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JOURNALISM IN THE AMERICAS Blog

Paywalls in Latin America: A special report from the Knight Center on digital subscriptions in the region's newspapers



 

Against the almost total domination of the digital advertising market by platforms such as Facebook and Google, some of the most traditional newspapers in Argentina, Brazil, Colombia and Mexico– the latter being the pioneer in Latin America– have decided to adopt paywalls as a business model in their search for greater financial sustainability.

Rodrigo Bonilla, Americas director for the World Association of Newspapers and News Publishers (WAN-IFRA), told the Knight Center that this year many of the newspapers in Latin America are coming to terms with the fact that money from online digital advertising is not enough.

"The ads from programmatic advertising – advertised in real time and using algorithms – the banners and advertising displays have not been enough for newspapers to attract more advertisers. That is why the idea that online money has to come from readers is coming back with force," he stressed.

In general, with the sustained decline in print advertising revenues, online digital advertising revenues are not yet sufficient to finance newspaper activity, especially in the case of Latin American media. Above all, this is due to the high fixed costs involved in the printing and distribution of print editions.

Rodrigo Bonilla (Courtesy)

According to Álvaro Triana, director of Innovation Media Consulting, the digital platforms of Facebook and Google account for more than 70 percent of the global market of digital advertising.

“In Latin America, only 12 percent of the total revenue of media companies comes from digital sources, according to the recent report Media Flow of Funds 2017 from the Arthur D. Little consultancy, which estimates a growth of 4 points to reach 16 percent participation in 2020, which is still very low compared to other regions of the world,” Triana said, according to what site Perú Retail reported in June 2017.

"The option of the paywall has always been on the table for Latin American newspaper companies. There have been newspapers that have started very early, such as the case of Reforma in Mexico (2003). It was followed by several Brazilian newspapers, [such as Folha de S. Paulo in 2012]. (...) The Argentine newspapers in which it was launched this year, such as Clarín and La Nación, did so in a coordinated manner with the help of a digital committee from Adepa (Association of Argentine Journalistic Entities),” Bonilla said. “The main newspapers in other markets (in the region), consider it but still do not feel encouraged.”

The idea is that more will join, progressively, and that they will undertake these initiatives together, Bonilla explained. He added that it is important that media outlets do not see each other as competitors in the digital markets because the competitors are actually Facebook and Google.

In the case of Grupo Reforma, which has newspapers in three of the most important Mexican cities – El Norte in Monterrey, Mural in Guadalajara and Reforma in Mexico City – the paywall was adopted in 2003, just three years after the creation of the group’s website. At the time, 100 percent of the content was available only to subscribers of the print edition.

While that percentage has decreased over time, the media company still offers a low percentage of its content to readers for free, distinguishing it from many of its contemporaries in the region.

The main reason for continuing with this business model is because "the journalism we do is timely, accurate, reliable, serves as a source of decision-making for our readers, meaning that our information has a cost," Jorge Jiménez Fonseca, publisher of digital content of newspaper Reforma, told the Knight Center.

One of the main commercial advantages of the paywall for Reforma has been the segmentation of its market. The subscribers of Reforma, about 100,000 people, are between 25 and 35 years-old and economically have higher purchasing power than the average consumer.

For Grupo Reforma, having a paywall implies having significantly less site traffic than its competitors, such as newspapers El Universal, Milenio and Excelsior.

"But at the commercial level, we have a base of readers who, being Reforma subscribers, are much more differentiated and belong to a defined social background. Meaning we can plan and generate campaigns for our advertisers that are aimed at a very specific type of reader and not readers in general. (...) This makes it more attractive for luxury brands such as Rolex, Mercedes Benz, etc.," Jiménez explained.

However, in recent years, the paper has been analyzing and testing various strategies to attract more subscribers, such as deferring subscription payment in monthly installments and opening five percent of its daily content to the general public. This five percent is usually sports news, local and international information of the day, but with added value, like when it published the ranking of the most lethal massacres in the U.S. after the recent mass shooting in Las Vegas.

