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CanWest Takes Tiered Approach to Pay Content at Canada.com

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Canadian media powerhouse will offer the most content online to print newspaper subscribers, with plans for a paid digital edition and multimedia service. But by giving up local exclusivity, one expert questions whether they can break the "Albuquerque Journal Rule" and get away with it.

Losing money online went out of vogue sometime around the spring of 2000, when the dot.com boom became the dot.bomb. While freebie-lovers everywhere have grimaced at the new tollbooths sprouting up at online content sites, the new reality is simple. We can no longer argue about whether people should pay for some content online; our arguments are limited to what they pay for and how.

That goes for American media, North American media, European media and pretty much anyone trying to make a business media profitable online. So it wasn't a big surprise when Leonard Asper, president and CEO of Canadian media giant CanWest, said it was time to start putting up tollbooths on its canada.com site. "There's no point in having canada.com with 120 million page views a month if nobody is paying for it," he said at a conference in September. "If we lose the page views, fine."

Now comes the what and how. CanWest offered some early details of its pay plan, with a tiered service similar to what Time Warner is doing with its U.S. magazine sites, and Tribune Co. is doing with some newspaper sites. There will be four tiers:

* Tier 1: Free breaking news content for the general public, taken from CanWest newspapers, TV and radio.

* Tier 2: Premium content for CanWest newspaper subscribers. So if you subscribe to one paper, you'll get full access to all its content online. This represents 80 percent more content than Tier 1, including "access to columnists and opinion pieces, search capabilities and archives," according to a statement from CanWest COO Rick Camilleri.

* Tier 3: A paid PDF format digital edition of CanWest newspapers, aimed at an out-of-town and younger audience that prefer to get news via digital editions.

* Tier 4: Due sometime next year, this will be a pay multimedia service that will be similar to the PDF version but with video content linked to newspaper content, according to Geoffrey Elliot, CanWest vice president of corporate affairs.

Elliot talks excitedly about the Tier 4 product. "It looks similar to the PDF format, but it has some whiz-bang multimedia characteristics," he said. "You would have the ability to click on things and bring them to life. If you click on a photograph, it might change into a video. If you click on an ad for a Mercedes-Benz, it might take you through to a multimedia presentation. If you click on the weather, you'll get a video of the latest weather as presented by the weatherman on Global Television, which is our TV network."

The new tiered system will start on November 3, with the Ottawa Citizen being the first to launch in the new format; the National Post will follow, and the other papers will make the change by the second quarter of 2004.

Raising the bar

Change will be good for the canada.com network of sites. CanWest Interactive took disparate newspaper sites and put them into a jello-mold template that makes the Ottawa Citizen's site no different than the Vancouver Sun's. The unified approach is similar to the one taken by Knight Ridder Digital and others, and has the advantage of making network-wide ad sales more simple. The downside is a vanilla look, and Web addresses that don't include the newspaper's brand name.

Elliot said CanWest Interactive turned profitable within the past 12 months, but the company needs to grow the business for the future. The tiered approach offers a boost for -- or perhaps an end to cannibalization of -- print subscriptions, which have been in decline for years. However, it also is a bit of a mishmash for consumers.

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Peter Krasilovsky, vice president and senior partner at Borrell Associates, said he has some concerns about the tiered system. He didn't like that the free content in Tier 1 wouldn't force registration; he called the segregation of columnists a "fairly aggressive" move that could backfire; and he questioned the bundling of search capabilities with a pay wall, and the forced PDF edition for those outside subscription zones.

Most of all, Krasilovsky wondered whether the free content at canada.com would jeopardize the local exclusives that make paid content work at some smaller newspaper sites.

"What is interesting here is that canada.com, as a national service, will not benefit from the remote, local exclusives that CanWest and other Canadian chains get," he said via e-mail. "Local exclusivity, in fact, is the only factor that enables newspapers to win at paid access today. We call it the Albuquerque Journal Rule. Without local exclusivity, there is generally a negative return on investment in putting the newspaper behind the firewall. It doesn't significantly boost paid circulation, and it limits advertising reach."

Tier 4 = Holy Grail?

Other Canadian news sites have had mixed results with paid content. The Winnepeg Free Press locked down all content in early 2002, and lost half its page views a year later, according to a story in the Globe and Mail. The Globe and Mail itself has tried a couple paid services -- a financial site called globeinvestorGOLD, and a sports site called TSNmax that's now defunct. Angus Frame, editor of globeandmail.com, told me the investor site is still bringing in new subscribers.

"Like any Internet business, we've looked at all sorts of business models while we try to understand the full potential of the medium," Frame said via e-mail. "And these days, we continue to carefully study the various options for making money online. But for now, we are happy to succeed as a free site supported by a growing base of advertisers."

Frame, along with Krasilovsky, were most curious about the Tier 4 effort coming down the pike from CanWest. "It's the Holy Grail, isn't it?" Krasilovsky said. "The New York Times and others all dream of getting paid a monthly fee like HBO for multimedia content. With its print, cable, and video assets, CanWest is really well positioned to lead the content industry into establishing a successful multimedia tier that people want to pay for."

Print subscribers will get full access to their newspapers online, but creating a unique multimedia offering is the key to getting people to ante up money online.

"The biggest disappointment with many paid services is that they aren't really producing new capabilities; they are simply letting consumers gain access to something they've already had for free," Krasilovsky said. "CanWest will do well to beat the drum for any new capabilties it brings to the table. And given its national scale in Canada, to devote some unique resources to the premium versions of canada.com."

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