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Gannett (NYSE: GCI) said it is “playing offense” again after years of cuts and contraction. Its touchdown strategy is a sophisticated paywal…

Gannett

Gannett (NYSE: GCI) said it is “playing offense” again after years of cuts and contraction. Its touchdown strategy is a sophisticated paywall system that the news giant says will both bolster local news reporting and deliver an extra $100 million in profits. The plan is ambitious, but is it realistic?

Gannett announced its plan late this morning as part of an “Investor Day” event at which the company presented a new strategy that it says will result in a stable debt structure and sizable dividends.

Gannett’s $100 million gambit is based on slapping subscription requirements on every one of its 80 community news websites, including their related mobile platforms. On a morning call with investors, CEO Gracia Martore said the plan was grounded in the public’s strong desire for local news and in readers’ longtime trust in Gannett’s papers. The company’s community papers include titles like the Reno Gazette-Journal and the Hattiesburg American.

Newspapers across the country have been dabbling in paywalls of one sort or another for the last two years, but Gannett’s initiative is the biggest across-the-board implementation to date. (Incidentally, Gannett prefers “new content subscription model” to “paywall”; the company is right to plump for a new, positive term — but I’m not sure this chunky phrase is a winner).

A Gannett representative told me this afternoon that the company has already been experimenting with paywalls for three community papers and that it will immediately expand that to six others, including ones in small markets (St. Cloud, Minn.), medium ones (Poughkeepsie, NY) and large ones (Wilmington, DE). By the end of the year, Gannett will have some type of paywall in place in all 80 markets.

Gannett will also taper its pricing and paywall strategy to each individual market — meaning that issues of pricing, bundling and meters will be determined on a paper-per-paper basis. This seems like a smart strategy — not only will the company have a chance to implement an optimal formula for each paper, but it will also acquire a wealth of price and marketing data.

Still, there are some wildcards here. These include Gannett’s capacity to develop and scale mobile and tablet applications for all of its properties. According to the company:

The plan is to have all markets have the same suite of apps – over time. The local community digital suite will be rolled out on a common architecture, but will, of course to locally “branded” – logos, etc. So the look and feel and operability will be the same, but the experience will look/feel “local”.

The project’s success will also turn on reliable revenue from Gannett’s legacy print papers. The company plans to build out its digital empire only through existing cash flow, so the scheme could hit a wall if print revenues fall faster than Gannett’s prediction of a “secular decline in the single digits.”

There is also the question of advertising. While the company’s $100 million prediction is based on new subscription revenues alone, this amount could be offset if paywalls cause online ad revenues to significantly decline. Finally, like the rest of the content industry, Gannett will have to find out if real mobile ad revenue will ever arrive or if it will remain a ‘just-around-the-corner’ promise that doesn’t materialize.

The company’s flagship paper, USA Today, is not part of the scheme. Forbes notes this is likely because the publication relies on a ubiquitous distribution strategy.

The company’s presentation this morning also described new digital marketing initiatives and the expansion of its sports-related properties.

The market seemed to approve of Gannett’s plans. The company’s stock rose over four percent while the larger market was flat.

  1. Do you want to know why they are putting up paywalls? Because they work.

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  2. Perhaps, for Gannett, the numbers will work in terms of balancing marginal revenue increases against deep cuts in costs. (Proof will come in the company’s willingness to share detailed numbers.)  But a blanket comment that “paywalls work,” without stressing the need to develop unique and valuable content as defined by the market (rather than the publisher), is just plain silly.

    Developing content takes resources, whether the content is distributed in print, on TV or online. Many newspapers have cut their content-generating resources so drastically that they are no longer competitive against available alternatives. Whether Gannett can succeed with paywall-sequestered websites, while continuing to cut budgets, remains to be seen.

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    1. I have a more direct measurement: mathematics. The NYT paper, which is the only paper in the NYT co. to put up a paywall (ok, boston did too, but too early to tell) is now growing revenue for the first time in five years and it is ALL from the paywall. The Arkansas Democrat has seen revenues increased by over 20 percent and circulation INCREASE since they put up their paywall in 2003. Nearly every single paper with a paywall has seen revenues increase. What other metric should one use??? Is our goal something besides making money? Paywalls work.

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      1. The Worcester Telegram & Gazette (MA), a New York Times property, implemented a metered access paywall in the first semester of 2010. It was more than just a paywall, but rather the first step in a long term bundled subscription offering, to increase engagement with its customers.

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  3. The problem with Gannet newspaper websites will be the content. Yes paywalls can work. But will readers pay for the poor quality of content that plague these papers?

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  4. Graham Shepherd Saturday, February 25, 2012

    Here is another view. Paywalls have been tried before and failed. The latest implementations create exactly the same barriers to entry as the old ones and will fail as well. Unless the subscription model entices, instead of confronts, few will take it up. Instead of charging per issue or per month, subscriptions should be a low rate per article prepaid for so many articles – no contracts, no obligation. Publishers would then find out what content is valued and what is not and subscribers would have no inhibitions about value for money. 

    The concept of “issues” is a dated one in the on-line world and newspapers have to escape from it. “Authoritative sources of information” is the type of concept that they now have to adopt. Bundling, as used by the cable industry and others, is a similar mistake because the rubbish in which the pearls are to be found undermine consumer confidence and brand value. Certainly, have differentiated prices for different content and for introductory offers, but help consumers make fully informed choices.

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