Avusa's bold Eastern Cape pay wall experiment

“The Daily Dispatch [in East London] and The Herald [in Port Elizabeth] are the dominant news players in their regions and this is the perfect setting to try it out,” said Lohmann. “We do know there are risks but with the advertising model [for the two sites] not working, it's a risk we're prepared to take.”

Communications strategy

Lohmann said that before the pay wall goes up, there would be a comprehensive communications strategy to tell users why Avusa, which also owns the Sunday Times, Sowetan and Sunday World, was going this route.

A large proportion of the two websites' existing users were in Gauteng or lived overseas, said Lohmann, some of whom Avusa was hoping to convert to online subscribers who pay a monthly fee for access.

“For people interested in the Eastern Cape, these brands have meaning,” said Lohmann, “I think we will know within two or three months [of the pay wall launch] if this going to work and if it doesn't, it's not the end of the world. We can revert back.”

Daily Dispatch editor Andrew Trench* is a pay wall proponent and, in a post on his personal blog this year, he wrote that there could be a “correlation between the percentage of readers willing to pay for online content and the percentage of readers willing to pay for content in the form of a physical newspaper”.

Physically pay

He gives the example that the paper's ABC figures show that it sells above 30 000 copies a day but AMPS figures estimate that there are 300 000 daily readers. Therefore, for the print publication, about 10% of the readers physically pay for the content. At the moment, the paper's website has between 100 000 and 120 000 unique users a month.

“I'd be happy to have even 10 000 readers paying to read the Dispatch Online every month,” Trench said on his blog. “It would provide us with a healthy revenue stream, easily cover the costs our little web team - and allow us to invest even more in quality online and print journalism. To continue to give away content for free will not improve journalism, it will kill it. Or we can sit around waiting for a goose to lay a golden egg.”

This really is the one of the most important issue facing newspapers today - whether they're in the UK, the US or far-flung places such as South Africa. Since the world's most powerful media baron, Rupert Murdoch, threw down the gauntlet in August last year and announced that pay walls would go up on his News Corp titles such as The Sun and The Times, media houses have been re-examining the strategic directions of their websites and crunching the numbers.

The UK is proving to be -in the words of the New York Times (which will itself implement a metred payment model next year) -“a laboratory for newprint's future”. This after News Corp announced that The Times and Sunday Times, which share a website, will charge £1 a day or £2 a week for access, starting this June. As part of the move, The Times is planning to add all sorts of interactive bells and whistles to its content, such as the opportunity for readers to take part in question-and-answer sessions with its top journalists.

Wall of marketing speak

Marketing for the paid-content model has already begun in earnest. If you go to www.timesplus.co.uk, you get a wall of marketing speak for its paid-content site - rather than its news content - and you must register to be “the first to get complimentary access to our new sites”.

On the other side of the scale in the UK, there is The Guardian, whose editor is vehemently opposed to pay walls because, he says, they are against the spirit of openness on the Internet and they will see the newspaper industry “sleepwalking into oblivion”.

Then there is the Daily Mail, whose online publisher recently said that its free site was now big enough to make advertising pay, expand its brand internationally and strike lucrative new partnerships with select clients.

It will be fascinating to see how this plays out in the UK. Will The Times get enough of a conversion rate when its readers could quite easily decamp to The Guardian's free online offering or, perish the thought, to that of the Daily Mail tabloid? The New York Times points out: “While publishers worry that the online advertising pie will never grow large enough, they are also aware of another risk of erecting a pay wall: A loss of readers to the BBC, whose free Web sites are already the most popular British news source on the Web.”

Open the door to competitors

Even though you need a small conversion rate (the generally accepted industry standard is you can expect to get 1%) and paid-content sites will be able offer advertisers valuable demographics, as well as more time spent on site, you open the door to competitors going after critical mass. In the US, there are portents of this, where Bloomberg's free website has been revamped to go after the paying users of the Wall Street Journal and the Financial Times.

Deloitte's 2010 Media Predictions report, released in January 2010, warns that for those considering pay walls:

• Extensive market research is a must and that early data suggests that publications with wealthier readers may be more attractive candidates for pay walls.
  
• Paid-for content providers need to invest in and market the content behind the pay walls. Cost-cutting will spur readers to shop elsewhere.
  
• Paid-for content providers need to use the latest in marketing technology to know their paying users to provide targeted advertising at a premium - not at a discount.
  
• The cost and complexity of monitoring the micropayment model cannot be underestimated and paid-for content providers should try make transactions as large as possible to reduce the transaction cost.

Back in South Africa

Back in South Africa, BDFM (which is 50% owned by Avusa and the publisher of Business Day and Financial Mail) told Bizcommunity earlier this week that it plans to put www.FM.co.za behind a pay wall before the end of this year. The Mail & Guardian Online has said it will charge for content in the near future. The Witness, the Pietermaritzburg-based paper that is 50% owned by Media24, has already put up a pay wall on its unique KwaZulu-Natal content (not on national and international news) but its aims are modest: to generate sufficient income to bolster its small web operation, rather than to make money. The partial pay wall went up in November 2009 and was more likely a defensive move against declining circulation.

So it is Avusa, with its recently consolidated online operation, that is the major pathfinder here and all in the print and new-media industries will be watching the Eastern Cape websites with great interest.

* Disclosure: Gill Moodie is married to Daily Dispatch editor Andrew Trench.

For more:

• Bizcommunity: BDFM digital hopes for reinvention [Hermaneutics]
  
• Grubstreet.co.za: Insights from the paywall coal face: The Witness user stats at a respectable plateau

Last updated 11 May 2010.