A screenshot of the notice that pops up for non-subscribers when attempting to access an article from Reforma.com

According to Jiménez, since 2015, Reforma has also made all video content it produces freely accessible.

“With this we are looking for there to be a hook, by showing the quality of the information and of the contents of the group, so that eventually you will subscribe,” Jiménez said. All of Reforma’s content on social networks is also freely available.

There are also times when the paper decides to lift the paywall for a limited period of time for “pragmatic purposes for society,” Jiménez explained. This recently happened from Sept. 19 to 30, when Reforma offered all content free of charge after a monster earthquake hit the region.

South America: Paywalls at traditional newspapers

As for the newspapers in Brazil, Ricardo Pedreira, director of the National Association of Brazilian Newspapers (ANJ, for its acronym in Portuguese), said that once embarking on the path of digital subscriptions, there is no going back. This is not only due to problems of the old business model of journalism based on advertising revenues, but also because of the strong economic recession that the country has faced in recent years, Pedreira told the Knight Center.

"The big Brazilian newspapers, all of them, are in a process of transition so that the income from digital subscriptions is the majority of their income. It is very evident that this is the road," Pedreira said.

According to the Instituto Verificador de Comunicação (IVC) of Brazil, the share of online subscriptions of the five largest newspapers in Brazil, which are Folha, O Globo, Super News, O Estado de S.Paulo and Zero Hora, has grown consistently.

"As of the first week of August of this year 2017, digital subscriptions represented 42 percent of the total subscribers of the aforementioned media. Last year that percentage was 39 percent, meaning, there is an increase in the share of online subscriptions in the revenue? of newspapers," the director of ANJ said.

Another of the economic strategies of the Brazilian newspapers mentioned by Pedreira is the concentration of print newspaper distribution in large metropolitan regions, and the search for digital subscriptions in the interior of the states, in remote areas.

For example, Pedreira said the newspaper Zero Hora, which is one of the largest in southern Brazil, is concentrating more on the distribution of its print edition in the greater metropolitan area of Porto Alegre (in the state of Rio Grande do Sul), giving priority to the search for digital subscriptions in the interior of the state. For that, "they all have a marketing job in that sense; in order to economize its distribution," he said.

In Argentina, in April and August of 2017, two of the largest Argentine newspapers Clarín and La Nación, respectively, decided to choose to establish paywalls on their content, leaving only a limited number of articles open to non-subscribers.

In early November, Clarín published that just over six months after having installed its paywall, it already has more than 50,000 digital subscribers in the Argentine market. It also reported having reached an audience record in the mobile format, surpassing 196,000 unique users in the month of October, which represents a 20 percent increase in the consumption of Clarín news with respect to the previous month.

Rather than a paywall model, in August 2017, Argentine newspaper La Nación decided to migrate "towards a digital subscription strategy based on two very successful initiatives in which La Nación is a pioneer in the region," Ernesto Martelli, digital strategy manager at La Nación, told the Knight Center.

Regarding the initiatives, Martelli referred to the development of digital content of La Nación (founded in 1870), which was the first Argentine newspaper to have a web version in 1995, and the development of Club La Nación, a virtual community created ten years ago that now has more than 800,000 members that are part of a system of benefits and exclusive experiences.

Currently, readers of La Nación have access to only 10 monthly articles without needing to register. Those who register for free as users of the site can access 30 more articles per month. And those who subscribe to the digital site have unlimited access to the newspaper’s content.

Additionally, paywalls are seen by La Nación as a great opportunity, because of the quality of their content on all platforms that differentiates the paper from others, quality that according to Martelli is recognized by the large size of its audience and the international awards they have garnered.

