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Wednesday, November 7,2012

Paywall: 6 months later

Circulation's down for the LSJ since it unveiled a paywall six months ago, though corporate is confident

by Andy Balaskovitz

Diane Gracia-Wing, an East Lansing resident who subscribed to the Lansing State Journal for over 30 years, says her hometown daily is useless to her.

For Gracia-Wing, the quality of content has declined so much over the past several years, she couldn’t justify a seven-day home delivery subscription to content she could get for free elsewhere.

She is not alone. In the six months after unrolling a new paid digital subscription model, otherwise known as a paywall, the Journal’s circulation continued its downward trend.

According to the latest figures from the Audit Bureau of Circulations, the Journal’s weekday circulation dropped 2.6 percent since March 31, from 41,330 to 40,248. Even worse, Sunday circulation declined 12.4 percent, from 65,904 to 57,701. Compare that to 2008, when the Journal’s circulation was 59,000 during the week and 77,000 on Sunday.

What Gracia-Wing saw as the decline in local reporting was “really the driving reason for me to cancel: The reduction in local reporters that they had and obviously the local news that went with that.”

Moreover, she hasn’t become a digital-only subscriber, which costs $12 a month, because she gets all the local news she needs in the allotted six free articles a day she gets without a digital subscription. “I don’t want to pay for digital access that is essentially the same thing in the physical newspaper,” she said.

Despite the circulation drop, which the Journal’s owner, Gannett Co., says is happening in its markets throughout the country, the paywall is helping offset the circulation losses. Gannett President and CEO Gracia Martore told financial analysts in a conference call last month that it’s the first time since early 2007 the company has seen an increase in combined revenue from print circulation and the Internet. Local revenue figures for the Journal were unavailable, though.

However, Gannett’s advertising revenue continues its downward spiral — a fact that still causes financial analysts some concern. And how long will the Journal be able to provide seven-day home delivery if its owner sees the need to continue to cut costs? 

“What Gannett is finding out is that we’re pretty happy with it,” LSJ executive editor Mickey Hirten said, referring to the paywall. “It’s a transition, we’re moving to a digital world. We’re taking a different approach than other papers and organizations in the state, and I think successfully.”

Basically, Gannett says that while average print circulation numbers are declining, revenue from the paywall is compensating for those losses. (Again, no numbers were available specifically for Lansing.) Together with gains in its broadcasting markets (Gannett owns 22 TV stations, including one in West Michigan) and digital services (it owns websites like careerbuilder.com and apartments.com), it’s also covering the decline in print advertising revenue.

Companywide, Gannett saw a 5.6 percent increase in circulation revenue for the three months ending on Sept. 23 compared to the same quarter last year, according to the company’s latest filling with the Securities and Exchange Commission. 

The fact still remains that the Journal’s circulation has dropped by 1,082 on weekdays and 8,203 on Sunday. Also, in order to be successful, some argue that the Journal would have to provide local news that people couldn’t get elsewhere. 

Audrey Barton, a Lansing resident who with her husband subscribed to seven-day home delivery for about a year before canceling about two months ago, falls roughly into the same category as Gracia-Wing.

“I like getting the newspaper, but it didn’t seem like the articles were meaty. It didn’t talk enough about town issues and Lansing people. I want more of that, less of Associated Press articles,” said Barton, an employee at Curious Book Shop in East Lansing. “What I was paying for wasn’t what I was looking for.” 

Barton said she satisfies her local news appetite by visiting other local news sites in the area. While the content has slipped, the paywall was the “last straw for us. We like independent news. We don’t use the LSJ website, I’m sorry to say.”

While things are looking better for Gannett’s publishing bottom line, one financial analyst said wild cards still remain. Indeed, if you look only at Gannett’s publishing revenues (advertising and circulation), it’s still 3 percent lower than what it was at this time last year, showing print advertising has not rebounded.

“Print is still losing ground,” said Edward Atorino, a Gannett analyst for the New York-based financial analysis firm Benchmark Co. “The wildcard for newspapers is: I don’t think advertising is going to get much better.”

Atorino said Gannett will likely increase the price of content to “offset some of the advertising decline.” Earlier this year, the Journal raised home delivery rates — in some cases $7 a month more — and Sunday newsstand prices from $1.50 to $3.

And then there’s not just printing papers, but delivering them to homes. The Journal is the largest market in Michigan that still offers seven-day home delivery. For example, Gannett’s Detroit Free Press prints seven days a week but offers home delivery only on Thursday, Friday and Sunday. However, the Gannett dailies in three smaller cities — Port Huron, Battle Creek and Howell/Brighton — are still delivered every day.

Atorino said it’s important Gannett “cut costs as much as it can,” and after a 2 percent Gannett-wide staff reduction in 2011, the company may also consider cutting back on home delivery as it did in Detroit. If that’s the case, Hirten hasn’t heard about it.

“Probably at some point it disappears, but who knows when that is?” he said. “There’s been absolutely no discussion that I have heard of to adopt a Booth-like plan,” he added, referring to Booth Newspapers, which last year switched its name to MLive Media Group to emphasize its online presence, mlive.com. None of its seven newspapers are still delivered seven days a week.

Referring to fully print versus fully digital, Hirten said if you think of those two ways to deliver news as the ends of a continuum, Gannett is somewhere in the middle. 

Regardless, he said: “You have to establish value for your content. It’s absolutely essential.”

Now he just has to convince Diane Gracia-Wing of that.

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