Gannett, Times Co. Web Paywalls Have Been a Success, Report Says

Gannett Co. (GCI), New York Times Co. (NYT) and other newspaper publishers are finding that consumers are willing to pay for online subscriptions for access to local news content, according to a report from Borrell Associates Inc.

Gannett, the owner of daily newspapers including USA Today, had 46,000 online subscriptions at the end of 2012, two-thirds of which were new readers, the Williamsburg, Virginia-based researcher said in a report being released today. Times Co. last year generated more revenue from circulation than from advertising -- in part because it “led the way” charging for online access, Borrell said.

Times Co., Gannett and others have been building these so- called paywalls in an effort to make up for lower advertising sales and print subscriptions. Still, only about 25 percent of all newspapers had done so by the first quarter, Borrell said. Papers have held off on paywalls amid concerns that readers would stay away, leading to a drop in ads. Yet research shows that after an initial decline, readership gradually returns to pre-paywall levels after 12 to 14 months, Borrell said.

“More are expected to jump on board this year, without negative impact on digital advertising sales,” the researcher wrote in the report. “Digital ventures could be contributing half of company profits to these media companies in five years.”

Washington Post Co. (WPO), for example, said last month it plans to adopt a digital-subscription model.

Borrell analyzed 6,284 local operations -- including radio stations, newspapers and cable systems -- and online ad-spending forecasts in the U.S. and Canada.

To contact the reporter on this story: Olga Kharif in Portland at okharif@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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