content; think problem solving: Publishers too often start with content. If we start with audience — college-planning students and parents, new mothers and fathers to be, bored cooks, and, big time, sports enthusiasts of all ages — we can see the motors of ebook publishing beginning to role. Think life stage, just for starters, and add the geo angle, and regional publishers can play.

Mining the database: As onesies and twosies, it’s fairly easy to pick content from publishers’ own databases. Think of bigger production cycle, going beyond the 100 a year, to a thousand, all niched products that could be semi-automated and templated over time. Better tagging of content for ebook usage then becomes a priority.

Ebook or app?: Early experimenters say let the content be your guide. The more multimedia, the better an app may work. Ebooks, though, can be sold through more distributors, while Apple continues to dominate the app business.

Pricing: What’s an ebook worth? If it solidifies a subscriber/member paying $300 or more a year, it’s worth a lot, even if it’s free. Think of the lifetime value of that subscriber.

To the right niche, some ebooks will be worth $1.99 and others — Retina perfect — will go for $19.99. Let’s take our 100 products a year. Let’s average 5,000 sales for each. Let’s price at $2.99 on average. That would be $1.5 million. Some books, though, could be blockbusters. We can play with this math and see where it goes.

For the ProPublicas, it’s a nice non-ad revenue stream. For other publishers, it’s at least a growing third leg of revenue (beyond ads and circulation) and one that may be nurtured into something significant. (Last fall, Will Sullivan offered a gaggle of reasons ebooks make sense for publishers.) As importantly, it can reinforce those two legs, pleasing subscribers/members with free (or discounted) perks and advertisers/sponsors who have new opportunities to represent themselves to niche audiences. That’s a pretty good combination, and one that publishers will soon embrace, just as they lately have all-access digital circulation.

By historical measure, it’s a strange move. A large newspaper company CEO is captain of his own ship, at a pinnacle of American company life and compensation. The Associated Press, on the other hand, has been something else indeed, a wire, about as unsexy as a news company can be. Retiring CEO Tom Curley came over to AP from his role as publisher of USA Today almost nine years ago. It’s been a helluva nine years of transformation, of turning the quite traditional company he inherited from long-time head Lou Boccardi into a modern news company. He got it part way there.

Now Pruitt takes the baton, as most reports paint a picture of night falling on one of America’s oldest industries. The Council of Economic Advisers has reported that the press is “America’s fastest-shrinking industry”, measured by jobs lost,” and the Financial Times headlined its recent newspaper round-up, “Bleak outlook for US newspapers.”

Why do it? Why trade in the sleepiness of California’s capital city (Sacramento is McClatchy’s headquarters) for the bright lights of Broadway, a long walk from AP’s NYC offices?

Number one on list may be McClatchy fatigue. Pruitt and his CFO, now-successor Pat Talamantes, have rowed the third-largest U.S. newspaper company oh-so-gingerly around the bankruptcy shoals that have grabbed more than dozen of their peers. They’ve had to make devastating cuts in staff and other expenses along with other companies, but get some points for greater efforts to keep newsroom size and spirit going in the face of that bleak reality. It’s important to note that McClatchy has found no special sauce in transforming itself for the digital age, performing on par, sometimes better, sometimes worse, than its peers. Pruitt is getting this job not on the basis on being a proven transformative player, but on being a known, highly respected news exec who understands the challenges of the times.

Almost exactly six years ago, Pruitt seemed like a big hope for higher-quality, newspaper journalism in the transitional print/digital age. On March 6, 2006, which seems like two eternities ago, McClatchy bought Knight-Ridder, then the second-largest newspaper company in the country, and my work home for 21 years through 2005.  Though Knight-Ridder’s quick demise was shocking, Pruitt’s commitment to journalism was reassuring. I remember the conference call the company did to tout the purchase, and the optimism and commitment in Pruitt’s voice:

“Opportunities like this come perhaps once in a company’s lifetime, and  we’re thrilled to have this chance to extend McClatchy journalism and our  proven newspaper operations to 20 high-quality newspapers in high-growth  markets. Our two companies operate in the finest traditions of American journalism,  devoted to independent, public interest reporting and the highest ethical  values. Combining the two creates a company particularly well-positioned to  lead the way in a changing media landscape. It’s truly a chance for McClatchy  to do more of what it does best.”

We hoped Pruitt would become a strong public leader for those values in this difficult age. Fending off bankruptcy, challenged by new non-family shareholders and consumed by month-to-month survival, that leadership went underground. There was little percentage in asserting journalistic values in that environment, it seemed.

So now: AP. Certainly, the company owns its own set of life-and-death challenges. The non-profit cooperative, owned by newspaper companies, is still somewhere betwixt and between a wire and a global media company.

One thing Pruitt trades in: a non-national company of diverse properties for a worldwide media play. In a word: Scale.

AP is one of the Digital Dozen companies I wrote about in the Newsonomics book. The digital business is all about scale: do something better than others and then take it out, at very low incremental costs, to the rest of the world. The Wall Street Journal, BBC, the New York Times, Bloomberg, Guardian and a half dozen others fit that definition; many will be the winners when we look back from 2020. Yet AP isn’t in that league.

Though only about 20% of its revenues these days (down from 40% when Tom Curley arrived in 2003) are paid by member newspapers, those newspapers control the direction of the non-profit company. Understandably, member/owners haven’t wanted AP to directly compete with them in the digital, death-of-distance age, but they’ve often been far stronger in what they didn’t want AP to do, than in what they wanted it to do.

AP’s been essentially a B-to-B company, with one of its prime customer revenue bases eroding so quickly. AP has made up part of that deficit by selling national content to web portals and upped its broadcasting and global businesses, but, like its owners, it has had to cut. The company’s made smarter investments in mobile lately, revamping what had been ho-hum, if early-to-market, iPhone and iPad apps. Those products offer glimmers of hope that the power of AP, and its members, can be realized by consumers. Mobile is the only area in which AP is going direct to consumers, with the goal of being the go-to site for news in the U.S. That’s a tall goal, with lots of competition.