"In terms of audience, we do not expect significant decreases. Although the strategic focus will be on the conversion of subscribers, with new content management indicators that will reorient part of the production efforts towards the creation of a greater differential added value, the development of digital audiences continues to be part of the initiatives and we believe we are solid there," Martelli explained. He added that during the first month of the launch of the paywall, the newspaper had a record audience much higher in terms relative to other media outlets, including those with and without paywalls.

In September of this year, La Nación and The New York Times launched a joint digital subscription, giving all their subscribers access to both media outlets’ digital content for a special package price.

"We believe that the tendency of users is to start paying for the content they value. In that sense The New York Times is not only a prestigious brand with journalistic values related to La Nación, but it has developed an interesting, successful subscription model,” Martinelli said. “We believe that simplifying a joint subscription can be attractive to a demanding audience segment."

Another South American country that, according to Bonilla from WAN-IFRA, will adapt the paywall model is Colombia, with newspaper El Tiempo. "They will experiment in the coming months, defining how many items will be given access, and the price," Bonilla said. And, he added, that so far, newspapers of Ecuador, Bolivia and Peru have no plans to resort to paywalls.

For Chile, paywalls do not seem to be a priority. It seems that in Chile, the media is still fairly oriented to print. "The brands of Copesa and El Mercurio are very established brands, El Mercurio has a very particular strategy that is to keep its content on paper on one side, and on the digital side, it has (as a brand) Emol, which is more an aggregator of content than a news site of El Mercurio. It's a very particular case," Bonilla said.

In Central America, according to Bonilla, some Guatemalan media outlets are evaluating adopting paywalls, but there is nothing concrete, yet.

Working together to launch a paywall

According to Bonilla, in Brazil, the idea of having to pay for online news was established very quickly because of the existence of internet provider portals that charged for access. For example, in the 1990s, the principal internet provider in the country, Universo Online (UOL), which is part of the business group of newspaper Folha de S. Paulo, began offering Folha content exclusively to its users. Moreover, UOL "developed its own paywall technology and shared it with all its ANJ competitors," he explained.

According to the book Cyberjournalism in Ibero-America by Spanish researcher and journalist Ramón Salaverría, charging for access to journalistic content along with subscription to an internet service provider, was used as a strategy in Brazil, as well as being able to read only a certain number of news pieces for free each month. According to the Reuters Institute report, "Brazilian consumers are the most accustomed to paying for digital content. (...) In 2012, (when Folha de S. Paulo instituted its paywall) digital subscriptions on newspaper websites grew 128 percent over the previous year,” the study said.

Regarding the Argentine case, Bonilla also pointed out that the interesting thing is to see these initiatives working together, such as Clarín and La Nación, which worked in coordination with Adepa to launch their paywalls this year.

"It is important to see cases like the Argentine or the Brazilian where the entire written press is coordinated to face this issue collaboratively, and with cooperation, because ultimately the competitors are others, they are not ourselves," Bonilla said. He also warned about the existence of digital aggregator sites that produce content by adding notes from the mainstream media, charging for it, making the latter lose huge amounts of traffic.

Brazil: Alternatives for advertising revenue post paywall

While Brazilian newspapers have opted to make digital subscriptions one of their main sources of revenue, they are also making progress in adapting advertising to its digital format, said ANJ’s Pedreira.

In Brazil, advertising revenues for Brazilian newspapers have increased with the Digital Premium joint initiative (created in mid-2014), ANJ’s Pedreira said. This initiative is the product of the union of 65 Brazilian newspapers that publish – simultaneously and online each Thursday – the same ads with premium format and exclusive content.

According to the Digital Premium site, before, contacting the main newspapers of the country to buy advertising in their publications took about three days, and each newspaper had different advertising formats. This made it necessary to have an individual negotiation with each newspaper and the price of carrying out the same campaign for the network rose considerably.

"It's a joint and simultaneous way to market advertising. It is an example of the advances that are taking place in digital platforms as well as in the advertising area," said Pedreira, as a strategy of newspapers to attract digital advertising to their news sites. "This has become a very big success," he said.



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