Readers show increasing willingness to pick up the tab

New York Times figures include International Herald Tribune. Boston Globe figures include Worcester Telegram & Gazette and Boston.com. Courtesy of Paul McMorrow.

Advertiser-supported journalism isn’t going away, but it’s not going to recover, either. The forces aligned against it are just too overwhelming. Classifieds aren’t coming back. Print is dying. And online advertisers are staying away from news sites even as Internet ads overall continue to grow, as this Reuters report by Jennifer Saba shows.

Which is why the New York Times Co.’s progress in tilting the revenue equation away from advertising and toward readers is so important. Joe Coscarelli of New York magazine writes that circulation revenue at the company’s Big Three newspapers — the Times, the International Herald Tribune and the Boston Globe — is rising faster than ad revenue is falling.

(Coscarelli doesn’t say so, but his Globe numbers are almost certainly for the New England Newspaper Group — the Globe, the Worcester Telegram & Gazette and Boston.com. The Times Co. does not break out those numbers separately.)

Here are the details. In the second quarter of this year, which ended on June 30, the Times Co. lost $88.1 million. Advertising, both in print and online, fell 6.6 percent, to $220 million. But circulation revenue rose 8.3 percent, to $233 million. News-business analyst Ken Doctor tells Coscarelli that the Times Co. may be the first major newspaper company to pull in more money from circulation than from advertising.

The newspaper business had long earned some 80 percent of its revenues from ads. It was often said that the news was free, with readers asked to pay only for printing and delivery. The question facing the industry is whether there are enough readers who value newspapers to pay much more for print than they used to, and to pay anything at all for online access.

The Times and the Globe both have smart, flexible digital-subscription systems that are being closely watched by newspaper executives. (The Telegram & Gazette has a paywall as well, though I’m not familiar enough with it to offer an assessment.) But the Times has been much more successful than the Globe in selling digital subscriptions — 509,000 for the Times and the IHT in the second quarter, compared to about 23,000 for the Globe, according to Chris Reidy of the Globe.

The caution flag for the Globe is that the Times is an utterly unique product — for all its flaws, it is surely the highest-quality, most comprehensive news source in the United States. And it may be the one news source people are willing to pay for.

The Globe is an excellent regional paper, but it’s unlikely that online subscriptions will ever be more than a small part of its revenue stream. Globe executives themselves seem wary of pushing the paywall too hard, as they continue to offer quite a bit of Globe content on the free Boston.com site. Indeed, the chart above, put together by Paul McMorrow of CommonWealth Magazine, shows that circulation revenue as a percentage of overall revenues actually dipped slightly in the second quarter at the New England Media Group.

In other words, the latest numbers are great news for the Times. For everyone else, they are something to aspire to, with no guarantee of success.

4 thoughts on “Readers show increasing willingness to pick up the tab

  1. Rick Peterson

    “the one news source people are willing to pay for”? Last time I checked, the Wall St. Journal had a circulation of 2.1 million, including 400,000 online. They’re more general interest than they used to be. Do they count?

    1. Dan Kennedy

      @Rick: Do they count? Yes and no. The Wall Street Journal and the Financial Times have long been successful in charging for online access. The Journal is more general-interest than it used to be, but it’s still a business paper. More to the point, most of those digital subscriptions are bought by employers, not individuals.

  2. This is interesting. Two thoughts come to mind. The first is that the Globe paywall, I find, is a much more restrictive than the NY Times paywall, which is set up so anyone can read the Times online, without paying, with only a few minor steps.

    The second is that a circulation-based revenue model could, in theory, have benefits. A least in the sense that the papers would be selling a product to its readers moreso than its advertisers (many of them large corporations that they need to cover). I know there have been some studies of how news changed when it shifted to ad-based revenue streams, primarily, which I will try to find. And, of course, I am not confident that papers such at the Globe wil be able to depend on enough paying customers for this model to work, as Dan noted.

  3. C. E. Stead

    DK – these are all also available on Nook as a casual purchase. I bought a Globe recently to catch up while on vacation – a sale the paper would likely never have seen otherwise! It’s a different, if related, market as you download the paper and continue reading when off-grid as opposed to having to stay at the hot spot with a laptop. Not a huge market, perhaps, but an enhancement of digital subscription.

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