So what should be at the top of Gary Pruitt’s to-do list?:

• In one word: Leadership. Yes, a sky (print) is falling. Yet, we’ve never more needed strong, courageous leadership in the news industry. What journalists — and not just those employed by daily newspaper companies — do is hugely importantly to their democracies and their communities. Tom Curley tried to make those points; too often his comments were received as those of the Old Guard simply trying to hold on. It’s not easy to change the conversation, but before the public, Congress and the industry, Gary Pruitt must step forward with an optimistic, inclusive view of the future of the news business.
• Embrace Big Story storytelling: Check out the new Big Stories section on the new AP Mobile app. It only contains five topics now, but its larger principle is important. AP is probably the second-largest company, by staff, in the world, with about 2700 journalists, second to Reuters’ approximate 3000. It made its reputation of getting it first, globally. That’s still vitally important. Yet, its ability to move beyond a commodification of sorts — for publishers, taking AP’s first story, then come behind it with a deeper story — is essential if it’s going to climb the mountain of value and charge more. As AP escapes from the age of Last In, First Out into a web of greater contextual value to its business and consumer customers, the more it can claim a place in that Digital Dozen.
• Master advertising: McClatchy is an advertising company; AP’s not. AP, if it is to be global player, needs to develop and bring in-house — quickly — advertising chops. Yes, its content-buying customers will sell their own advertising, but AP needs capacity to do that same, and not be wholly dependent on those buyers to create — and share value.
• Leverage global connections: The world’s news agencies employ 10,000 or more journalists among them. Collectively — if they were working even more closely together — that would be the largest journalistic workforce on the planet. Finding ways to leverage more and more any journalistic synergies (technology can help here) is an opportunity AP’s competitors don’t have. Some of those news agencies have found more alternative funding sources than others, though all are struggling with their core businesses. Learning from them is essential.
• Play paywall pool: With Lee’s embrace of paywalls, we’re now seeing pay systems become the default at U.S. dailies. Paywalls aren’t only a digital circulation revenue move; they reconfigure customer relationship and should force re-thinking of product portfolio. Consequently, figuring out where AP fits into the new paywalled world (and as more than in-front-of-the-wall, bulk-up-the-free content) has suddenly increased in priority.

By the end of this year, figure that about 20 percent of the U.S.’s 1,400-plus dailies will be charging for digital access. Gannett’s February announcement that it’s going paywall at all its 80 newspapers galvanized attention; when the third largest U.S. newspaper site, the Los Angeles Times, went paid this week, more nodding was seen in publishers’ suites.

More than a dozen dailies in Europe are charging, led by Finland’s Sanoma (see “Sanoma’s Big Bundled Success”), Axel Springer, and News Corp.’s Times of London. It looks like more than a dozen in Germany alone may be charging by year’s end. In Asia, the powerful Singapore Press Holdings is first out of the gate, with other dailies there planning to follow.

Suddenly it’s paywalls all around the world. We’ve moved — in a couple of years — from the question of whether to when. The big question that should be asked now: How?

Charging for digital access is a nuanced question. For smart publishers, it’s part of a much larger strategic shift, touching every part of their operations: circulation, content, and advertising.

Let’s look at the newsonomics of an increasing paywalled world. The well-publicized New York Times digital scheme has gotten most of the attention, but it’s a global news source — more akin to The Wall Street Journal, the BBC, The Guardian, and CNN than to regional and local dailies.

While the Times is a fledgling pay model success, we can’t say, broadly, that paywall models are widely successful. Most aren’t failures, but few can point to the significant revenue difference that The New York Times, WSJ, or Financial Times plans have made to their transitioning businesses. Why? And what are the emerging successful formulas?

First, it should be said that the sky has neither opened up into a dazzling blue future nor fallen. A couple of years ago, predictions about the impact of paywalls mostly fell on the doomsday side of the equation. About the same time that going pay was proclaimed as another sign of the imminent death of Old Media, some were poking fun at the new iPad as a big smartphone that no one would want to hold up to her ear. Time to chill on the whole doomsday storytelling — we’re all in for lots more twists and turns.

So if charging for digital access — a too long phrase, but one that’s most accurate than paywall — is neither a panacea nor a tombstone on the way to the inevitable, what is it? It’s a building block, and it’s a way to re-envision the business.

It’s about a major shift in strategy, says Star Tribune publisher Mike Klingensmith, whose paper went pay on Nov. 1.

“We’re changing the nature of the customer relationship,” he told me. “Instead of the website undermining pricing of your content, it supports the pricing of your content” — seizing on the profound difference the all-access revolution is beginning to make. Relationships don’t change overnight, and that’s one important lesson to draw here: If newspaper companies can do more than offer lip service about relationship and “membership,” they have the ability to recreate an updated version of the trusted, community-oriented relationship that the better dailies long held. If they can reinvent the relationship, they have a shot at transforming themselves (“The Newsonomics of Crossover“) as they move into the mostly digital era.

Let’s look at some of the metrics learned from the early pay period, in talking with a number of the business executives who have been at the forefront of this grand experiment.

The big bogeyman of digital ad loss

The first big question that’s been laid to rest is the journalistic corollary of the Hippocratic Oath: Do no (advertising) harm. Remember the big fear about “going pay”: Would a paywall decrease digital visitors so much as to harm theonly part of newspaper publishers’ businesses that’s growing, digital advertising? Metered models, like The New York Times’ (“At Almost 400,000 Digital Subscribers, Inside the New York Times Pay Strategy, Year 2″) and the Los Angeles Times’, are now the trade’s standard, having been advocated strongly by Press+ when it got rolling in 2009. Allowing 10-20 free articles a month has meant that traffic loss has been minimal; given the near-infinite amount of digital ad inventory, such traffic loss has had practically no effect on digital ad sales.

“All of the almost 300 publishers now using Press+ have kept their online ad revenues because we use data to make sure there is plenty of ad inventory to meet advertiser demand,” says co-founder Gordon Crovitz of Press+, which was acquired by RR Donnelley last year.

Even if some papers experience a small negative impact, new digital revenue quickly outpaces it. “In our first month of paid service, online subscription revenue was 3x the network advertising we lost because of the drop in pageviews, and our online subscription revenue has grown every month since,” says Andy Waters, general manager of the Columbia Daily Tribune in Missouri, which went pay on Dec. 1, 2010.

Pageview loss has ranged as high as 40 percent (at the Columbia Daily Tribune) and has typically run about 10-15 percent. Interestingly, from Minneapolis to Columbia to Hamburg, traffic often begins to grow markedly after the initial shock of a paywall. It may take months or a couple of years, but traffic is essentially reset and can then be rebuilt. Clearly, the most important readers — core readers who really use the news product through the week — have stayed the course.

The flipside of a tougher paywall is a higher signup rate, and more revenue, from those valuing the content.

Remove one major fear.

Selling more papers

One reason some papers went pay: Try to reduce the number of subscribers fleeing print. So far, there’s been a minimal impact on retaining subscribers, or “reducing churn,” as it is called in the business. The Memphis Commercial Appeal’s publisher Joe Pepe points to a 1 percent increase in Sunday home delivery, similar to what The New York Times has found. In Minneapolis, the Star Tribune has gotten 20 percent of its 15,000 “digital-only” subscribers to pony up an additional 29 cents (!) a week to get the Sunday Strib.

The Sunday sale is a major part of the how we see rolling out. At the Strib, it’s an inside-out, outside-in offer. If you only take the Sunday paper (subscribers who get two or more days of the paper delivered get free digital access), you’ll get a low, introductory rate to add digital access; if you’re a digital signup, you’ll be pitched on the 29-cent deal.

