The Paper That Doesn’t Want to Be Free

The Paper That Doesn’t Want to Be Free
By ERIC PFANNER
Copyright by The Associated Press
Published: August 16, 2009
http://www.nytimes.com/2009/08/17/business/media/17ft.html?th&emc=th


Not long ago, when other media executives were convinced that the only way to succeed on the Web was to give away their content, The Financial Times played the eccentric.

John Ridding, the chief executive of The Financial Times.

“We were regarded as slightly freakish,” says John Ridding, the newspaper’s chief executive.

Indeed, the newspaper started charging readers for access to its Web site in 2002. Now, with few signs that advertising is rebounding from a deep slump, and with other publishers moving to imitate FT.com by erecting so-called pay walls, Mr. Ridding feels vindicated.

“It was pretty lonely out there for a while in paid land,” he said last week. “But it has become pretty clear that advertising alone is not going to sustain online business models. Quality journalism has to be paid for.”

Now The Financial Times is adding to its paid-content strategy with a plan to accept micropayments for individual articles, as an alternative to a subscription.

And one by one, other publishers are starting to see wisdom in the paper’s ways. Rupert Murdoch, chief executive of the News Corporation, said this month that the company intended to charge for all its news Web sites. That plan would have the company’s major newspapers in the United States, Britain and Australia joining their sister newspaper, The Wall Street Journal, which already charges for access to most of its site.

Executives of The New York Times have said they are considering ways to get readers to pay for online access, though they have yet to disclose specific plans.

That is a big change from 2007, when The Times site abandoned a pay wall for some content, concluding that it was restricting the potential for online advertising, despite the site’s having attracted 227,000 paying customers.

Around the same time, Mr. Murdoch was saying publicly that he might drop the pay wall around the Web site of The Wall Street Journal, which the News Corporation was in the process of acquiring.

With luxury goods companies, banks and other advertisers cutting back in this economic recession, ad revenue has fallen sharply at The Financial Times, as it has at other papers. Pearson, the London-based publisher that owns the paper, does not break out separate figures for it, but analysts say its ad revenue is probably down at least 20 percent compared with last year.

Pearson said last month that operating profit at FT Publishing, the unit that includes The Financial Times, had fallen 40 percent in the first half of the year, with revenue down 13 percent.

The print circulation has also fallen, with sales in June down 7 percent from a year earlier, to about 412,000 copies, according to the Audit Bureau of Circulations in Britain.

FT.com has not attracted a huge paying audience, with about 117,000 worldwide, up from 101,000 in 2007. That is far short of the one million paying customers of The Journal’s Web site.

Yet FT.com is lucrative because it charges a premium for its content. A premium subscription to the Web site, with access to all content, costs $300 a year in the United States. Adding the print version costs $100 more.

Because of rate increases by FT.com, revenue from Web subscriptions has risen 30 percent over the last year, Mr. Ridding said. The Financial Times has also raised the price of its print editions.

In another effort to generate additional digital revenue, the newspaper restricted access last year to its content through databases like Factiva and LexisNexis, requiring users to buy special licenses to read archived articles. More than 600 corporate customers, with a total of about 50,000 users, have done so.

The price of a subscription to the databases “wasn’t reflecting the value of what we were producing,” Mr. Ridding said. “So we took control of the pricing,” he said, adding that the change led to “robust revenue growth.”

Also last year, The Financial Times acquired Money-Media, an online provider of news for fund managers that charges a subscription fee. Last week, it acquired MandateWire, a digital provider of news on the pension fund business.

The newspaper also recently started an online newsletter for investors in China, called China Confidential, which costs $4,138 a year.

The growth of paid online services under the Financial Times banner shows that the paper was right to maintain pay walls at a time when other media companies were yielding to the Silicon Valley mantra that “information wants to be free,” said Tim Luckhurst, a journalism professor at the University of Kent in Britain and a former editor of The Scotsman.

“It has proved, in one niche at least, that editorial journalistic endeavor does create value,” he said.

For other online publishers seeking to charge readers, the big question is whether consumers would be willing to pay for general news, as opposed to specialized financial news. Some analysts doubt it, but Mr. Ridding said he thought they might.

“I sometimes think there’s too much fatalism around — people throwing up their hands and saying it’s not possible for general publishers to charge,” Mr. Ridding said. “I think it is possible, and necessary, for them to charge.”

In an effort to generate more revenue from casual users, The Financial Times plans to fine-tune its Web business, which currently gives readers 10 free articles a month before they are required to pay for access.

Mr. Ridding said the site would add a new form of paid Web access next year involving micropayments for individual articles, something that Wall Street Journal executives are also said to be considering. That way readers would be able to buy individual articles in lieu of subscribing.

FT.com’s system is aimed at retaining infrequent readers who arrive at the site from a search engine. The goal is to keep the site accessible to a wide audience for advertising purposes.

Despite the downturn, advertising remains an important revenue generator for newspaper Web sites. Rob Noss, who runs the luxury group at Mindshare Worldwide, a media buying agency, said it was still unclear how readers of newspaper sites would respond to advertising if they were required to pay for access to the sites.

“My personal view is that if I’ve paid for the information, my openness to the advertising will be affected,” he said.

Not every digital initiative of The Financial Times involves pay walls. This fall, the paper plans to introduce a stand-alone Web version of its weekly magazine How to Spend It, a forum for luxury advertisers. Mr. Ridding said that at least at the beginning, access would be free.

Analysts say The Financial Times could face a renewed threat from The Journal, particularly if Mr. Murdoch developed an innovative model for charging on the Web. Mr. Luckhurst, for example, thinks The Journal will package subscriptions to the paper with other News Corporation content.

But The Financial Times is not facing the “existential crisis” that confronts some other newspapers, Mr. Ridding said. “It all stems from a belief in the value of our journalism,” he said. “We are pretty happy with how things have developed.”