The original version of this story used an incorrect percentage (37 percent instead of 73 percent) to identify the number of Californians between the ages of 18 and 84, which then affected the analysis of readers in Los Angeles and Southern California. The story was corrected on June 15.

Newspaper circulation and readership continue to fall: 3.3 percent for both daily and Sunday papers in 2014 according to Pew. Daily circulation has fallen 11 of the past 12 years, losing 33.8 percent of its total readership. There are many hypotheses about the reasons behind these declines and reactive measures to combat them. However, one explanation I have not seen addressed sufficiently is that the existing business model for news publications caters to only half of their total addressable market (TAM). Newspapers will continue to see their readership dwindle if they don’t do something to add new readers from what I call the forgotten 50 percent.

What is the forgotten 50 percent?

If you put all potential newspaper readers on a bell curve and chart the paying users on the left and free users (until they hit the pay model) on the right, there is a large percentage — ­­the forgotten 50 percent — ­­in the middle who are currently not being addressed by the existing one-­to-­many business model of newspapers and news websites. These potential readers are unwilling to pay for a print subscription or scale a paywall and they are not loyal enough to proactively visit the news site on an ongoing basis (or even sporadically) for news. This middle section is the forgotten percentage. For some newspapers this number could range anywhere from 10 to 90 percent. What are news organizations doing today to monetize their content with these readers?

The forgotten 50 percent: The Los Angeles Times

Let me begin with a simple example using myself and where I fall on this bell curve. I do not pay for print or online access to any paper so I never fall in the left-­hand side (rationale for this will come later in my analysis). I will sporadically read content from The New York Times and The Wall Street Journal if a relevant article comes to me through my social channels or email newsletters that entice me to click. For every other publication, I am in the forgotten 50 percent. I could be a reader of several publications:

  • I grew up in Brevard, North Carolina, so I would be interested in lifestyle announcements from The Transylvania Times.
  • I went to high school in Asheville where my twin brother lives and my family’s company is based so I would be interested in select business and local news from The Asheville Citizen ­Times.
  • I attended college at the University of North Carolina at Chapel Hill so I would be interested in university news from The Chapel Hill Herald, The Raleigh News & Observer and The Daily Tar Heel.
  • I now live in Winston­-Salem so I would be interested in local news from The Winston­-Salem Journal and the Greensboro News & Record.
  • I want relevant national and international news from newspapers such as The New York Times, The Wall Street Journal and USA Today but I am not committed enough to browse their sites daily during my morning routine.
  • I like technology news so I would be interested in relevant content from any other publication that wrote about it and delivered that news to me.

I just named 10 publications I’m aware of that I would welcome into my reading stream when relevant, and I’d invite countless others to make that attempt if their content matches my preferences. It is all about incidental information acquisition, leveraging technology to break down each publication into an a-­la-­carte format and delivering articles to each user based on their preferences. The reader was initially unaware of the article, but consumes it once brought into their purview and is appreciative for it.

The rationale for having hard paywalls is to drive users to publications’ sites to monetize free users with advertising and try their best to convert them to paid users. It is working to monetize the left and right sides of the bell curve. But it is doing nothing to monetize the middle group.

We can see this issue starting to be addressed by publications striking deals to put their content on Facebook and Snapchat, and aggregators such as Flipboard. But the process is too rudimentary. For example, The New York Times editors should not be choosing which “select few” articles go into Facebook as editors do not know what these potential readers want to read. Instead, technology can easily compare their content with the immense preferences indicated in each user’s profile to strategically position different articles to different cohorts of users.

Unbundling, personalization and customization

Just as broadcast channels are inevitably getting broken apart into individual shows for a-­la-­carte consumption through Hulu, Netflix and Amazon Prime, and 30­-minute news broadcasts are getting broken into customizable news segments via WatchUp, this model of unbundling, personalization and customization is only getting started for newspapers.

Let’s compare the news industry to the music industry to discuss progress to date. Musicians and their separate CDs are equivalent to siloed newspapers with their separate publications ­one end-product pre­-packaged to all recipients. Then, iTunes came on the scene and listeners could buy only one song at a time instead of the entire CD, similar to the Danish news company Blendle, where users can buy one article at a time. Spotify lets users listen to just one song or an entire album via a fixed monthly cost. The closest comparison in our industry is NextIssue, which populates all lifestyle and some news magazines into a digital kiosk where users can see the entire magazine but still in a one-­to-­many format. Pandora Radio uses algorithms and indicated like and dislike preferences to string together a unique end product for each listener. My business Reportory reflects this same model: we use preferences on source, topical category and keyword, plus likes and dislikes, to create a customized news digest with a freemium ad-­supported version and a tiered­-consumption subscription option.