The L.A. Times is putting its own spin on the Sunday deal: pay 99 cents a week for the first four weeks (and $1.99 thereafter) to get free digital access and the Sunday paper. Want just free digital access only — that’ll cost $3.99 a week. You don’t have to be a coupon professional to figure out the better deal. The LAT approach mimics the NYT approach, which charges readers about $60 a year more if they refuse to take the Sunday paper. Maybe we should call it the Godfather offer.

How much will Sunday (“The Newsonomics of Sunday Paper/Tablet Subsciptions“) grow, given such pricing — which I expect more metros will adopt, given that they still have relatively weighty, ad-revenue-rich Sunday papers? The first job is to stop the Sunday bleeding, and if combined digital/Sunday products do it, consider it a tourniquet that publishers hope to get a couple of years out of, even as daily print circulation continues to decline. The Sunday angle — the Sunday paper angle — is a big one.

New money

While The New York Times is on a double-digit circulation (print + digital) revenue trajectory, other papers are having a hard time reaching that number. Columbia points to a 5-6 percent lift, enough to cover several newsroom positions for the small daily. Minneapolis points to a 3.75 percent lift, based on its new $1.5 million revenue stream, earned at $100 a year (or $2/week) from 15,000 digital subscribers. Others say the circulation revenue is flat to a little up.

One little secret of the trade: the opt-out. Build in higher pricing for combined print and digital access, and allow readers to take print only — if they affirmatively opt out. Eighty percent or so won’t opt out, and so we’ve seen high retention rates among newer subscribers.

The wild card here is how much the all-access offer — part of the changing customer relationship the Star Tribune’s Mike Klingensmith suggests — allows papers to price up their overall print/all-access subscriptions. He says the paper priced up its overall subscriptions 9 percent last spring, with little negative impact, the first time it had priced up in recent memory. Another increase is in order for this fall.

That’s the big key here, I think: If you tell customers “we’ll get you our content however, wherever you want it” — and deliver on that proposition with products that match the tablet and smartphone age — the creation of added value makes sense to readers. So it’s important to look beyond digital-only revenue itself, and look at the total reader-revenue-producing potential of smart pay plans.

As Gannett points to a goal of adding $100 million in new revenue, which would be a 10 percent circulation rev boost overall, look for as much of that to come from upward pricing in general as new digital-only subs themselves.

That said, it’s useful to pay attention to a new emerging metric: what percentage of a newspaper’s site unique visitors are signing up for digital access-only subs. The New York Times broke the 1 percent barrier last year, 390,000 subs compared to 33 million U.S. unique visitors. The Commercial Appeal is at .8 percent; The Star Tribune is at .25 percent with its four-month initiative. The Columbia Tribune is at .2 percent. It’s just one metric, but one that tells us about comparative traction. Though, it seems like a tiny number, it’s not. Fly-by traffic, supplied by Google and now Facebook, supplies so much traffic that about 3 percent of most newspaper sites’ unique visitors equal their paid print circulations. The digital-only conversion metric provides an apples-to-apples comparison, even as overall print/digital circulation impact remains key — and is measured in that old standby, dollars, euros, and pounds.

The goal here: Head to 50 percent of overall revenues being paid by readers.

These numbers are only a snapshot and come from some of the better practitioners of the digital pay craft. Many more are underachieving. The point is that there is an emerging playbook of how to get pay working right.

For now, let’s boil it down the how to 5 P’s:

• People: As in customers. Few newspapers — probably a dozen or fewer in the U.S. — know their combined print and digital audiences as a single audience. It takes a lot of technology moving to get a single, whole view of a customer, matching the subscriber database with the digital registration database to get a holistic view. Without that view, it’s tough to operate a modern, somewhat digital/somewhat print business — and maximize the value of new pay propositions. The New York Times, the Star Tribune, and the Commercial Appeal are among those who do, and papers as small as The Day are getting there.
• Product: This is a simple question of content. How much strong local coverage are readers missing after a half decade of staff cuts? The better a news organization covers its community, the more it can dare to charge and still get customer traction. Some papers may simply have already cut too much.
• Presentation: Consumers — us — understand the all-access pitch. News (and magazine) publishers have to make it real. That means real ready-for-the-tablet (and smartphone) products, app-based and HTML5. Replica-plus products will satisfy paying readers less and less over time — and won’t compete with Flipboard-esque experiences.
• Pricing: Enough said. Newspaper (and magazine) pricing has been fairly dumb over the years, a follow-the-leader, seat-of-the-pants exercise. Playing with the value equation, print and digital, requires both testing and matching of new value to new price.
• Promotion: More than just marketing, the new promotion makes better psychological sense of the all-access proposition to older and newer (and younger) customers.

So 5 P’s — or maybe more.

“You have to do eight things right,” says Gregor Waller, a former exec at Axel Springer and now CEO of Digital Age Consulting, who is in the midst of advising a number of major media globally on pay models. “It’s like a golf swing. If you miss out on one, you can’t hit the ball correctly.”

It’s easy to get cynical about hyperlocal news on the web. People have been working to figure out a scalable model to support it for years. But news-model fatigue shouldn’t be mistaken for permanent failure — it’s just that no one has yet found success.

Community journalism pioneer Steve Buttry, now heading up community engagement at Digital First Media, says he is buoyed by disruptive-change theorist Clayton Christensen’s notion that 90 percent of successful startups start out with the wrong strategy and often take three or four attempts to get it right. That makes some kind of web sense. For those of us trained in the arts of journalism, though, it’s probably a tough lesson: We’re trained to get it right thefirst time.

With that in mind, let’s look into the next round of hyperlocal, the emerging newsonomics around Patch’s aim to become profitable, just as Digital First Media (DFM) dials up its own hyperlocal strategies. Though many newspaper companies are testing hyperlocal strategies, individually or through their chains, Patch and DFM stand out for the scale of their intent. We’ll stick with the term “hyperlocal,” even though it’s a squishy one, because it still best describing the kinds of close-to-where-we-live school news, local sports, police reports, and government coverage we find useful. It may a community of 20,000 or 80,000, but for many of us, it’s less than a whole city.

Let’s start with Patch. Each quarter, as AOL announces its financial results, CEO Tim Armstrong sticks his head in the boxing ring, and lets it get punched around a bit. He took over a newly independent Time Warner spinoff and has been madly transitioning it beyond its sinecure of the old-timey Internet access business.

I won’t debate here his hits and misses, his romancing of Arianna (or was it the other way around?), or the half-life of AOL, given its trajectory and the fact it haslost more than $800 million since its 2009 spinoff.

