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As online advertising revenues are expected to slow to little more than a trickle this year, Hearst is the latest newspaper company trying t…

As online advertising revenues are expected to slow to little more than a trickle this year, Hearst is the latest newspaper company trying to figure out how much of its content it can put behind a pay wall. Earlier this week during the Q4 earnings call, a Cablevision (NYSE: CVC) exec touched on plans to make Long Island’s Newsday.com a complement to its pay TV services, while a few weeks ago, NYT mused in a Q&A with readers that the paper would try to find a way to charge readers for more of its online content.

Inescapable conclusions: A memo obtained by WSJ and attributed to Steven Swartz, the president of Hearst newspapers, lays out the issues confronting the company: “One inescapable conclusion of our study is that our cost base is significantly out of line with the revenue available in our business today. It is equally inescapable that during good times our industry developed business practices that were at best inefficient.”

Difficult change: Hearst’s newspaper division is in the middle of its “100 days of change.” The initiative was billed as a signal that the company is finally serious about saving its ailing news business as the prospects dim for many of its properties. During the last 50 days, Hearst has already warned that that it would shutter the San Francisco Chronicle and it would either kill or produce a digital-only version of its Seattle Post-Intelligencer unless a buyer could be found by early March. More after the jump

More web reporters, editors needed: As Hearst Magazines continues to explore the creation of its own e-reader — Hearst Interactive has invested in both its e-book partner FirstPaper and in E-Ink, which helped create Hearst mag Esquire’s digital cover in September — to save its segment, Swartz’ memo also pins a great deal of hope on the success of devices like Amazon’s Kindle, which allow access to magazines, newspapers, blogs and other content for a regular charge. He adds that Hearst must demand that readers on the iPhone and other portable gadgets pay as well. But he concedes that general market newspapers — which he says are “all pretty much alike” — can’t put everything behind a pay wall. By erecting a pay wall around some content, the company’s newspapers might be able to charge higher prices by presenting advertisers with a more engaged and committed readership, as opposed to equally valuing all eyeballs that come to their sites. To attract paying subs and more money from advertisers, Swartz says that the newspaper websites have to be built up. That includes creating more web-centric content by expanding “the number of reporters, editors and photographers who are running a truly great blog” and tapping citizen journalists for hyperlocal content, something NYTimes.com is starting to do.

Print realities, digital goals: Swartz describes Hearst’s newspapers’ situation as having a “revenue and business model problem as opposed to an audience problem.” Print subscribers don

  1. Not only online advertising has slowed down, printed format advertising has being hit the hardest

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  2. It's hard to imagine a worse collection of strategic initiatives. The results will set new standards in legacy media failures to embrace digital.

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  3. I don't understand why people think pay walls will work. In my experience, I've come to understand the basic model for newspapers (without online or commercial printing). Advertising accounts for 80-85 percent. Circulation runs between 10-14 percent. And the remainder comes from other things paper traditionally did (reprints, merchandising, etc).

    If that model applies to online, though on a much smaller scale, how can companies justify the investment and expense to institute a pay wall? Plus, the cut in traffic will affect impressions, which will have a negative impact on ad revenue. Not to mention that companies with pay walls already in place, such as the Arkansas Democrat Gazette, are encountering the same financial troubles and making the same choices (i.e. layoffs) that those without are experiencing. Yet, companies such as Hearst think this is a good idea?

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  4. Dust of your Joseph Heller as newspapers ponder which content should be paid for and which should be given away free online. Can you imagine the editorial pissing matches?

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  5. I am glad Hearst has raised this issue of pay walls because it's something every newspaper and magazine are going to have to come to terms with. The business model of giving everything away online for free doesn't work.

    If you owned a furniture store you wouldn't let people order your stock online for free while selling the same item in your High Street store at a cost? It doesn't make sense. Newspapers and magazines across the globe have been treading water for years now, shoring up falling revenue by cutting staff and cutting pagination. It seems clear that for many it can't go on any longer and it's time now for the business model to be redressed. Unfortunately that could very well mean pay walls.

    My big problem with this is that smaller, independent outfits are squashed because they can't afford to let their content be published for free, while the big guys eg. television companies will be able to run their online news content for free. What then for quality journalism?

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