March 23, 2012

Will you soon have to start paying to use The Post’s Web site? No, not in the short term, and maybe never, if I read the tea leaves correctly.

Paying for online or digital content (called a “paywall” in media jargon) is much in the news right now because this month has seen several headlines on the subject: The New York Times’ digital fee system had its first birthday, and the paper reduced from 20 to 10 the number of free stories you can view per month before you have to pay; the Los Angeles Times launched its digital “membership program” on March 5; and the Gannett Co. announced that its array of 80 regional newspapers — but not its flagship paper USA Today — will begin charging for online content by the end of the year. So why not The Post?

The Post feels that it first has to accomplish two goals before it would even consider charging for digital content.

Step One: The Post has to attract more readers to its Web site. Indeed, the company is increasingly focused on this goal, and according to internal numbers, The Post’s online traffic has steadily, and significantly, grown in the past year.

Industry experts say that, to make a paywall work, you have to have a loyal core of readers who come frequently to the Web site and stay awhile. This core has to be several hundred thousand readers strong before it makes sense to charge them and take the risk of losing more fickle users who will go elsewhere for online news.

The Post doesn’t think that its core of loyal readers is large enough yet to consider a paywall, but it hopes to get there in a year, maybe two.

Step Two: The Post has to improve information technology systems — software and hardware — that run the Web site so that it works quickly for users.

How much revenue could charging digital readers really add to the bottom line? To find out, let’s look at the Times’ and Post’s annual reports — publicly available data.

The New York Times Media Group — the division that includes the New York Times and the International Herald Tribune — increased its circulation revenue (revenue from people buying newsstand copies, print subscriptions and digital subscriptions) from 2010 to 2011 by $21 million, or about 3 percent. It saw no growth in circulation revenue the year before. Let’s assume that most or all of that increase was from new digital subscriptions. It didn’t even cover the decline in Times advertising revenue in 2011, which was $24 million.

The Post’s annual report doesn’t break down newspaper division revenue into advertising and circulation, and it includes newspapers the company owns in addition to The Post, such as the Herald in Everett, Wash. But a bit of subtraction reveals that annual Post circulation revenue is between $250 million and $275 million. Increasing that revenue by 3 percent, as the Times did in its first year of digital subscriptions, would amount to maybe $7 million or $8 million.

Same conclusion: That increase doesn’t even cover the 2011 decline in Post print advertising revenue of $33 million.

So a paywall is not a solution; it would help over time, but it would not bring a revolution in profitability.

The other thing to consider is that if everyone else is putting up paywalls, and The Post doesn’t, it has a huge opportunity. It could be the only quality news site that remains free. And ponder this: What if The Post, through its innovative uses of technology and social media — witness its Facebook app Social Reader; more than 15 million people downloaded it in just over five months — cracks the code for how to make money with digital content. Then The Post would be formidable. Post executives just met in California with the powerhouses of Silicon Valley. This is not coincidence.

Online readers who tell me they’ll pay for The Post come in three categories. I like Post content pure and simple, says one group, and I’ll pay for it. Another group says: I like Post content, and if you make the blasted Web site work better, I would gladly pay for it. Group three — my favorite — says The Washington Post, because it is in the U.S. capital and has a long record of hard-hitting reporting, is a crucial, constitutionally approved check and balance on government. It must not only survive, it must also thrive if it is to keep government accountable, and so I’m willing to pay for it.

Those are three categories of online readers on which to build for the future, whether you charge them or not.

Patrick B. Pexton can be reached at 202-334-7582 or at ombudsman@washpost.com. For updates, read the omblog at www.washingtonpost.com/blogs/omblog.