For the news business, two facts stand out. First, Patch is doing journalism, employing more than 1,000 journalists. Second, it is testing a model that needs testing, however Patch’s history is eventually written.

That model may be getting a rocket boost of revenue, if January’s trends hold up. In an interview last week, Patch President Warren Webster says that January booked ad revenue alone equaled half of all of 2011 ad revenue. If that trend were to continue, we’d be looking quite differently at Patch’s chances of making it into the black before AOL’s investor patience runs out. Just last week, Starboard, an “activist fund,” increased its AOL stake to 5.1 percent, pushing for strategic changes, and Patch is in the middle of its sights.

[Update, 2:52 p.m.: Some added context to the Patch ad revenue increase: The January ad revenue noted above should be noted as bookings for the year as a whole, committed by January. Further, Patch says that, as of today, it now has commitments for more than 75 percent of the total revenue that it recognized in 2011. Those are ads that it has sold and that will run some time in 2012. It recognizes the revenue, like almost all ad sales companies, when ads run. Indeed, January 2012 is up manyfold over January 2011, but in terms of the yearly revenue contribution, it will be relatively small given that January is a light ad month throughout the industry. While it's impossible to extrapolate whole year 2012 revenue, based on the data so far, the sharp turn up in trajectory portends a major boost in ad revenue in 2012 — how large and how sustainable, still to be seen.]

That model may be getting a rocket boost of revenue, if January’s trends hold up. In an interview last week, Patch President Warren Webster says that January ad revenue alone equaled half of all of 2011 ad revenue. If that trend were to continue, we’d be looking quite differently at Patch’s chances of making it into the black before AOL’s investor patience runs out. Just last week, Starboard, an “activist fund,” increased its AOL stake to 5.1 percent, pushing for strategic changes, and Patch is in the middle of its sights.

AOL won’t release specific Patch financials, but we can piece together numbers — Patch CSI — that tell us the story so far. AOL has said publicly that one quarter of its 864 sites are making $2,000 a month or more of revenue. That would also mean that 645 or so of its sites are making less than $2,000 a month in revenue.

On revenue, let’s be generous and say that one-quarter of the Patch sites are making an average of $2,500 per month. That would mean $30,000 a year. So 215 (or one-quarter of the sites) at $30,000 kicks up to $6.45 million annually.

Let’s say that on average the other three quarters of sites are earning an average of $1,500 a month, or $18,000 a year. Multiply that by 645 and we get $11.6 million.

So annual 2011 revenue would come in at about $18 million. That matches up with other extrapolations, guesses, and the like, which put the number around $20 million.

We know that AOL is spending $160 million a year on Patch. So on an operating basis for 2011, total revenue of $18 million would leave Patch with a $144 million operating loss.

But wait. If January was that good, equaling half of the 2011 revenue rate, that would mean Patch took in $9 million in that month. If it could sustain that number all year, it would be up to $108 million in revenue. Yes, its sales cost would increase, so let’s add in another $20 million for those. If all the other costs were constant, 2012 costs would be $180 million. 2012′s revenues would be $108 million.

You could look at that number two ways:

— It would still be losing $82 million a year;

— It would have erased 43 percent of its operating loss in a year.

A Patch half-green, or a Patch half-brown.

On the green end is Patch’s maturing approach to ad sales. For instance, Webster is enthusiastic about its recent initiative to add a third leg of revenue, in addition to national impression-based advertising and largely sponsorship-based local advertising.That third leg is better monetizing of its directories. “In the last two months, we pushed our sales team to push claims.” “Claiming” is getting local merchants to verify their free business listings. Of course, the next step is to get them to advertise and to enhance those lists. “We hit an all-time high recently,” he says. “We got 400 claims in a single day across Patch.” Patch says its claimed-listings rate is up roughly 124 percent over the past six weeks.

The big potential payoff here: Claiming is lead generation, and Patch has found claiming merchants to be 4 to 5 times more likely to advertise once they claim. These enhanced directories offer video profiles, highlighted listings and “owner messages.”

Journalistically, what does Patch have to do to win a race towards profitability, a marathon that will probably last at least three more years? Fundamentally, it needs to fulfill its promise: “Hi there, we’re Patch, your source for local knowledge you can’t live without,” a promise it curiously makes on its overall entry page, but not on its town sites.

If I were giving out grades, I’d give many sites As and Bs for vitality and enthusiasm — and those are good starters in journalism. The better sites do give us a sense of townness, a tribute to the reporters running ragged around their geographies, snapping photos, doing quick interviews, promoting Patch, and more.

In news, they’re in and out — no real competition to good daily newspapers, even with their diminished staffs. They’ll hit on good stories here and then, but can’t be depended upon to do it. I thought that the March 2011 acquisition of Outside.In would lead quickly to better news aggregation from other local news producers — creating a better local news briefing — but so far I see scanty evidence of that.

Blog posts are increasingly numerous — Patch is up to 14,000 active bloggers, Webster says, or 16 per site on average. But they run a wide gamut in quality and readability.

In utility, Patches are hit and miss. Lots of local events can be found — to the gratitude of civic-minded organizers of them — but the presentation isn’t the most user-friendly.

As sources of finding a good new restaurant or a handyman or the best child care in my neighborhood, they fail. The city guide vacuum (“The newsonomics of the Swift Street Courtyard“) — still left in place after the Sidewalks, Digital Cities, Real Cities, and more have come and gone — is a market opening for Patch. Yet its directories are utterly generic, not distinguishing an above-average eatery andJack in the Box (“Whether you’re looking for a quick bite for breakfast, lunch or dinner, or a late-night snack, this Jack in the Box, conveniently located on Ocean Street near Water Street, is ready to serve you 24/7. You’ll find favorites such as cheeseburgers, Sourdough Steak Melts, Chicken Fajita Pitas, shakes and fries, as well as specialties that include a chicken teriyaki bowl, deli trio grilled sandwich and grilled breakfast sandwiches. Salads, tacos and a kids’ menu are also available.”)

That may explain the recent hiring of Rachel Fishman Feddersen, late of Bonnier’s Parenting.com, and an early city-guide staffer, way back in 1995 for New York City’s Metrobeat, which was later bought by CitySearch. A feature pro and a mom in Montclair (once the hyperlocal capital of the country, when Patch, Baristanet, and NYT’s The Local competed there, and now still deeply competitive even after the Times pulled out), she’s into her second week on the job. She told me that her job as chief content officer will range from “the unsexy stuff” — things like page load times, better SEO, newsletter-sending time — to showcasing Patch best practices to coming up with winning editorial features.

Patch is also experimenting with new more visually interesting designs in a couple of dozen markets. Webster acknowledges that the directories in particular and other parts of the site “are not yet built out.”

