Newsday's Unconventional Subscription Model

When Newsday announced last spring that it was contemplating putting its Web site behind a paywall, I wrote a scathing critique of the idea. 

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...

Comments

[Stevebuttry]

Mark, we agree that the Newsday-Cablevision situation is unique, and thus may not say a lot about how other paywalls will or won't work. However, even with the way that Newsday and Cablevision lowered the value of their web site and the expectations for their paywall by making the site a throw-in for your cable or newspaper, I think it's still a stretch to say that it's working fine.

For one thing, I don't recall anyone predicting that web-only subscriptions would be counted in the dozens. If that's gravy, it's barely a spoonful. To have only 35 subscribers from the 25 percent of Long Island (a rather populous island) is actually a powerful, stunning rejection of the value of the site by people asked to judge it on its own merits.

And I have seen no figures on either the increase (or slowed decrease) of subscriptions to the print edition or Cablevision. So, even by their standard of lowered expectations, we have no reason to proclaim this as working.

I blogged my differing view of the Newsday-Cablevision spin: http://bit.ly/b0wEKA

[twitter.com/mterenzio]

Thirty five is weird. http://tinyurl.com/ydtbh64

[Shafqatislam]

I'm going to have to agree with Steve on this one. They've effectively convinced 0% of their remaining addressable market that their content is worth paying for. Given any standard web conversion rates, that is poor.

Also, the 25% of non-Cablevision Long Islanders is a fairly large and statistically significant group. I think we can extrapolate that Newsday would be completely screwed if they didn't bundle. People simply aren't wiling to pay for it. Rather than force it down people's throats, it might be better to focus on the digital property and transform it into something that people want.

With regards to the site design, not only is it terrible, their conversion funnels are very poorly designed. Almost as if they don't want any new online subscribers. More here: http://blog.newscred.com/?p=239

[Kevin Bauman]

I also have to disagree with the assessment Newsday's strategy. Basically what Newsday has done, is cut off a bunch of current, and potentially future viewers, given the content away for free to Cablevision subscribers, and made an additional $9,100.

This is success? They were already giving the content away for free. Now they're just giving it away free to fewer people.

Unless they can attribute a significant increase in Cablevision subscribers to the Newsday pay wall, I'd say this is the very definition of failure.

[Mark Potts]

Ken:
Thanks for your comment. Where Newsday.com wins is through higher advertising rates. It can deliver local advertisers a well-defined local audience. Thats a far more attractive sell, at higher CPMs, than what it could offer when readers were coming from all over (and by identifying readers through their cable and print subscriptions, the site can target advertising even more sharply, further increasing rates). The business plan is not to make money from subscriptions; its to make it from higher ad rates.