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Free Content Becoming Thing of the Past for UK's Online Newspaper Sites

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From niche content like crosswords to full site access, and from PDA news updates to fantasy football -- British news sites are leading the charge, by charging. Also, see a comparison of the services offered by the top six sites.

Just 18 months ago, the United Kingdom was the land of free online news: Readers surfed from site to site and read every word, searched every archive and subscribed to every news alert -- all for free.

Now everyone's charging for something: With ad sales producing nowhere near the revenues needed to support news sites, every major newspaper site in Britain has decided it's time to bolster sagging income by charging for content.

In March 2002, Times Online started charging for its crossword; the Financial Times started charging for parts of its news site in May 2002. Guardian Unlimited and Telegraph joined the fray in June of this year, leaving their main news product free, but charging for special services like an ad-free version of the site, and for special news alerts.

"Now, it's serious," said Tom Ewing, European market analyst with Nielsen/NetRatings. "There's a real market developing."

But while British press barons are united in their bid to squeeze cash out of their consumers, they all follow different strategies. Basic access is still free -- no one in the United Kingdom has cut off their readers cold turkey.

"It would be silly to presume that consumers would be willing to pay for everything online. So most publishers introduce a tiered system," said Alex Daley, head of the Association of Online Publishers (AOP), the British equivalent of the Online Publishers' Association.

Like other sites around the world experimenting with paid content, British online newspapers are performing a delicate balancing act: Too many fees and readers flee and advertising -- which still accounts for 70 percent to 80 percent of all online broadsheet revenues in the United Kingdom -- flees along with them.

Times Online was the first British newspaper Web site to charge for news content: It started out in May 2002 by charging ?39.99 ($67) to overseas users for an annual subscription to the site.

They have since added a host of other non-free content and reported in August that the income from these subscriptions had helped them turn their first profitable quarter -- the one ending June, 2003. Spokesmen for the company did not release numbers to back up claims of profitability.

In May 2002, the Financial Times started charging ?75 a year ($125) for its archive, and for some comment, analysis and market reports. For a premium, weighing in at a hefty ?195.00 ($325), subscribers can also get access to business databases like Lexis-Nexis and niche journals from throughout the world.

"Right now, we have 55,000 subscribers, with probably a 60/40 split between first- and second-level subscribers," said Zach Leonard, managing director, Europe, the Middle East and Africa, of both FT.com and the Financial Times newspaper.

But visitors fled after FT.com introduced subscriptions: According to Nielsen/NetRatings, the site's unique user numbers dropped from 604,000 in May 2002 to 463,000 in June following the introduction of charges. Advertising slumped as a result.

While Nielsen/NetRatings data shows FT.com traffic has not recovered, ABC Electronic figures show that both page impressions and unique users now exceed pre-subscription levels.

Guardian Unlimited, in contrast, followed the value-add model. It was at pains to emphasize that the vast majority of its site would stay free when it introduced charges this summer, and its unique users numbers have remained steady. It also kept its archive free, perhaps one of the most obvious opportunities to charge.

On the other hand, it charges for a wider variety of news services than all its competitors, with prices ranging from about 35 cents for news updates delivered via mobile phones, to about $165 a year for the digital edition of the Guardian newspaper.

The site charges for new services -- like the ad-free version of the site and digital editions -- and for value-added services, like e-mailed roundups of the day's news and the Guardian crossword. To the tight-fisted surfer, the site still looks free, but to the dedicated reader there are many opportunities to hand over cash for useful services.

"It's very, very smart move," said Mike Butcher, who writes mbites.com, a blog about new media developments. "The whole point about online news, given Reuters, Press Association (better known as PA), Bloomberg, CNN -- even Google's news service -- is that everything is knowable. The point is -- when do you know it? So charging for e-mails that offer timely news is a good way to monetize your content. You make that a premium service, but those who won't pay for e-mail are driven to the site, so you create traffic to boost your advertising as well."

Charging for extras is "a trail which a number of sites have been blazing," said Nielsen/NetRating's Ewing. "The closest to the Guardian model is El Pais in Spain, which charges for some of it's content. It doesn't charge for top stories or breaking news, it charges for more specialist material and that has, by all accounts, been a reasonable success for them. ? (It) leads me to believe that the two-tiered model, with top line content free and deep content charged for, is a workable model and will probably be a positive move for the Guardian."

Telegraph.co.uk has followed a similar strategy to the Guardian: "We're similar in our approach, staying very close to the parent brand, always using (the Web) as an integration platform and a collaboration platform, rather than just seeing it as a rather opportunistic punt," said Hugo Drayton, former managing director of Hollinger Telegraph New Media, which publishes the Telegraph.co.uk Web site. (Drayton was recently appointed managing director of the Telegraph Group, which publishes The Telegraph and Sunday Telegraph newspapers.)

The Telegraph is the most fee-free British broadsheet on the Net, charging for a digital edition aimed at overseas readers and for fantasy football -- though registration is required to access the free content. The Guardian plans to introduce registration soon, though they are anxious to keep their critical mass of deep links from blogs and Google (see OJR's Q&A with Emily Bell).

A Fisk full of dollars?

