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Can the Dailies Survive by Charging Online?

Both the Chronicle and the newspapers of the Bay Area News Group are hoping to make you pay for your online news. Will it work?



Cast your mind, constant reader, back to those halcyon days of early December. You sit down at your desk, flip open that laptop, and start scanning SFGate for a quick taste of Bay Area news. Perhaps you'll check on Matier & Ross; they're always good for some scuttlebutt. Or maybe you'll read Willie Brown's column, or Ray Ratto on the Raiders' apocalypse of a season. But instead, you get a dismaying little note: If you want to read this story, you'll have to pay for it.

Two months ago, after years of losses so steep that its parent company publicly floated the idea of shuttering the paper, the San Francisco Chronicle finally bit the bullet and started charging for online content. Its editors started slowly, with just a story here and there, but they've accelerated the pace and plan to take more and more of their stories behind a subscription firewall. Soon, substantial amounts of content, which we have all so blithely taken for granted, will no longer be free. After fifteen years, the party's over.

Fine, you say to yourself, there's always The Oakland Tribune or the San Jose Mercury News or the Contra Costa Times. But you'll be outta luck there sometime soon as well. Late last year, Dean Singleton, the leader of the MediaNews empire and pretty much every Bay Area daily newspaper that isn't the Chronicle, announced that he, too, will start charging for much of his papers' online content. In addition, he plans to lock out the spybots of Google News, even banning that service from scanning his protected content and displaying the headlines. Bloggers can link to these stories, but following that link will just get you to the same firewall.

A little over a year from now, you may no longer be able to read any Bay Area daily newspaper online for free.

And it's not just happening here. All over the country, after years of bankruptcies and plunging revenues, the largest media and entertainment outlets are finally getting up the gumption to demand that you pay for what they produce. If they succeed, the odd quirk of history that gave us instant online gratification will come to an end.

But will they succeed? While some specialty publications have been able to pull off a subscription-based model, that plan has had its share of spectacular failures as well. TimesSelect, The New York Times' scheme to charge $50 a year to read its archives and columnists, is the most prominent example, closing down after two years of middling growth and lost advertising opportunities. Newspapers have spent years and millions in consulting fees trying to figure out a formula to monetize the web, but no one knows if there is one.

Here in the Bay Area, the stakes are no different. Due to a unique combination of operating costs and its awkward position in the marketplace, the Chronicle has been losing roughly $50 million a year; last February, the Hearst Corporation, which owns the paper, warned that it was on the verge of closing the paper altogether. Dean Singleton's company MediaNews is in considerably better financial shape, but some reporters at its local newspapers, which are known as the Bay Area News Group, glumly doubt that Singleton is willing to spend the kind of money it will take to make much of his content something online readers will be willing to pay for. And both entities are competing with the entire online world, from local television news sites to Perez Hilton. If they can't make a go of it, there's a surprisingly good chance that one will gobble up the other and be the last tycoon — current federal law notwithstanding.

What, exactly, will readers pay to read? The answer — if there is one — will determine the future landscape of the Bay Area's media.

The story of how the media missed the chance to cash in on the web is an old one; they should've charged from the get-go, and now everyone's just too used to getting something for nothing. Calling newspaper moguls idiots for blowing it is a cottage industry, but institutions are always slow to react to events on the ground, especially when they're clocking double-digit profit margins.

Once the nation's papers got behind this eight ball, they faced an awkward dilemma. If just one paper took its work behind a subscription firewall, readers would all go somewhere else. But if they all did — if, say, The New York Times and The Washington Post and the Los Angeles Times implemented a firewall simultaneously — well, that's price-fixing, and that's illegal. Industry officials asked for an exemption to the anti-trust laws, but the Obama administration said no. American publishers were akin to a group of kids standing at the edge of an ice-cold pool, all telling each other they're going to jump in, but waiting for one leader to finally take the plunge.

Last year marked the point at which they decided to jump. It started in late May, when representatives from The New York Times, MediaNews, Hearst, McClatchy, and other newspaper chains met in an obscure Chicago hotel near O'Hare International Airport. The subjects of the conclave included what to do about Google and Yahoo, and how to charge for online content, but the real subject, it seems, was how to collude without appearing to collude.

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