Analyzing the Los Angeles Times’ forgotten percentage

The Los Angeles Times saw 25.18 million unique digital views in January 2015. They reported 59,769 paid users for the six months ending September 30, 2014, implying a mere 0.24 percent of online readers pay for access. Looking at their print subscribers, their total average circulation was 690,870. Thus the left­ end of their bell curve is 750,639 paying readers, and the right­ side is 25,125,231. The difficult part now is analyzing their total addressable market to calculate their forgotten percentage.

According to the 2013 U.S. census, 3.88 million people live in Los Angeles. Let’s broaden that to Southern California since we can safely assume people within a 100-mile-radius of Los Angeles may be interested in some of the content generated by the Los Angeles Times. That’s 22.68 million people as of 2010. Approximately 73 percent of all Californians are between the ages of 18 and 84 (my pre­determined optimal news­reading age). That gives us 2.83 million readers in Los Angeles, or 16.56 million readers in Southern California.

Thus, if the existing Los Angeles market made up all of its paying readers, that would equate to 26.5 percent; for Southern California, only 4.5 percent.

Taking its online unique views minus online subscribers, there are 25.12 million users each month accessing the site for free. We can safely assume the majority of those are the 95.5 percent who currently are non­paying readers from Southern California, plus a wide plethora of transplants and other readers around the world who have an interest in Los Angeles Times content.

But how many forgotten readers fall into the middle bracket? These are the readers the Times and all other news organizations need to prioritize a monetization strategy for in the next several years as falling subscription revenue squeezes the left side and diminishing advertising revenue weakens the right side. Are prior-paying users loyal enough to move to the right side of the curve so you at least still secure a small amount of advertising revenue, or move immediately to the middle, meaning you lose the reader completely? How often do readers on the right side move back ­and ­forth between the middle group as their preferences and lifestyles change?

Unfortunately, I can’t answer this for the Times or for any other paper. Just as my 10 papers outlined above do not know they are losing potential revenue by not pushing their relevant content to me, publishers cannot easily identify all of these potential semi­-customers to monetize.

The solution, in my opinion, is an open marketplace where all content is available in an a­-la-­carte format from all newspapers and news magazines around the world. For discussion purposes, let’s house this marketplace within Facebook. Even if the Times has nearly 26 million readers, they can easily find their missing percentage within the pool of 1.44 billion Facebook users by how many indicate their paper as a preferred source plus how many times their articles get pulled into digests based on keyword and topic matches.

But aren’t aggregators already doing this today?

No. Google News just aggregates links, forcing users to go back to the siloed sites and paywalls, essentially forcing users to either go back to the left or right side of the curve. LinkedIn Pulse has a combination of full­-text articles and RSS feeds linking back, and it currently only does univariate aggregation where readers can receive all news from a desired publication, but not truly a ­la ­carte to send me the one relevant article matching my preferences from that source. The same is true for Flipboard, News360, NewsRepublic, SmartNews and the myriad of other news aggregators in the market today. Facebook Paper, sadly, had such potential but the experience is extremely limiting with only a few select topical sections available, and the inability to indicate which publications appear within each section. Reverting back to the historic one-­to-many model of news — where editors choose the news — are apps like NYT Now and Circa, and news email subscription services like Vox Sentences and Quartz.

No doubt there are a number of players focused on some sort of delivery and/or personalization of news, but I strongly believe nobody — yet — is doing it right to fully monetize the forgotten 50 percent.

Just as I am an avid paying subscriber to Pandora to listen to my own curated and relevant music each day, I would also pay for a similar service — such as what I have built with Reportory — to combine only the relevant articles from all of my preferred sources each day. Thus my rationale for no longer paying for wasteful one-­to-­many publications when I only read less than 5 percent of their content each day. Why force users to pay the same amount for the same product when we all consume a different percentage of the content?

Until the news industry comes to grips with a better pricing model to monetize the full 100 percent of its total addressable market, I —­­ and millions if not billions of others ­­— will stay in the forgotten and non­monetized percentage.

Tracy Clark  
 
Nonresidential fellow



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