What else might AOL and Patch do to close the profit gap faster? It could grow its audience more quickly by better connecting Patch to other relevant parts of AOL. Huffington Post, for example, doesn’t automatically recognize local visitors and give them easy access to a local Patch site. Find the “Local” tab, and you can choose one of HuffPo’s city sites — but there’s no Patch content to be seen. That seems like a no-brainer. Further, a dedicated tablet app (rather than the 2x smartphone product) seems like it should be in place by now.

“Everyone wants us to fast-forward to the end of the movie,” Webster notes. He has a sensible point. Given how each Patch rumor — two sites consolidated here, freelance budgets cut back there — is treated as forensic evidence, Webster is in relatively hardy form. He admits that Patch, with its fast expansion, took too much of a one-size-fits-all approach to site deployment, and was too “cookie cutter.” Some of the changes in budgeting — for instance, devoting some site budgets more to marketing awareness and less to paying stringers — derive from overall understandings of the market; others attempt to learn that needs in West Des Moines are different than in West Orange.

That’s only fair, I think. Whether the moves have been right or not, it makes sense to tweak this hyperlocal business and journalism model, and each change shouldn’t be a cause for suspicion. Let’s remember that at the same time Patch may be cutting out freelance dollars here and there, daily newspapers are continuing to remove dozens of full-time jobs.

Further, as Buttry points, it takes time to get things right — though it’s not clear how much time Patch has, given growing competition.

Advertising competition is ubiquitous, with Google, Facebook, and Yahoo all taking new runs at local treasure. Buttry’s Digital First is making moves of its own. The company, which is making itself famous for developing dozens of new local, digital advertising products, is now in a couple of big Patch territories, particularly Connecticut and California, as Digital First digs deeper into MediaNews management in both Northern and Southern California.

People increasingly will compare Patch and Digital First. Says Buttry: “We get a lot of attention because of the geographic overlap, and we have big ownership [Alden Global Capital, in Digital First's case]. But we are transforming whole newsrooms, not setting up one-person shops.” Digital First’s Connecticut Group Editor Matt DeRienzo outlines the coming competition even more directly, pointing to the strengths of his Connecticut test lab in Torrington, a model soon to spread to Oakland and New Haven, with numerous variations elsewhere. He makes three points — ones that all legacy newspaper companies would have to use against insurgents like Patch:

• “A larger staff, and a newsroom structure with reporters who have editors on site leading and counseling them;
• 134 years of history covering the community (and in Torrington, we opened our entire archives for free access to the public, one of the most popular features of the newsroom café);
• A physical gathering place that is built more like a community center than a newsroom (free public meeting space for the Garden Club, Little League board of directors, Young Republicans, etc., classes and workshops for the public, open story meetings, etc.).”

And yet: Digital First, at this reading, has about 1,000 bloggers within its cities, compared to Patch’s 14,000.

Then there’s the overlap question: Aren’t these guys doing the same thing? Well, sorta, kinda. Buttry even says Digital First could reach out to Patch, offering a partnership or aggregation arrangement of some kind, though he hasn’t done that yet. “We should include them in our local networks.”

So it’s not David vs. Goliath, nor David vs. David, nor Goliath vs. Goliath. In fact, these may be two Davids both fighting against the Goliaths of Facebook and Google, which are rapidly gaining digital ad market share on everybody. It’s just another front in the digital wars, one perilously close to our homes.

Let’s look this week at the journalistic turmoil in the world’s eighth-largest economy: California, a.k.a. the Golden State (beta motto: “We get post-IPO Facebook capital gains taxes — you don’t”).

The massive changes we’re seeing in California journalism portend even faster journalistic change across the country. We Californians like to believe we’re always at the birth of the new new, from Hollywood to Silicon Valley. Certainly, that’s been true of news change — and now that change has greatly accelerated, doing spins, free falls, reversals of fortune, and lots more. It’s not really change — it’s chaos. No one can tell what the journalistic landscape of the state may look like in, say, 2014. All we can say with certainty: we’re witnessing the death and life of California news.

Who will own the biggest news media? Who will manage the biggest news media? How much of a life in print will be left for newspapers as they go digital? And, of course, how many journalists will be paid to get the news to the state’s 37 million residents and to the rest of the country? Already, well over 1,000 daily newspaper journalists have lost their jobs over the past five-plus years.

How many new combinations — among news entities formerly known as newspapers, broadcast, and digital news startups — will emerge and grow to scale? Those combinations are already beginning to tax legacy imaginations, and as of this week, we’ve got a new intriguing model to add to the mix.

The promise of California Watch’s model

Tuesday, we saw a new model birthed: the friendly takeover of one digital news startup by another. California Watch, the almost-three-year-old statewide-oriented model of a modern news agency, is merging with Bay Citizen, the two-plus-year-old Bay Area-oriented news startup, which has had more than its share of birthing pangs.

Both sites were born in the depth of the recession and a relatively dark period of Bay Area journalism. (See “Bay Area Online News Renaissance: 7 Pointers Forward.”) Both hired talented staffs (from voluminous applications) and won journalism awards. Yet California Watch, built on $5 million in foundation funding, developed under the wing of the Center for Investigative Reporting (itselffounded way back in 1977). It has prospered, grown, and earned quick legitimacy and even respect from the state’s major media, which run its stories. CIR, which has long focused on investigative pieces of national import, is now largely synonymous with California Watch; it’s one organization made up of 30 journalists (writers, editors, producers, data analysts, and more) and nine other staffers.

We’re seeing in the merger the greater strength of the California Watch model. Call it B2B (business-to-business), a statewide news agency re-imagined for this century. It’s a model being eyed by journalists in some of the other 49 states: Produce muscular, multimedia journalism once (with a little tailoring of stories by market) and distribute it to many news outlets, from Voice of San Diego to KABC-TV in L.A. to the San Francisco Chronicle. These news distributors pay small sums for the stories, but the money is adding up. Increase the flow of journalism, in the Bay Area specifically and California more widely, and the networking “new wire” importance of California Watch grows, especially as struggling dailies continue to cut their own content-originating staffs.

Bay Citizen foundered on leadership and strategic disagreements, on personalities, on the editorial priorities muddied by the otherwise-valuable feeding-stories-to the-regional-edition-of-The-New-York-Times program, and more. That’s all history now.

CIR/California Watch executive director Robert Rosenthal, and his former boss at the San Francisco Chronicle, Phil Bronstein — the two served as managing editor and executive editor, respectively in the last decade — now face strategic and operational decisions on how best to put together the combined nonprofit. Bronstein, who has served as president of the CIR board, now serves as the executive chair of the merged organization, in part owing to the last wishes of the Bay Citizen benefactor Warren Hellman, who died unexpectedly in December. Two long-time daily newspaper guys, now able to build a new news model outside the constraints of constant cost-cutting and legacy hand-wringing. The foundation is set, with such stories as “On Shaky Ground” (“The Newsonomics of California Watch’s Single Investigative Story,”), which won over many editor skeptics.

