Torstar to move to a subscription model, charge readers for online news
Torstar Corp. plans to charge readers for online news once more in its latest strategy to recover after the internet disrupted the newspaper industry.
Chief executive John Boynton announced Wednesday that the media company, owner of the Toronto Star and dozens of other publications, will move to a digital subscription business model, emulating recurring revenue models in industries such as music and entertainment.
“In some cases, it turned around entire industries,” Boynton said at the annual general meeting in Toronto, pointing to Spotify and Netflix as success stories.
Boynton did not reveal details on the subscription model, including when it will launch or how much it will cost, but said it will apply to the Toronto Star and StarMetro brands. The Globe and Mail and the National Post already use online subscription models.
This marks the Star’s second foray into charging for access to online content. In August 2013, it launched a paywall that asked readers to subscribe for $9.99 per month. It dumped the paywall less than two years later because it couldn’t get enough people to sign up. It subsequently launched subscriptions for Star Touch, a tablet app, but axed that product after sinking $23 million into the experiment.
But Boynton, who was hired last spring to help the company transition to digital, is convinced it will work this time thanks to better technology, shifting attitudes and leadership changes.
The old paywall didn’t have the correct infrastructure to succeed in the recurring revenue business, which relies heavily on data, he said. The new product will analyze what readers are reading, when and where in order to better curate content and target ads, he said. Torstar will never sell reader data, he told reporters after the meeting.
Consumers have become more comfortable with subscription models thanks to their prevalence across industries, Boynton said. Torstar’s research found that consumers, especially younger audiences aged 18 to 34, are also increasingly willing to pay for news given issues around trust and fake news. Eight per cent of Canadians pay for digital news, he said, a number that’s expected to grow given penetration rates of 16 per cent in the U.S. and 20 per cent in Scandinavia.
“Clearly, customers are seeing that content from trusted sources has value,” he said. “More of that content over time will be monetized, less and less will be available for free or for other companies to use without permission or payment.”
Torstar has also replaced half of its leadership team, hiring people with experience in digital subscriptions and recurring revenue models in industries including banking and telecom.
Boynton acknowledged there’s a “certain irony” in returning to a subscription model given the vast majority of metropolitan newspapers used to rely on revenue from home delivery subscriptions before someone decided to give it away online for free.
“Now you look at it and go, ‘What were we thinking,’” he said.
Torstar’s move comes the same week Bloomberg announced a paywall for its online news and Montreal’s La Presse, taking a different tactic, said it would become a non-profit entity. It is part of a larger transformation strategy at Torstar, which will spend $11 million to $13 million this year to reinvent its core business.
The biggest change thus far occurred in April when Torstar rebranded the Metro News free daily newspapers to StarMetro in outposts across the country and migrated Metro content to thestar.com. Boynton called it a “very low-cost way of expanding and getting a lot of scale digitally.”
Torstar’s strategy will not rely on government funding or agreements with platforms like Google and Facebook, Boynton said.
“We’re not relying on anything from them whatsoever. Our strategy is based on finding effective business models that will do it on our own,” he said.
“If it sounds a bit isolationist, I think its pragmatic to not try to hinge or hook your transformation strategy into other companies doing things you want them to do, or federal or provincial institutions.”
He later clarified that the government could help support the industry through its disruption, much like it did the auto industry, but that Torstar’s strategy doesn’t rely on any support.
The announcement came after Torstar reported a loss of $14.5 million in the three months ending Mar. 31, down from a loss of $24.3 million in the same period last year. The results were in line with analysts’ expectations given ongoing declines in print advertising and subscription revenue as consumers and advertisers spend more time and money online.
The quarter had “very few surprises” as challenging publishing trends continued, RBC analyst Drew McReynolds noted to clients.
Torstar’s revenue dropped due to a transaction with Postmedia, owner of the Financial Post, that resulted in the swap and closure of numerous newspaper titles. The transaction is expected to save Torstar between $5 million to $7 million annually.
Torstar also reported that it sold Workopolis on April 12. Proceeds are expected to be between $2 million and $4 million.
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