I was wrong.
Newsday, as it happens, is in a unique position, and is taking advantage of it. Owned by Cablevision, the paper is circling the wagons around its core news and cable market on Long Island. Its online subscription plan goes like this: If you're a Cablevision cable-TV or Newsday print subscriber, you get access to Newsday.com site for free. If you're not, Newsday wants non-subscribers to pay $5 a week, or $260 a year.
That's a hefty fee, and not surprisingly, just 35 people have signed up for it since the pay wall went up about three months ago—a paltry number that left many observers a-titter and a-Twitter when it slipped out this week.
Yep, Newsday apparently has successfully alienated its non-Long Island audience. But that turns out to have been the idea.
Like other papers, Newsday is retrenching to focus on local coverage, supported by local advertising. On Long Island, it's basically the only game in town—the geography of the long, skinny island shields Newsday from most significant competitors. Newsday.com's coverage and advertising base are similarly limited to Long Island—and Cablevision has concluded that it can't make significant money from any audience outside that core area. Control of the cable system gave the company a means to enforce that strategy.
That makes Newsday's subscription model one of a kind. It's not charging its core audience for access; 75 percent of Long Islanders are Cablevision or Newsday print subscribers, and thus get Newsday.com for free. The site can detect and allow visits via a Cablevision modem or has a Newsday print account, or it can accept access routed through a different Internet provider if the visitor can provide a Cablevision or Newsday account number. Because Cablevision owns both the cable system and the paper, it can make this work.
By putting up the paywall to outsiders, Newsday.com controls its advertising base, and also adds a sort of premium channel for cable subscribers—a nice competitive firewall against cable archrival Verizon FiOS.
The Newsday paywall isn't completely impregnable—there are whispers that it can be beaten by repeatedly reloading pages, or by using expired Cablevision account numbers, or by visiting mobile.newsday.com. And it still disenfranchises locals who aren't cable or print subscribers. But Cablevision views that as a marketing tool to get them to sign up for the cable system—or wants its $260 for a subscription to Newsday.com.
What Cablevision and Newsday don't want—just don't care about—is non-Long Island subscribers. Buh-bye. Take a hike. Adios. (Or pay $5 a week/$260 a year for access.) Those distant subscribers can't be monetized through local advertising, the reasoning goes, so why bother with them?
Living outside Long Island, you may not like that (it does seem unfair to Long Island expatriates), but Newsday is willing to take the hit to hone its focus on its home market. It's simply not interested in site visitors from elsewhere, and its site, with its local focus, isn't intended to serve them. They have little or no value—even at $260 apiece, apparently.
Like it or not, the unusual strategy seems to be working just fine. Newsday.com says its unique local visitor statistics are down just slightly since it started requiring Cablevision or print subscriptions; Reportedly Web traffic-counter Nielsen says Newsday.com traffic has dropped by one-third or more—but Nielsen's measurements of locally focused sites are notoriously flakey. Those 35 subscribers at $260 apiece? Gravy.
Tad Smith, Cablevision's president of local media (and a friend and former boss of mine) explained the situation this way in a memo to his staff:
The way to measure success for newsday.com is not, therefore, to count how many people sign up to pay $260 per year for access to the website. Our objective instead is to grow our target audience's utilization of newsday.com's great content and tools. How does this create value? Those who value the website's benefits are more likely to be retained as Cablevision or Newsday subscribers, and the enhanced retention improves the economics of our business. This is quite similar to the value that is created by a targeted local cable network offered on your cable service.
As such, the newsday.com strategy is entirely different from the strategies pursued by other current and prospective online publishers. Other online publishers do not sell high-speed Internet services. They must sell their services to customers one by one. In short, newsday.com is unique in the advantages it brings Cablevision and vice versa and we like it that way.
(I do fault Tad for suggesting elsewhere in the statement that a point of the strategy is to emphasize the value of the print edition of Newsday by "provid[ing] print subscribers with a rich web experience." That's printie-think. Long-term, the intention should be to place a high value on the Web site as a standalone product.)
As Smith's memo and PaidContent point out, we really can't draw a lot of conclusions from the Newsday subscription experiment: It's unlike any other effort to charge for online content, because of Cablevision's control of both the access and the destination.
It probably is instructive that the number of people who've signed up for subscriptions is so comically low—a loud warning shot to short-sighted newspapers that are boldly threatening to charge for online access (but timidly not actually pulling the trigger just yet). But because Newsday's situation is unlike any other, it's difficult to criticize the strategy. In its weird way, it seems to be working just fine.
Now if they'll just do something about that butt-ugly site design...