For the moment, the big news out of this move is this: the potential to establish a new local model of scale and capacity. California Watch/Bay Citizen will be able to move forward with an editorial staff of more than 50, providing a scale that’s been needed to fill the yawning vacuum of local and statewide coverage. National investigative nonprofits from ProPublica to the Center for Public Integrity have stepped up their work, in volume and value, as newspaper-based coverage has slipped. In America, though, it’s a local-to-statewide news — across the 3,500-mile expanse of the country — that’s been crying out for bigger, new models to build on the successes of the MinnPosts and Texas Tribunes.

MediaNews dives into Digital First

The merger isn’t the only big news news in the Bay Area; it’s just the most public.

MediaNews — the largest news publisher by circulation in the state, with more than 30 dailies and great strength in the Bay Area, north of the Bay Area, and in greater L.A. — is about to be shaken to its Dean Singleton foundation. Singleton built the company, deal by deal, and assembled a coalition of willing executives to run the businesses and newsrooms.

They clustered, they cut, and they maneuvered through bankruptcy, and now their leader has been pushed into retirement, replaced by the wild, private-equity-bankrolled revolutionaries from Digital First/Journal Register Company (JRC). CEO John Paton and company moved rapidly (especially in newspaper time) to turn the financially and editorially bankrupt JRC upside down, lopping legacy costs, shooting voluminous video, opening newsrooms, and jettisoning anything and everything that didn’t smell of local.

That’s easier done in New Haven and Macomb that it is in San Jose and L.A. Applying faster, digital-first fixes to larger newsrooms and newspaper operations offers a complexity of challenge that will makes good drama for the rest of us. Expect to see rolling retirements of the Old Guard, with Denver Post CEO Jerry Grilly already announced.

Reorganizing newspapers on paper (or computer) is one thing — the new management knows its toughest and first challenge can be summed up in one word: culture. Yes, after the newspaper industry has been half-sized, culture, good, bad, and silly, is usually the first challenge new management faces in pushing change.

As MediaNews’ California properties change, they’ll change the landscape around them. Expect differing kinds of new competition and new potentials for unorthodox partnerships. Partner up, in fact, the MediaNews turmoil with those of another high-profile experiment: Patch.

The hyperlocal shoot of AOL, it has made a big bet on California. Of its 800-plus sites, 132 are based here. Many of the sites are lively, with good features, calendars, and lots of local, if episodic, bloggers — even if the sites don’t come close to living up to Patch’s tagline: “Hi there, we’re Patch, your source for local knowledge you can’t live without.” AOL, of course, won’t release traffic data, but its latest financial report showed that its $120 million investment isn’t close to bringing in enough ad revenue. That’s confirmed by checking on the sites (national ads prevail) or attending a local Patch-sponsored community meeting, as I did last Friday. Second question from the audience: “Why don’t you have local ads?”

Given Digital First’s open-newsroom strategy and philosophy, Patch is particularly vulnerable to the MediaNews changes. MediaNews can do what Patch is doing — and cover the news with more than single reporter/editors. Or MediaNews properties could partner with Patch.

Don’t think that Bay Area media change is restricted to text and print. KGO Radio, the market’s long-time talk leader, saw its talk line-up of multiple decades jettisoned one night in December — to public uproar, where else, but on Facebook — as it embraces the all-news (broadcast and digital) mantra and goes head-to-head with KCBS.

Public radio on the move in L.A.

Moving briefly to the south, we can see that the change is only prologue.

If Californians like to be first, they can be the first to claim one metro area with three — count ‘em, three — bankrupt daily newspapers. That would be metro Los Angeles. Both MediaNews (Los Angeles News Group, or LANG, with holdings like the Daily News, the Long Beach Press-Telegram and the Pasadena Star-News) and Freedom Communications (Orange County Register) fell into bankruptcy and emerged quickly from it, with banker and private equity owners. Then last summer, the two tried to mate, as Alden Global Capital, holding about 40 percent of each, tried to arrange an arms-length (tough to negotiate with yourself within the bounds of law) marriage and somehow failed. Tribune’s Los Angeles Times entered bankruptcy in December 2008 and has yet to emerge from equity owner/bondholder hell. Those three companies continue to gyrate in the marketplace, maneuvering within their increasingly limited options.

With L.A. Times publisher Eddy Hartenstein assuming the Tribune CEO title as well last spring, the Times has been shaking up its strategy and management, edging into its own digital-first territory. One clue: the November appointment of a quartet of new VPs tried to find new harmony in digital revenue. They include Jennifer Collins from Variety and Andrea Nunn from HBO, giving an indication the newspaper company is trying to stretch well beyond its roots. They move in as long-time Times chief revenue officer John O’Loughlin moves out, having just assumed the president’s job in a exec-suite reorg at the Houston Chronicle.

Among the Times’ many options: a flipping-the-switch bet that would have it abandon some print to cut costs and become more heavily digital faster.

Ahead of still more staff cuts, the Times lost its change-oriented editor, Russ Stanton, in December — and then saw him hired by public-media mover KPCCas VP of content. Even a few years ago, that would have seemed a bizarre career move. The editor of The Los Angeles Times goes to lead the news effort at a local public radio station?

Yet when you compare the two enterprises — today — you see one in decline and one believing in its own upside.

Yes, The Los Angeles Times still has (today) 500-plus newsroom people, and KPCC can claim fewer than 60. But as the Times cuts, though, the Southern California Public Radio (SCPR) board has given the go-ahead to double its newsroom to more than 110 by July 1, 2014, needing to raise $24 million over four years to do it. Already raised toward that goal: $8 million so far. Already hired: 20 people in the last year. For 2012 alone, the plan is to bring in at least 13 more news positions — including producers, editors, bloggers, and hosts.

Those numbers are curious ones, but still seem small. Don’t, however, under-estimate SCPR president Bill Davis. Davis is a public media exec in the mold of his mentor Bill Kling, the Minnesota Public Radio visionary entrepreneur who first outlined how public radio could become public media and move into the local news vacuum. In fact, MPR, through its joint parent American Public Media subsidiary, is a sibling to KPCC.

Davis knows how to raise money, and he sees the journalistic devastation that’s enveloped his city. Add that energy and ability to the mix and the journalistic arithmetic begins to change. Five hundred newsroom people at the L.A. Times sounds like an army. Peel off the parts of that army that are devoted to sports, entertainment, and the production of content (as opposed to the creation of it), and you may be down to a couple of hundred who report the local news.

