Online pay-wall stabilizes Newport paper

Like newspapers everywhere, the Newport Daily News has struggled to figure out how to adapt to the digital era, with its unpleasant combination of declining print profits and disappointing Internet revenue. Then last spring, the paper decided to take a radical, new approach.
After years of posting many of its stories online for free, starting June 15 the Monday-Saturday paper made all its articles available in an electronic edition – an exact digital replica of the printed newspaper – but only for a steep price: $345 a year for an online-only subscription, compared with $145 for home delivery of the printed paper or $245 for both the print and online editions.
Not everyone in the industry thinks the paper made the right choice. Jim Brady, the former executive editor of The Washington Post’s Web site, said the Daily News’ decision “reeks of desperation.” Although Brady acknowledged the paper might stabilize its finances in the short term, “in a few years, the continuing decline of print will put the paper in serious financial trouble and leave it no Web business to build upon.”
After three months, the first part of Brady’s forecast has proved accurate: the Daily News has stabilized its home-delivery subscription base and boosted its newsstand sales by about 200 copies. (The paper’s total daily circulation is roughly 13,000.) The print edition’s size – a rough measure of advertising – is now consistently 20 pages a day, up from 16 earlier in the year. The Providence Journal’s decision to close its Newport bureau and raise its newsstand price to $1 has also offered an opportunity to build market share. (The Daily News recently raised its own newsstand price from 50 cents to 75 cents.)
The widespread attention within the industry to the 163-year-old paper’s decision (the story was picked up by outlets ranging from Newsweek and The Economist to Radio Free Europe) surprised Sheila L. Mullowney, who became the Daily News’ executive editor in 2007. “But it also did indicate that everybody in the media is watching,” she said in a recent interview. “I think everyone has kind of come to the conclusion that we can’t keep doing the same things we’ve been doing.”
The thinking among executives at privately held Edward A. Sherman Publishing Co., which owns the Daily News, was that they needed to focus on preserving the printed newspaper, which still provides the vast majority of revenue. The steep price for the digital edition is meant to compensate for the fact that Internet advertising brings in far less money than print, which has left subscribers to pick up a larger share of the cost of the news.
Mullowney said the decision to focus on print also stemmed from a realization that the Daily News needed to focus its limited resources on its central mission – coverage of Newport County – rather than digital innovation. And the paper hoped to stop the trend of print customers dropping their subscriptions because the news was available free online.
Other newspapers will be keeping an eye on the Daily News as the industry scrambles to find a new business model. After peaking at a record $49 billion in 2005, newspaper ad revenue nationwide slid to less than $38 billion last year – the worst decline since the Great Depression – and is on pace to fall another 30 percent this year, according to the Newspaper Association of America.
“From a business perspective, it sounds like it’s working just fine” for the Daily News, said Alan D. Mutter, an industry consultant and entrepreneur who writes the popular blog Reflections of a Newsosaur. He describes giving content away as the newspaper industry’s “original sin,” because it cannibalized print readership without replacing its revenue and taught readers to expect news stories to be free. Mutter still thinks there are “a few sweet spots” where subscription-based online content can work – specifically, for outlets that provide “content that is exclusive and valuable to the user.” That could mean in-depth business coverage by The Wall Street Journal, which also charges readers, or geographically focused coverage like that of the Daily News.
“In a lot of ways, small and medium-sized papers have the ability to charge because they have an exclusive lock on local coverage and local advertising,” Mutter said. They also have been less damaged by the industry-wide decline during the latter half of this decade. Papers with a circulation of 15,000 or less actually increased their ad sales by 4.3 percent between 2004 and 2008, the only category that managed to do so, according to a survey by the Inland Press Association, a trade group.
But Dan Kennedy, an assistant professor of journalism at Northeastern University, thinks the Daily News’ strategy is “a recipe for failure.” It will cut the organization off from the online community, he said, and also provide an opening for online-only outlets, since “pay walls only spur the creation of more alternatives.”
In fact, the City by the Sea has become an unlikely hotbed for media upstarts. In addition to a number of blogs, Lynne Tungett, a veteran Middletown writer and editor, has started Newport Now (newport-now.com), a blog-style news site with updates on local affairs and events, as well as obituaries, an events calendar and other features. Another online-only organization, Newport Seen, was launched recently by public relations consultant Linda Phillips and is modeled on the Palm Beach Daily News, New York Social Diary and other publications that chronicle high society.
Newport Now has no advertising currently, but Tungett predicts it will find an audience. She also notes that her site does not have the printing and other overhead costs that the Daily News and other established organizations do. Kennedy predicts more community news outlets will pop up over the next few years, although he expects the process to be haphazard, with some towns getting high-quality sites while others are left with only “some crazy blogger.”
Newport Now and other would-be competitors face a significant gap in resources – the Web startup has just three part-time, paid contributors, compared with the Daily News’ 19 editors, reporters and photographers. Still, Kennedy cautioned against underestimating the appeal of no-cost news. “The free, online alternative merely has to be good enough,” he said.
Mutter said newspapers that take the Daily News’ print-centric approach risk failing to forge a connection with the next generation of would-be readers. The percentage of adult Americans who read a print newspaper daily has been falling for years, and the younger the individual, the less likely he or she is to pick up a paper.
“I highly doubt if people under the age of 30 will ever become avid newspaper readers,” Mutter said. “If [the Daily News] intends to maintain and grow the franchise into the future, they have to accept that the vast number of modern readers are going to be expecting a digital product that they can capture any way they want – on an iPhone, a netbook or whatever it is.”
Mullowney said Daily News executives are aware of the risk and are exploring ways of making the paper available on other digital delivery systems. They are also open to eventually changing their Web strategy if the economics of online news become more attractive. Still, the tradition of the Newport Daily News as a newspaper runs deep – the current publisher is the great-grandson of Edward A. Sherman himself.
“We want to be a newspaper as long as we can be a newspaper,” Mullowney said. •