The For-Profit/Non-Profit Hybrid Model

This is a long one, so bear with me.

For local newspaper web sites, paywalls make sense. Local news will never be able to be conducted on the scale of local newspapers circa 2005 if they continue to offer free content online. Local interactive advertising will pick up, but it will only provide a fraction of the revenues of print ads. In most medium- to smaller-sized markets, there is only one entity providing in-depth local news and sports coverage: the newspaper. People in cities like Pittsburgh, Kansas City, and Milwaukee, which aren’t very transient and have stable populations that care about local issues, would be willing to pony up for good local coverage.

Major market newspapers very likely do not have that option. Papers like the Washington Post and Los Angeles Times are primarily regional as print newspapers, but have a large national and international web following. It is their national, political, and international coverage that makes them players on the web. But there is such an abundance of this kind of news available for free on the internet that efforts to charge for it may, in fact, cost more money in lost advertising than it makes up for in subscriptions. And efforts to charge just for local coverage may result in a big yawn from the less locally-focused populations of their respective regions. Likewise, in these markets television stations may have the resources to do an adequate job of covering local news on the web (and many cities have more than one newspaper, the smaller of which would certainly be willing to pick up the slack).

So paywalls are out of the question. What about the non-profit model that some are pushing for? Simply put, I don’t think a non-profit model would scale for organizations of this size. There are just not enough individuals and corporations willing to entirely fund the operations of a large newspaper that was making 30% profit margins less than 10 years ago. The comparison to NPR doesn’t work, either, because NPR is largely funded through donations to local stations, which are in turn passed along to NPR through programming fees. These papers do not have the luxury of having a national network of local affiliates. Not to mention the fact that a non-profit model also probably wouldn’t fly with the papers’ profit-minded owners. And a word to those who think Google or internet service providers could, should and would pay to give users access to newspaper web sites: this is a pipe dream. Get real. Not only is this never going to happen, but it would never work to begin with. I won’t waste the words to explain why.

What I propose as a solution is a for-profit/non-profit hybrid model. Newspapers would remain for-profit entities (which I believe is preferable because non-profit newspapers run the risk of becoming lethargic and dull). The web site would still be free for all. And there would still be a printed daily paper (perhaps not on Saturday). What would be added is “memberships” to various areas of coverage. People would be encouraged to “subscribe” to a particular topic that they’re interested in, the main incentive being similar to public radio and television pitches: that the money would be used directly to bolster coverage in these areas.

Let’s take the Washington Post as an example. There could be monthly memberships for: Politics, Local, World, Sports, Business, Outlook/Editorials and Style. As an added incentive of joining, members could participate in members-only online chats or in-person events, and would have exclusive access to a “wire” for their section. Journalists could post interesting and forward-looking tidbits to the wire: either actionable, bite-sized info that will be part of a later article, or fascinating stuff that might otherwise not make it into a story. This would all be very Twitter-like in its chronological and frequently-updated nature, but it would have to be done through a proprietary system. The key is that the wire be – as stated – actionable, forward-looking, and interesting (thus, habit-forming). Also, members would be able to comment on the wire, and suggest stories for coverage in a more direct way than the current Wild West-style comment sections.

One last incentive for subscribing, which many people cite as one reason they subscribe to the print edition on Sunday: all members get the Sunday insert ads and money-saving coupons delivered to their door, perhaps within a small, display ad-filled weekly “subscribes guide.”

Users would be able to pay a bit more for a “universal subscription” that gives them access to the members-only features of all coverage areas. Universal members would still be able to direct their subscription fees to particular coverage areas. And a print subscription would also include all the web members-only features.

Here’s a possible pricing model:

• Section membership: $9.99/mo
• Universal membership: $15.99/mo
• Print subscription: $19.99/mo

In addition to the subscription revenue, and the Sunday insert ad revenue, newspapers would be able to make more money online by using the demographic info gleaned from members to enhance online ad targeting.

Part of the reason why I think people would pay for this, and why it could be very successful, is that the “membership” is very participatory and democratic. Each section becomes its own community. Newspaper companies have tried doing web chats and meet-ups and other participatory things, but it never quite works. Part of this is because over-worked, multi-tasking journalists simply don’t have the time to devote themselves to this kind of stuff. The added revenue can help ease some of the burdens that make active participation prohibitory for working journalists. The other reason it will work is that, by joining one particular section (which I imagine most people will do), it helps give people a sense of ownership in the paper. Right now most people have an almost adversarial relationship with their newspapers; the division of “us” and “the media” is extremely pronounced. This would help break that down. It helps that the process of choosing which section to support is itself very democratic, as does the ability to interact more directly with that section, through the comments/suggestions area of each section wire. Again, the NPR model comes to mind as one where people feel a connection to the journalistic product.

The model I just laid out could probably also work for the New York Times, despite the fact that it’s even less of a local brand. I don’t think it would work for USA Today. The paper is too mainstream, has too few original elements to make it stand out, and doesn’t seem to have the same kind of connection to its readers that a Washington Post has. USA Today, in the long run, is screwed. I could be mistaken, but I think it will ultimately be a relic. People won’t pay for short and generic. They’ll pay for unique and specific.

I’ll exclude the Wall Street Journal from this discussion. WSJ has a uniquely-successful web site subscription model. Financial journalism is actionable in a way that mainstream journalism will never be able to match (but it should probably try to, for good measure). The Journal has a relatively steady subscriber base and an enthusiastic owner. It’s not going anywhere.