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Can A Media Web Site Become Too Popular?

From initially hoping that web news sites would just go away, to then adopting the “if you can’t beat them join them but with as little as possible” strategy to then jumping in with no holds barred, the media has grappled since the Internet began to define its rightful place on the web.

And now it has come to yet another crossroad. That most feared nightmare of all – cannibalization – when a media web site’s popularity causes a decline in readers/viewers to its traditional media product – is starting to have some real consequences, financially and philosophically. Media organizations are going to have to take some pretty hard decisions in deciding the way forward.

Which is one reason why the media was in a twitter when it learned that Rupert Murdoch was chairing a one-day meeting with some 50 of his senior global executives to try to get to the bottom of how News International can take the best advantage of the Internet, especially with the growth of broadband, and come up with the proper Internet strategy for its various properties.  After the various PowerPoint presentations were done the basic answer was still “Don’t Know” and so NI has done what most companies do when they don’t see the way forward – it has called in the consultants.

Murdoch has already expressed concern that his tabloid Sun, the UK’s daily circulation leader with some 3.3 million saw circulation drop by nearly 4%  (a 136,000 copy decrease in the August, 2004- January, 2005 period when compared with the same time frame a year earlier.)  Murdoch said he accepted that the UK market in general was soft, and that the free Metro competition had bitten into the Sun’s circulation, but there is a nagging question whether the wild success of the Sun’s own website might also have something to do with the hardcopy decline.

And if that is the case, is that a good or bad? More viewers online means possibly higher advertising revenue there, but less readers to the hard copy could mean less advertising revenues there. Can the two products continue to live side-by-side in financial harmony with the online site continuing to publish most of what is in the hardcopy newspaper?

In January, 2005, the Sun’s website attracted more than 5 million viewers – up 56% over a year earlier – resulting in 138 million page hits.. One reason the online site has done so well is that it is a classic marketing example on how to converge a newspaper with its web site. The web site attracts the young – the very audience publishers are craving to capture – by offering features a newspaper cannot -- videos, it hosts chats, etc.

But the Sun’s research shows that 78% of its readers are active online users. Is the Sun being cannibalized -- that significant numbers of its readers have turned to the online site for free and they are saying that is good enough and they have stopped paying for the hardcopy.

With one of his most successful newspapers experiencing that kind of trouble there is good reason for Murdoch to want to get the company’s Internet policy right.

But in Norway, Verden Gangs (VG), the country’s leading newspaper with 360,000 circulation, has already decided its own web site is to blame for the newspaper’s 4% annual circulation decline, and it has taken steps to reduce the newspaper’s flow of copy to its web site.

The front pages of the hardcopy and the web site will now look different. No consumer stories from the newspaper will get filed on the web site before lunchtime; no newspaper feature story nor any column will now make it to the web site at all. Time will only tell if that will be enough to have those missing newspaper readers come back and pay for the hardcopy news product.

There had been stories late last year that managers at the Sun had considered similar measures – pulling the most popular features from the web site so they appeared just in the newspaper – but it never happened and the online editor said it would not happen. But usually where there is smoke there is some fire, and internally a raging battle is probably still being fought.

The Murdoch meeting in a midtown New York Hotel took place not far from the New York Times headquarters where an almighty debate is said to be taking place between those who want the Times web site to switch to a subscription model based on the success Dow Jones has with the Wall Street Journal, and those who want to keep to its successful advertising model.

The Times’ web site attracted 16.4 million unique visitors in January – a 23% gain from the previous year and 11% up from December – with a record 553 million pageviews. January 2005 ad revenues were 35% ahead of January 2004.  The Wall Street Journal, on the other hand, has built the web’s largest subscription news service with more than 700,000 subscribers. Those who subscribe to the hardcopy paper pay $39 a year for the web access; those who don’t take the newspaper pay $79. WSJ.com claims 153,000 unique visitors each business day. WSJ executives have often exclaimed they have never understood why media companies give away news when they have proved people will pay for news, and they have publicly encouraged the New York Times to make the switch.

While they may not agree on the best model to generate Internet revenues for their newspaper sites, these two publishing giants have recently agreed separate deals signifying they believe the Internet is THE place for future media company growth.  Dow Jones recently completed its deal to buy the financial CBS MarketWatch site for $528 million; and the Times has announced it is paying $410 million for About.Com, a consumer information site that has some 22 million unique visitors monthly. The Times says that combining the 13 million unique visitors to the its various current web sites with those of About.com makes the Times Company the 12th largest entity on the Internet.

Observers claim that in both cases the companies paid too high a premium for what they bought. If that be true then it is just further proof of how important they believe the Internet is to their future business growth.

And it is not just newspapers that have revised their Internet strategies. News agencies that originally did not want to offend their clients by publishing the same news, pictures and video on their own sites for free that they sold to the media for a lot of money have reversed course and are making every marketing effort to win the direct consumer market. Reuters has taken it one step further and is now actually withholding various exclusive information (interviews etc.) so it will have stories on its sites that no one else has. It reported a slight decline in its 2004 media revenues because it had pulled out of some of its third party Internet business to retain that exclusivity.

Media web sites are attracting huge numbers of visitors. The Guardian in the UK claims nearly 10 million monthly users. In Spain, El Mundo’s web site surpassed 6 million readers in January, making it the most popular news site in Spain and perhaps in the Spanish-speaking world.

So the question is no longer how the media can attract readers to its web sites, but rather, to use an English expression, how one can have its cake and eat it --- ensure those same readers who pay good money for the hardcopy continue to do so as they enjoy the web site offerings. And, if Dow Jones and the New York Times have it right, the media should be scouring the Internet looking for sites they could buy, because in the media world of tomorrow it is the web that will produce the real revenue growth.

© Philip M. Stone of  Stone & Associates, a partner in followthemedia.com


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