This is the future of online newspapers

The Guardian yesterday announced that it was going to start charging for online services, making it the last UK broadsheet newspaper to install a paid-for element on its website. The end of universal free news content has finally come.

And so we thought we'd take a quick look at where all the broadsheets stand at the moment when it comes to charging for content, the different approaches they have taken and where they see the future going. Speaking to the people behind the websites, there is now a clear view of where and how to make money from news on the Web.

Newspapers are a unique business in that competition is a minute-by-minute battle. News is something you don't already know. With the Net able to supply that information almost instantly, newspapers have had little choice but to put everything they publish every day up on the Internet in the hope of keeping people on their site and returning to their site the next day.

The struggle has always been how to make money by charging for the content while also keeping as many people as possible visiting the site to make it attractive to advertisers. And of course there is the ever-present back-of-the-mind fear that free and diverse online content will stop people buying printed newspapers.

Newspaper websites' and their content have gradually become split into six areas. There are news stories - they are free and will always be. After a week though, these stories become archive stories and access to them may be charged for. Third are columnists and opinion pieces - news items that are exclusive and identifiable to the individual paper.

Next are email services - giving people a concise rundown of stories that are likely to interested them direct to their inboxes. Fourth is the digital facsimile of the printed newspaper - whether in internet-standard jpeg images, or PDF files or using some proprietary software. And finally there are the add-ons - crosswords, competitions, games and the like.

The only other distinction is those readers that live in the UK (and are being aimed at by the paper's advertisers) and those live elsewhere - overseas.

Each newspaper has taken a slightly different stance with each area and all of them seem to be fairly happy with it at the moment. At least two have become profitable. But is there a correct way of doing it, or will each newspaper's approach become the same as its editorial line - catering for the majority of its readers?

We spoke to the people who make those decisions plus one or two interested observers into the whole affair.

The Guardian

The Guardian was at pains to point out that all the stories (including its archive) will remain free. It will charge annual subscriptions though for its email digests - one at the beginning of the day that cover the day's papers and one at lunchtime that covers breaking news - as well as for crosswords, an ad-free version of the site and a new digital facsimile service.

The email digests will cost £12.50 a year, crosswords £25 a year, an ad-free version £20 a year and the digital version of the Guardian £98.57 a year or £10 a month. Until the end of July, all have introductory 20 per cent discounts.

Simon Waldman, the Guardian director of digital publishing, told us the move was a first step into understanding the market for paid-for content. "When it comes to newspapers on the Web, people want two things," he told us. "A live up-to-minute extension of the paper, and a replica of the newspaper."

The digital replica of the paper will be available in a few weeks and has been developed in house. Thumbnails of pages will be visible which when you click on them will bring up a jpeg image of individual stories. A PDF file of the story will also be made available.

While Mr Waldman explained there was no plan (yet) to charge overseas readers or for archive access - as most other broadsheets have done - the decision to introduce charges is a clear shift in the Guardian's online philosophy.

The newspaper is in the slightly unique position of being owned and run by a trust and so has been protected from the worst aspects of competitive pressure and shareholders. This has enabled it to invest heavily in its online services and as a result it has by far the largest online readership for UK newspapers - 7.3 million.

This is also why its move to charging for content is such a landmark in online news.

BBC

In terms of the overall online news market in the UK, The Guardian lags only the BBC. It is not a newspaper but we mention it as the BBC news website has caused much consternation among other news providers because it doesn't charge for any content but has access to huge news-gathering resources, all paid for by the British public.

This situation is damaging the market for online news, say the other site owners, since it doesn't allow a level playing field. The BBC is looking at charging overseas readers but rather more interestingly Tessa Jowell is looking at how the BBC's internet programs are funded and whether they are justified under the current licence.

Financial Times

The Financial Times' website, FT.com is (or rather was) next largest behind the Guardian. It introduced a two-tier subscription service around this time last year. Readers can see the lead stories each day for free but virtually everything else requires a subscription. In this sense, it moves away from the usual "one week is archive" rule.

For £70 a year or £5.83 a month (19p a day), you get access to all the stories, columnists and email news service, plus a better search facility and a digital facsimile of the paper in pdf format. For £195.00 a year or £16.25 a month (53p a day), you gain access to its extensive world press search and in-depth reports.

The FT is in a fairly unique position in that it is a specialist business paper and so its readers (often companies) are more likely to pay for directly relevant information. That said, it has still only seen 55,000 of its 3.5 million online readers sign up.

Its decision to go in so heavy with subscription was in part due to the huge sums that FT.com managed to get through during the dotcom madness, which helped contribute to a 12 per cent fall in profits for its 2001 financial year. By the end of 2002, following the subscription scheme and some job losses, FT.com had however become profitable.

Daily Telegraph

The Daily Telegraph also claims 3.5 million users and following the Guardian's announcement is now the UK broadsheet most free with its content. Crosswords cost £25 a year and its pioneering and successful fantasy sports games charge a few quid for registering and for changing players and details. Apart from that, its content is free, as is its archive.

Last month, however, it did announce a digital facsimile service using Olive Software - a proprietary piece of XML software used by the Washington Post and The British Library for newspapers - for its overseas visitors.

Hugo Drayton, the MD of the Telegraph's New Media arm, says he is happy with what the paper offers at the moment and does not have any more projects for the immediate future. However, he does see charging for content gradually creeping into the equation. "Until recently it has been difficult to charge for any general newspaper content," he told us. "But that is changing slowly as it gets back down to the main players."

