The Boston Globe made waves today by announcing its plans to lock its newspaper content behind a paid subscription firewall. But setting up a paywall is one thing. Making it work will be a tougher chore.
The Globe said today it will begin charging for online newspaper access, through a new BostonGlobe.com, in the second half of 2011. Boston.com, which attracts 5 million unique users per month, will be refashioned to focus on breaking news, sports, weather, arts and entertainment, and classifieds.
The paper, which is owned by the New York Times Company, did not announce a pricing scheme for the new online subscription service, other than to say current subscribers will get access to the new BostonGlobe.com for free.
As last year’s subscription price increase showed, pricing can make or break a venture. After a tumultuous spring in which the Times Company threatened to shutter the Globe, the paper hiked its subscription rates by 33 percent last year. The Times instituted a similar increase. It’s been for naught. New financial disclosures show the windfall from last June’s circulation price change has been nearly wiped out already.
In the first three months following the June 2009 price hike, circulation revenue across all of the New York Times Company jumped 7 percent. Circulation revenues have continued to post gains in the subsequent quarters, but those increases have been getting smaller and smaller.
And now, a full four quarters after the increase went into effect, the gains are vanishing altogether.
Last week, the Times Company told investors it expected its third quarter 2010 circulation revenue to fall by 5 percent. The quarter, which wraps up today, is the first in which financials will take into account both higher subscription prices and lower subscription volumes.
Last year’s 7 percent gain was powered exclusively by higher cover prices; this quarter’s 5 percent retreat shows higher cover prices haven’t been able to keep pace with the lower circulation rates that price hikes engender.
Globe circulation fell by an astounding 23 percent in the first nine months following last year’s price hike. Those numbers are expected to be lower still when updated numbers are released next month. And they are directly related to the paper’s cost.
Globe home delivery rates now top $600 per year. That’s 3.5 times what Miami Herald readers pay for downtown home delivery, 4 times what Los Angeles Times readers pay, and 4.5 times the going rate for the Chicago Tribune. In a possible bad omen for Globe readers, it’s cheaper to read the LA Times in print ($155 per year) than it is to pay for unlimited access to the Worcester Telegram & Gazette’s website ($180 per year).
Publishing observers like to hold up the Wall Street Journal as proof that content can survive behind a paywall. It’s important to note that the Journal is posting serious revenue gains by moving its paid product at a reasonable rate: Its web-only subscribers pay just $100 per year.
The point: Like many consumers, Globe readers will pay to get the news, but only up to a point. Demand for the news falls as the price rises. It’s not a difficult demand dynamic to understand. And it should be the paper’s foremost concern as it moves forward. The Times Company badly underestimated the ramifications of jacking up its cover price. Its new Globe paywall will be useless if nobody’s willing to pay the cost of getting past it.