But how replicable are these two models? The Wall Street Journal provides content geared toward financial decision making and reaches a more elite and affluent audience than most news organizations. The Arkansas paper is the dominant news organization in its state.
To see how news executives figure out whether to charge online, we examined the decision-making processes at two large metro newspapers—The Dallas Morning News and The Miami Herald. Each thought about the same issues, relied on similar data—and then embarked upon completely different strategies.
Both papers have histories as journalistic powerhouses in their home markets. The Herald, which has been owned by McClatchy since 2006, has won twenty Pulitzer Prizes, on subjects ranging from local election fraud to the Iran-Contra scandal. The Morning News has won nine Pulitzers and has dominated the Dallas market since its parent company, Belo, bought and closed the rival Times Herald in 1991.
But both have experienced significant declines in their print circulation, and both had reason to believe that their free websites might be partly to blame.
At the Herald, circulation had been steadily declining for years. The Herald and its Spanish-language sibling, El Nuevo Herald, fell from a combined daily circulation of 393,382 in 2005 to 261,657 in 2009. Most of the decline was outside the Herald’s “city zone”—its core in Miami-Dade County. The Herald has also cut back discounted bulk circulation to schools, hotels, and other institutions.
The trend has been similar in Dallas, where the Morning News has dropped from 373,586 daily circulation in 2007 to 264,459 in 2010. In part, that is also because the paper began to focus on its most loyal print subscribers a few years ago. The News trimmed back most of its delivery beyond a 100-mile radius of Dallas, though it still circulates in Austin, the state capital, which is 200 miles away. “We reduced footprint in the state,” says John Walsh, senior vice president for circulation at the Morning News. “Advertisers were saying they’re not interested outside the core market.” That helped eliminate some extraneous expenses. It took so long to get newspapers to Odessa, about 350 miles west of Dallas, that the delivery person “had to spend the night in a motel after delivering the paper,” Walsh says. “It was like the Pony Express.” The Morning News also eliminated much of its single-copy sales effort, removing 9,000 of its 10,000 newspaper racks around the metro area.
A few years ago, the News began doing studies about the price sensitivity of its subscribers. Executives wanted to know if the remaining readers were now a core of the faithful who would be willing to pay much higher prices for home delivery. One study indicated that a 40 percent hike in the price of a subscription would result in a loss of around 12 percent of its subscribers, says publisher James Moroney. That emboldened executives to raise the price of a monthly subscription aggressively, from $21 to $30 in May 2009 and then to $33.95 in 2011—one of the highest prices for any metropolitan paper in the country.
In those days, Moroney was convinced that free digital access was the way to go. In May 2009, he told a U.S. Senate committee holding hearings on the state of the newspaper business that “if The Dallas Morning News today put up a paywall over its content, people would go to the Fort Worth Star-Telegram.”
Within a few months, though, Moroney began reconsidering his aversion to a paywall. In remarks in the fall of 2010 to a small group at the Carnegie Corporation, Moroney provided this analysis: “The Morning News does 40 million page views a month. If we could sell out three ad positions on every page every day at a $7 CPM, we would yield $10 million” a year. That, he noted, would cover less than a third of his editorial costs—even as those costs have dropped as newsroom staffing has fallen from 660 at its peak to around 400.
More fundamentally, Moroney had concluded that a focus on volume—either in the form of cheap print subscriptions or of web traffic that generated insufficient revenue—had damaged the news industry’s economic vitality. “What I most fear about this obsession with volume is it underlies the persistent belief that if we will just grow sufficiently large audiences online, then eventually we will sell enough advertising to be sustainably profitable,” he told the group. He added, “There is more supply [of online ads] than there is demand. And the explosive growth of social media only ensures this imbalance of supply and demand will persist for a considerable period of time.”