Pioneering Newspapers Go On-Line

What began as a trickle is turning into a torrent as newspapers around the world rush to set up shop on the information superhighway.

From media giants Gannett, the Times Mirror Company, and Knight-Ridder to the Winona (Minn.) Daily News, publishers are building "home pages" on the Internet's World Wide Web, linking up with commercial on-line services such as CompuServe, America Online, and Prodigy, or setting up their own free-standing electronic bulletin boards.

As they do, they launch into uncharted waters. Questions of how to handle content are unresolved. Nor does a generally accepted business approach exist.

Papers are investing from tens of dollars to hundreds of thousands of dollars to break into digital distribution. Yet no newspaper is making a profit from its on-line service yet, says Steve Harmon, an analyst at Paul Kagan Associates, a media investment research firm in Carmel, Calif. "Many are lucky if they break even." By some accounts, the only people operating in the black now are those who run conferences on how to set up on-line newspapers.

Yet newspapers face many forces driving their desire to digitize. Production costs - up to 90 percent of a paper's expenses - are rising. Young adult readership is falling, while growth rates for advertising income and circulation are lackluster. The phrase "stop the presses" has taken on an ominous meaning as publishers consolidate operations, lay off staff, and close papers.

Meanwhile, "the installed base of home computers is rising steadily," says Josh Schroeter, director of the Center for New Media at Columbia University in New York. The number of young people mastering the mouse also is growing. Moreover, computer and modem speeds continue to climb, and telecommunications links are being developed to carry ever-larger amounts of data at lightning speed. These are expected to improve today's often-awkward travels to and within an on-line news service.

Finally, "there is the fear that you have to have an on-line presence or you risk obsolescence," Mr. Schroeter says.

The result: More than 300 newspapers worldwide - two-thirds of them in the US - currently have on-line editions operating or planned, compared with 20 at the end of 1993 and about 100 at the end of last year. Steven Outing, a consultant and author of 1995 Online Newspaper Report, says that in two years the total could reach 2,000.

Electronic papers cannot fully replace their cellulose counterparts, says John Lux, editor of the Chicago Tribune's electronic edition, available on America Online. Nor is he convinced that this trend isn't just a fad. Yet he holds that an electronic paper has three advantages over its print counterpart: immediacy, an ability to add depth through access to past articles, and interactivity. Ironically, the most heavily used features of the Tribune's on-line service are the "chat" rooms, where users can exchange opinions with the Tribune or with one another.

One of the latest electronic editions is Digital Ink (DI), the Washington Post's on-line service. After months of testing, the service made its debut July 17. According to Michael Rinzel, an analyst with 1995 Online Newspaper Report, DI "is the best example of what newspapers can do with on-line products."

"We started out with the presumption that print would continue for a long time," says Don Brazeal, DI's editor and publisher. "To duplicate the print product wouldn't make sense. We use the content of the Washington Post as a cornerstone, but then we move beyond it in a variety of different ways."

While he won't discuss specific figures, Mr. Brazeal notes that the Post has said it is willing to make a multiyear, multimillion-dollar investment in its on-line offspring. Twenty employees, including three full-time graphics specialists, focus on content alone.

With commercial on-line services, a user may have to navigate through at least two menus to get to a publication's cover. The relationship with the subscriber is less direct. And the publication only gets from 15 to 20 percent of the money generated from a user's on-line time at its site. In DI's case, subscribers see DI's virtual front page immediately after logging in through AT&T's Interchange Network. "We pay AT&T a small percentage of the fees we collect, and we bear a greater responsibility for marketing the service," Brazeal says.

If DI, which also is expected to unveil a site on the World Wide Web in another month, represents one end of the access spectrum, the Providence Journal represents another. Like papers such as the San Jose Mercury News and Atlanta Constitution, the Journal publishes with a commercial on-line service - in this case, Prodigy.

"We wanted to make a business of it," says John Granatino, director of electronic publishing at the Providence Journal. "We determined that it's not possible to do business on the Web. The culture there is free, free, free, and you can't survive by giving it away." In addition, he says, security concerns make people reluctant to pay for products on the Internet. "Prodigy already has an advertising model," he says.

As publishers experiment with different business approaches, they also are dealing with content questions. Many papers are repackaging material from each day's edition and putting it on-line, known as repurposing.

"This approach to content is largely what you see today," observes Columbia's Schroeter.

Repurposing is also favored by executives at The Christian Science Monitor who are exploring options for an on-line edition. "We believe that if you do not incur the cost of original content and if the cost of repurposing can be recouped through advertising and subscriptions, your marginal costs will be manageable," says David Creagh, the paper's business development manager. One approach to augmenting the paper's on-line content would be to make related material from the Monitor's radio service available on-line as well, he says.

Over the long haul, "repurposing content won't work," Mr. Outing says. "People ... are looking at adding features that excel in an on-line medium."

"What is the best way to tell the story? A print piece? A traditional electronic document? Or multimedia?" asks Schroeter. Today's on-line news content "is all bad. But I don't despair. It's like the early days of film, where directors made movies of plays acted out on a stage."

It will only be a matter of time before the most effective formats emerge, he says. The question analysts raise, however, is whether the new entries in the field will stick it out until those formats and business models emerge.

*Peter N. Spotts can be reached via the Internet at spotts@moses.csps.com.