That local news — sans entertainment and sports — is what the expanded KPCC plan aims at. So let’s say that KPCC could get to 100 (Kling’s magic number) in the next several years, as public-spirited citizens (a la Philadelphia and Chicago?) chip in to create and sustain a local news alternative. Let’s say the Times continues to reel, run aground on the shoals of legacy costs, and its newsroom, already dispirited, trims down to 150 local news creators. As Rick Santorum said not long ago in Iowa: Ballgame.

Finally, let’s head to the border. There, the San Diego Union-Tribune, worth a billion dollars a decade ago, has been sold twice in three years. This time, local developer Doug Manchester bought it and promises to turn the newspaper of record in California’s second biggest city into a booster sheet. Across town, online startup Voice of San Diego — a California Watch affiliate which just had to cut staff due to budget cuts — has recently partnered with the local NBC station for news coverage.

Mix ’em, match ’em. It’s a Mating Game that seems like it could only come out of California.

• 390,000 digital subscribers overall.
• Growth rate of 20% fourth quarter over third quarter.

Those are the public numbers. We’re left to extrapolate the dollars. My extrapolation is that the run-rate for the Times’ new digital revenue is about $86 million a year. We take the 390,000 digital subscriber number and assign an average revenue per digital customer of $221 a year. At its four-week (or 13X a year) billing rate, that’s a little less than $17 every four weeks. Full all-access (tablet + smartphone + online) costs $35 each period, tablet access $20, smartphone, $15. So let’s take the differing price points, rolling intro offers (99 cents for the first month), special deals and cancellations into account. Let’s believe that it’s the lowest price point digital product (online + smartphone) for $15 each four weeks generates the majority of buys. Let’s then use a $17 average.

That produces $86 million a year, or more than eight times what the Times took in annually from Times Select; time to bury that ghost. If we compare it to some other Times’ yardsticks, it takes on more meaning:

• It’s 12% of the New York Times overall circulation revenue for the year. That puts the annual circulation number in positive territory — up 3% for the year, and a lively 8% for the fourth quarter – reversing the 2010 trend.
• It’s $100 million less (about $186M for New York Times itself) than the amount of digital advertising revenue for the year. So it’s important, but the digital ad number still is more decisive in making up for the print revenue decline. Despite 10% digital ad growth for the News Media group (without About properties), the NYT property still saw a 3% decline in ad revenue for the year. One more way to look at it: the Times took in $22 million less in advertising overall in 2011, so new digital circulation revenue exceeded that decline by 4X.
• It’s 1.1% of the Times’ 33 million U.S. unique visitors, once we take out international buyers. That one percent seems like a tiny number, but it’s 34% of its print circulation. Anyhow, “total unique visitors” are getting to be close to an irrelevant number. Paid readers who also consume a majority or strong plurality of page views are the customers the Times’ care about.
• It’s four times ousted CEO Janet Robinson’s good-bye payout. That’s small consolidation to outraged staffers, dealing with their own 1% issue.
• It’s four times the dividend family members are hoping to see reinstated. The dividend paid out $20.8 million in 2008. Even they need to be kept happy to keep the Times out of public play, there are few new dollars to assuage them.

So, overall, the Times digital circulation seems to be an increasingly important part of the next-gen publishing model, but not an earth-shaking one. I think much of the story — and import — here is behind the scenes. As we look at the mechanics of selling digital access, we see a business model with birthing pangs, and one that may lead to anticipated and unanticipated healthy development. In talking with Paul Smurl, VP of paid products for the Times, this week, I picked up some related datapoints that help us understand what this first year may lead to:

• 70%+ % of the Times’ print subscribers have now “authenticated.” That’s hugely important. Several years ago, the Times began exhorting its print subscribers — through direct mail and e-mail — to sign up for online access to the Times, laying the ground work, intentionally and unintentionally, for the model of All Access that it introduced a year ago. In August, 2010 the Times had only 50% of Times subscribers registered. That didn’t mean that only 50% read the Times online. It meant that a significant portion didn’t read the Times online and that those who did, but didn’t register, didn’t associate much value with their print subscription payment. Why register, when anyone can go to nytimes.com and read for free?

Now, with three-quarters of print subscribers registered, the Times has climbed a major mountain. Paying customers increasingly see value in both print and digital. The Times can begin, as it has to link up print subscriber profiles (address, demographics, buying history, and more) with digital usage (what read on which device when and lots more). So through these initiatives, the Times is moving — as every smart publisher must — toward a single view of its reader customer. That view then informs the Times’ ability to better target advertising and to sell readers more digital and print stuff, like the New York Times Store. (And it’s all about stuff, as George Carlin timelessly reminds us.)

• Look beyond subscription sales. Hearst, Rodale, Conde Nast and other magazine publishers have led the way in producing new ebook specials. The future here — think of mining the NYT database — is game-changing. Smurl says he thinks of it as “SKU management,” a new discipline for a new publisher. Look for the Times to start with specials around events like the Olympics and the Oscars, feeling its way along as it figures out “cover price,” sponsorship and ad potentials.
• Compare old and new world costs of acquisition: It costs a lot for a newspaper to sign up a new subscriber. I’ve heard estimates from $50 to $200 per new customer. The cost of acquiring a digital customer can be as little as near-zero to a small fraction of the print cost. Here, we begin to get into the positives of the digital press shift; picking up new customers costs far less. CFO Jim Follo noted on this morning’s call that costs for the company will not decrease this (the first time in four years), and part of the reason is increased spending on digital marketing. The Times is pouring the limited cash it has in going to digital subs.
• Churn is less with digital than print customers: Skeptics opined that people might sign up, but then flee after sampling the paid digital product. The opposite appears true: Smurl says digital churn is less than print churn. Add together the low cost of digital acquisition and the lower churn, and you have a formula for much digital marketing experimentation in 2012 and beyond. Who is the Times trying targeting to buy? “Like-mindeds,” in Smurl’s parlance, those with curiosity, societal engagement — and education and income to match.
• About 12% of digital buyers live outside the U.S.: That’s a growing number. It’s an indication that the Times is becoming a global news medium. Of course, that’s always been true, in Internet times, but largely meaningless. It’s been hard to sell advertising outside the U.S. (other than the Times-owned International Herald Tribune’s traditional business) and, of course, there was no way to make money from digital readers. Now that’s changed. With only 5% of the world’s population (last week I focused on this upside in “The Newsonomics of the Global Media Imperative“), the Times has huge growth potential beyond its core market. By 2016, I wouldn’t be surprised if 25% of the Times’ digital subscribers — many with no access to print, remember — are non-U.S.
• Exploiting Sunday: It took about 12 seconds for Times’ readers to figure out the new subscription math, when the company when digital-paid last year. When they did the math and saw they could get the four-pound Sunday paper and “all-digital-access” for $60 less than “all-digital-access” by itself, they took the newsprint. Which stabilized Sunday sales, and the Sunday ad base. Then the Times was able to announce a near-historic fact in October: Sunday home delivery subscriptions had actually increased year-over-year, a positive point in an industry used to parsing negatives. Now, Sunday is emerging a key point of strategic planning. Keep the Sunday paper strong for at least several more years — and quite likely longer — and the Times gains a fighting chance to find a print/digital hybrid model to sustain its journalism.

