It's practically gospel among media gurus that charging for online news won't work. Too bad no one told the Arkansas Democrat-Gazette.
The Little Rock-based daily has had a paywall around its website since 2002, long before most other papers had even thought of charging for online content.
The paper, the state's largest, has a daily circulation of 169,000, and 258,000 on Sunday. And while its website has just 3,600 online subscribers, those who subscribe to the printed paper get complete access to the website thrown in.
Conan Gallaty, the paper's online director, says this has helped the Democrat-Gazette maintain its circulation at a time when many readers are deserting print for free online news.
"For the last 10 years we've remained steady in both daily and Sunday circulation, whereas other markets have seen 10-30 percent drops," Gallaty says in a phone interview.
The website's paywall "has been very effective in maintaining our print circulation," Gallaty adds. "Our goal is to make sure we don't have people moving from print to online just to get our information for free."
Gallaty stresses that the Democrat-Gazette website isn't just a sleepy rehash of the printed paper. It offers plenty of online goodies, including breaking news, videos, blogs and podcasts, much of which is free.
But the contents of each day's paper are ensconced firmly behind the website's paywall.
"If your whole strategy rides on just dumping the paper onto a website, that's a losing strategy," Gallaty says. "The website has to be different than the paper. A paid model like ours forces us to do that."
So why use web access as the carrot to get people to keep buying the paper? Because that's where the money is. Even after a recession that gutted display advertising dollars, something like 90 percent of a typical newspaper's revenues still come from print.
Online Ad Revenue Just Wasn't Enough
Gallaty says the paper's top dogs built the paywall when they realized that online advertising, which many had hailed as the revenue source of the future, just wasn't paying the bills.
"We said, 'This model isn't playing out, the revenue just isn't there.' We realized we couldn't keep losing a dollar to keep a dime," Gallaty says.
"We feel like we've done a decent job of having a growth strategy for the website and a protectionist strategy for our paper," he says. "We have a hybrid model. There's a lot of content online for free. We want to be as aggressive as possible with online news without losing the business that keeps the lights turned on."
Gallaty quickly adds: "We're not married to print. We don't do this out of a love for paper per se, we just look at this in a business sense. The online ad revenue just isn't there yet."
Gallaty recently was a guest on a talk show on WHYY radio in Philadelphia, along with media gurus Jeff Jarvis and Alan Mutter. The topic? Paying for online news. Both Jarvis and Mutter spoke fairly disparagingly of the Democrat-Gazette's business model.
"It's a very short-term strategy and it will die with its readers," Jarvis told Gallaty. "What you're doing is not going with the future."
Gallaty says he didn't mind, and that he could almost - almost - see where Jarvis and Mutter were coming from. "Both of those guys are former journalists. They saw the slow adaptation to the Internet by newspaper companies. It really frustrated them. They saw that other companies ran laps around the newspaper industry," he says.
"But while it's easy to point to a great success story like Google, you have to remember that there were thousands of companies just like Google that failed miserably," he adds. "Not every new online business is successful. It's great to be entrepreneurial and reinvent yourself, but the odds are against you."
Gallaty believes some media futurists want to "let go of the classic business model that has made papers profitable, and jump headfirst first into online news and just hope the business model is there. We don't want to run on just the hope that the model is there."
What frustrates Gallaty is the fact that so few papers have even tried a paid-content model.
"We need more experience with paid content," he says. "Maybe with other papers trying it somebody will come across the one model that will help the industry tremendously, and people will stop mindlessly buying into the idea that information should be free. That's been one of the worst things for this industry."
