I ran the back-of-the-envelope calculations on converting a news site from free to subscription-based in this space a month ago, and found the notion wanting, to say the least. Now along come Martin Langeveld, reaching the same conclusion with even better calculations, and Jeff Mignon and Nancy Wang, reaching an even more dire conclusion by throwing some very sophisticated modeling at the problem.
But I daresay the prognosis is not as dire as Mignon and Wang estimate. Their revenue numbers for an online-only 50,000-100,00 circulation newspaper site are pretty scanty. But that's because they tried to calculate it using CPM (that's cost-per-thousand, journalism majors—it's the standard way of pricing national advertising).
Problem is, local advertising—really local advertising—isn't necessarily sold on a CPM basis. In fact, as some have joked, small advertisers can't even spell CPM. They just aren't that sophisticated. Instead, they buy advertising based on a belief it will get them exposure and drive people into their businesses. It's not a terribly artful way to do it, but it tends to mean that the CPMs they pay are actually astronomical—maybe 10 times the ones that Mignon and Wang use for their calculations.
So if you're a publisher looking at the math and despairing that you're never going to make any money again, take heart. In theory, that's what these calculations seem to show. But take heart: in practice, there's a lot more advertising money available in local markets for online sites than these numbers indicate.
Meanwhile, can we drive a wooden stake into the heart of these nutty online subscription ideas? Please?
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