In addition to his day job, Smurl has been busy over the last year talking to newspaper publishers, near and far, about going paid. Dozens of people have filed into the Times to see what they can learn, and apply. In addition to the tricks of the trade, Smurl finds itself offering quasi-spiritual advice. “You can’t be apologetic about charging,” he tells his often down-hearted visitors. “Sometimes it’s as much a motivational session as anything else,” he says. Today’s motivational lesson heard all around the media world is summed up neatly in four words: 390,000 paying digital subscribers.

Let’s elevate, for a moment.

Let’s take a NASA view of the media landscape, enjoying the clear, whole-earth picture of our struggling news planet.

The wide view would tell us that, although the U.S. often believes itself to be the straw that stirs the global drink, we make up but 5 percent of the world’s population. Our special friends in the U.K. make up only another 1 percent. While much of the world’s digital inventiveness and entrepreneurial investment is born in the U.S.A., the marketplace for digital news, media, and information products has been going increasingly global.

The global digital media revolution is transforming how, in economic terms, we now think of the business. Global growth is no longer an add-on to the usual in-country business model; it’s becoming a major driver of business — and product — planning.

As we look at the newsonomics of the global media imperative, let’s pick out just a few of the many diverse datapoints on which we have to draw:

• The Financial Times, probably the single best model of print-to-digital transformation success, has announced that its digital business leader, Rob Grimshaw, is leaving Number One Southwark Bridge, astride the Thames, for New York City. Grimshaw is managing director of FT.com, and his business is truly global. The company, founded in 1888, now finds 31 percent of its readers in the Americas and only 23 percent in the U.K. — with another 13 percent now in Asia. For the FT, Grimshaw’s move is logical: Go where your customers are, and to the heart of digital innovation. (Talk to Europeans in the digital business, and they’ll tell you how America-centric, and West Coast-centric, the digital business is, somewhat to their dismay.) For the FT, even with its good number of American consumers, the U.S. is “an emerging market,” a belief held by Reuters as well.
• If you were to name the FT’s most head-to-head competitor (for time, and thus indirectly for money), it would be The Wall Street Journal. The Journal’s digital audience is now 30 percent international, and just last week in launched still another international local (in native language) edition, for Germany. The Journal’s crosstown rival, The New York Times, is moving globally as well. Already 12 percent of its paying digital subscribers are international, with the Times applying its pay strategies to its European operation, the International Herald Tribune. Last year, it also launched India Ink, focused on that country’s news and culture, with an on-the-ground team there. Expect the Times to move into China this year.
• Less than a year after launching its first non-U.S. site in Canada, Huffington Post last week added an Italian site, alongside its French one. It continues negotiating with publisher partners in several other western European countries, following up on Arianna’s meet-and-greets there last fall.
• The (second) British invasion of the U.S. continues apace (“The newsonomics of the British invasion,”), as the Guardian (reinvigorated U.S.product), the Independent (using Press+ to sell access to U.S. consumers), the BBC (staffing up editorial and ad pushes) and the Daily Mail, which announced a new U.S. push last year and said last week it is now moving on to India.

This isn’t just about news media. Netflix, in yesterday’s earnings report, tells us that almost 10 percent of its streaming business is now global, almost two million of 21 million streaming subscribers. That global growth — and huge upside — is balancing Netflix’s 2011 pricing stumbles.

For an even bigger picture perspective on the global imperative, let’s look at the four digital behemoths that are reshaping everything in their paths (get out of the way, if you can, or accede to junior partner status). Consider how much revenue each of Google, Apple, Facebook, and Amazon earned from outside the U.S in the first three quarters of 2011, from my recent report for Outsell, “Getting it Right with GAFA”:

• Google: 54 percent
• Apple: 54 percent
• Facebook: 38 percent
• Amazon: 46 percent

Yes, there’s lots of current political hullaballoo about “bringing jobs home to the U.S.,” but the truth is that much of the digital industry, as with their brethren in the Fortune 500, is now truly global. Look at those GAFA numbers and you have a harder time thinking of them as American companies, in the traditional sense of serving American customers.

Forget the 99 percent meme; think of the 95 percent (outside the U.S.) as the real opportunity for the companies formerly known as national. (And, yes, the global imperative further illustrates the difficulty that metro and community newspapers face in finding growth. Other than metro newspapers’ smartphone, tablet, and web city-guide potential for international visitors — $1.34 trillion spent by 60 million of them last year — the lure of global riches doesn’t do much to support community journalism in our far-flung land.)

It’s a stark fact for what once were nationally defined media businesses: If you don’t go global, you’re at an increasing disadvantage to your competitors — and who isn’t a competitor for audience or advertising? If you stay nationally focused, you’re trying to wring as much revenue out of a much smaller market, while competitors are building their top line and their capability to innovate with global revenues. So increasingly, I think we’ll see media companies that are either global or regional/local, with national ones more the exception than the rule. Yes, there’s a role that the English language plays here, as about a billion people worldwide may read English well enough to be eligible audience, and, that, too adds to the imperative to compete against other English-first media based in London or New York. Yet as proven with the Journal’s non-English editions, this is about more than language domination. We also see early signs of non-English products finding their way to English speakers, as Worldcrunch (“All news is global”) brings translations of top worldwide titles to the market.

There are lots of ways to play the global game. Many newspaper companies are putting out editions of their core product, aimed at in-country issues. Some are putting a new face on the same content. Then there are those truly becoming multi-national news and information companies.

You’d have to put Oslo-based Schibsted in that group. Now eighth overall by revenue in the global news industry, the company operates online classifieds businesses in 28 nations; in 20, that’s its main business. Those nations can be found on three continents and now include such populous growing markets as India, the Philippines, Indonesia, and Malaysia, as well as much of Latin America. That’s a truly global play that is supplying Schibsted with 49 percent of its profits, on just 25 percent of total revenues.

News Corp. — the leading company by news revenues worldwide — is certainly flexing its muscles, even if it contracts them for the time being in the U.K. amid scandal. Just in the last week, we saw the company’s moves in Turkey and Afghanistan, which aim to add to its presence on every continent. As a pipes (satellite and cable) and content company, the lines between the two will blur. Expect for instance, products like the innovative WSJ Live  (“The Newsonomics of WSJ Live“) to find carriage all over the world as digital distribution and monetization mature.

A lot of what we are seeing in the marketplace today is prologue. If you look at how small the non-home-market revenues are for many companies — in the low single digits — we see not global businesses, but national businesses with stronger global intentions.