And then there's the Independent.co.uk: It has developed charges for four "portfolios" of content: news and sport, comment and analysis, the crossword, and famous -- some might say notorious -- Middle-East correspondent Robert Fisk, who is so respected and admired that he merits a subscription all to himself. Thousands of subscribers pay about $50 per year to read him.

It's paid off -- and handsomely at that: "Robert Fisk is our star seller," said Richard Withey, managing director for Independent Digital. "He is absolutely a journalist of international renown. The Independent is a good international brand anyway; it travels very well. We got a lot of visitors from outside the UK, and quite a large proportion of them come to us because of Robert Fisk. He sells very well. Whenever he publishes an article in the paper, our revenues go up. Not that that is why he does it."

Withey said subscriptions are in the tens of thousands, and he adds that he is encouraged by the significant number of users who buy one article and subsequently upgrade to a subscription.

"A lot of people visit our site for the breaking news and for the Independent's stance on breaking news," Withey said. "I'd say that more than 70 percent of the site is still free to access for at least seven days.

"We wanted to charge for what was unique to us, that wasn't like anybody else's, hence the Robert Fisk stuff. But we also wanted to keep up our page impressions up so we could make money from advertising, and we've managed to do that. Our page impressions, in fact, haven't dropped."

Holding the line isn't enough however. Nielsen NetRating's Ewing said that newspapers need to grow their audience, because the market for news is stagnating.

"Uniquely among major Internet sectors across Europe, the news audience, the percentage of online users who visit a news site during the month, is actually pretty much unchanged over the last two years," Ewing said, "whereas other sectors such as shopping, travel, and finance have all gone up, in some cases quite dramatically." Ewing believes online news sites need to broaden their appeal.

It's not an opinion that secures unanimous support from publishers. "I totally disagree with him that newspapers are peaking on the Web," said the Independent's Withey. "I have my issues with all of the Web-measurement methods and surveys. We don't use any, as a point of fact, because there isn't a gold standard of audience measurement on the Web, and I think Nielsen in particular can be criticized for the quality of their workplace panels where most newspapers are read."

But while growing the online readership remains a primary goal for all online publishers, cutting the cost of doing so is a more urgent priority.

The prophets of profit

Most of the British broadsheets claim they are making money or heading for break even this year.

But some deride profit claims: Often the people making them refuse to release figures supporting their claims ?- and often Web sites costs are partly covered by the parent newspaper.

"Yeah, we'll be breaking even this coming financial year," said the Telegraph's Drayton. "We may make a bit of money. Obviously in a big group like this there's the question of how do you account for it? The Times just made a fantastic splash claiming that their Web sites are profitable, but I don't think they've got any costs attached to them (so) it's pretty easy!"

Times Online director Annelies van den Belt is unimpressed with the doubts: "I'm not going to comment on that. We chose to release that information because it was not only valuable to us, but we felt it was valuable to the whole industry. If you choose to treat digital seriously, you can build a business."

Simon Waldman, director of digital publishing at Guardian Newspapers Group, Ltd. -- publishers of Guardian Unlimited -- agrees. "You are starting to see the development of a real business. They are not these insane, billions-pound businesses that we talked about at the peak of the boom. It can take a long time to get there. We've always believed this is a long-term game, this is not a get rich quick scheme. And I think a lot of companies who went into it thinking it was a get rich quick scheme did some very stupid things. You need a broad revenue base, and for me it's about three strands: display advertising and sponsorship, recruitment advertising and subscriptions revenues. And we want all of those three to be healthy businesses."

The British heavyweights, with the exception of the BBC, believe they can create a healthy business, and subscriptions are a part of that.

But the publicly funded BBC is really an exception of note. The BBC has the most popular British news Web site by far, with 16 to 20 million unique users per month. But it has pockets ?2 billion ($3.32 billion) deep, filled with taxpayers' money. While it does not run advertising, most commercial newspapers believe that the BBC makes it harder to compete and survive because it poaches potential readers and subscribers.

The BBC response is to claim the public service defense. "We believe that the news we provide is a valuable service for the UK's license fee payers," said Pete Clifton, the newly appointed editor for BBC News Online. "It delivers to them, on an increasingly important platform, a rich source of BBC News content which they may have missed elsewhere. This content, paid for by them, covers news from local to international, and we feel it is right to make this available on the Web."

Newspapers are eagerly awaiting the British government's online review, which will report on the market impact of BBC's Web business next year. Many in the industry want curbs placed on the BBC Online; they hope the online review will make recommendations to that effect.

All of the United Kingdom's bigger online news operations are focused now on growing profits -- and doing that is naturally more difficult in a marketplace where one of your competitors is deeply subsidized and giving away top product for free.

Now that every quality national newspaper in the United Kingdom charges for something, observers believe the market is ready for commercial development.

"The ability of the FT to charge is not a problem," said FT.com's Leonard. "We suspected it would be, but we have a full year plus to say, 'Wow, we can,' and can probably create new tiers of things to charge people even more."

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Richard Withey: "We wanted to charge for what was unique to us, that wasn't like anybody else's."

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Annelies van den Belt: "If you choose to treat digital seriously, you can build a business."

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Hugo Drayton: "We're ... always using (the Web) as an integration platform and a collaboration platform, rather than just seeing it as a rather opportunistic punt."

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Simon Waldman: "You are starting to see the development of a real business. They are not these insane, billions-pound businesses that we talked about at the peak of the boom."

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