The whole dotcom free content drivelution is drawing to a close and Mr Drayton even likes bloggers. "The whole blog thing has been great in liberating people but when people want the real take, they turn to trusted newspaper brands."

Its digital facsimile version may be pricey at £22 a month (72p a day) and has had a "slow start" but Mr Drayton calls it an "interesting development". It is about exploring new ideas - "acting and fine tuning" - he says, noting that the Guardiandecision is good news for the Telegraph and for the market.

The Times

The Times introduced a crossword and archive subscription service in March last year. All content in the paper is free for a week and then charged at £1 per article for a minimum of 10 articles - bought in advance. If you are willing to spend £2,000, this cost per article falls to 10p. The crossword meanwhile costs £8 a year (reduced from its launch price of £10 a year).

The general manager of Times Newspapers, Paul Hayes, was very forthright when the subscription plan was announced: "The free ride is over and the days of free content have gone." And he remains so now: "We said a long time ago that it was over. There are two ways to do this, one is advertising and the other is to charge."

Every aspect of the site needs to support itself with its own revenue stream, and that is why the Times charges for overseas customers, for its archive, for the digital version of its paper and for its law reports. Mr Hayes points to the fact that the site has just had its first profitable quarter that they were right to introduce the charges - "I'm glad that everyone else has caught up with us," he says.

News stories and "free-to-air" content (a TV phrase) will remain free but with anything digitised or which requires additional work, it is "reasonable to ask people to pay for that". Subscribers to the various content services though still only number thousands, while The Times' has around two million unique users.

Instead, a lot of the Times' online content success has come from games - something unique in the newspaper world at the moment. It also heavily features a shopping area of the site, again rare among other newspaper sites. Both were included in order to justify the expense of running a website and push it into profitability. "We're making a profit now, so we have a future," says Mr Hayes.

The Independent

Which leaves the Independent - the UK's smallest broadsheet both online and off. Ironically, though, it is the Independent that has benefited the most from charging for content.

It decided to go the micro-payment route (paying a small amount each time you want to read an article) in April this year and chose British Telecom's new Click&Buy service so that it wouldn't have to invest £200,000 in its own payment system.

For any stories over a week old, plus columnists and opinion pieces, readers pay £1 per story, £5 for a month, £30 a year for various parts of the site, or £60 a year for access to everything.

The MD of Independent Digital, Richard Withey, told us he was surprised with the take-up. "It certainly shows that people will pay for quality content," and even happier with figures that show 20 to 30 per cent of people that paid for a single story go on to buy a larger subscription. Incredibly, he also says that revenue from content charging is neck-and-neck with advertising revenue - a situation that is not even slightly replicated elsewhere.

However, the Independent's method is very unlikely to suit larger newspapers since BT takes a large cut of the money for supplying the system and also only provides limited statistics on users - always a vital element for newspaper execs. Mr Withey agrees: "This is probably no good for the bigger players, but it's nice for us as it's all new money."

The Independent has also considered charging for an ad-free site but unlike the Guardian is planning to keep its newsletter free since advertisers like the direct nature of it and it stands to make more by keeping the number of newsletter subscribers high.

The market overall

So the time of free newspapers on the Internet is over. Which will not come as a surprise to anyone. However, there are a variety of ways that papers have tried to find revenue off the back of its site without slamming the door in the face of visitors seeking that day's or week's news.

While advertising remains the single most important aspect, it does not cover all the costs of a website, so newspapers have had to find ways to make their site sustainable by charging for elements of it.

Key in this progression has been the Association of Online Publishers (AOP), which was formed in July 2002 as a way of tackling the problem of online content and whose members are solely the UK's large news organisations. Since its formation, newspaper groups, less wary of its competitors, have started testing out different methods of bringing in revenue.

The head of the AOP, Alex Daley, is encouraged by the recent changes. "There is a trend towards consumers beginning to pay," she told us. "Newspapers are dipping their toe in the water at the moment as they remained concerned about the balance between content and advertising."

She continues: "It's about finding the right niche product or service. And they are all priced very carefully as no one wants to cannibalise their print products." Key, she says, is for papers to know who their end users are and their habits - so we can expect to see more cases of visitors being prompted to register and then being followed around the site with the use of cookies to see where they go.

However, these small movements are mostly thanks to the AOP, which has got executives talking to one another. "It does make a difference it you can get people to sit down and discuss where the industry is going. When people share ideas, they get the feeling they know where they are going and it makes the industry stronger." There will always be an element of free content on the Internet though, she says.

Industry observer Rafat Ali, a business journalist who runs the site www.paidcontent.org, is not so certain that the industry has got it right though - or even if it knows where it is going. "Everybody is groping about in the dark at this point," he says. "It's all about diversifying revenues while leaving the main content untouched."

He says that the least all papers should have is a digital facsimile version but also ad-free sites and things such as SMS alerts are starting to see their potential. He criticises most archive systems as too expensive, but then with micro-payments of a few pence still stubbornly refusing to appear on the market, the high price may hold up for some while.

And so the newspaper industry has started talking to itself a bit more and clear-cut approaches to making money have been discovered. That at least allows websites to be become profitable - and so sustainable.

Having run through the dotcom madness, it seems all UK broadsheets have at least found the right track when it comes to websites and are now walking along it in a loose group taking a breather. The interesting time will come when someone starts running again. ®