Online Fee For All

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Online Fee For All
Co-founder Matthew Mitchell at MediaPass’ West L.A. headquarters.

The Internet isn’t the free-for-all it once was.

As news organizations realize that online ad revenue alone is not enough to support news-gathering operations, many have begun imposing so-called paywalls.

From community newspapers to online radio shows and blogs, publishers large and small are now charging for their content, a trend West L.A. startup MediaPass LLC is trying to capitalize on.

MediaPass, founded in 2010, designs and manages paywall systems for content providers and already this year has announced deals to process subscription services for the online sites of tabloid Weekly World News and conservative radio talk show “Right Wisconsin.” The site of CBS Sports radio personality Jim Rome is now also using MediaPass to charge its subscribers.

What links these disparate content sites is a desire to increase revenue beyond advertising.

“We wanted (content providers) to try it and get addicted to the money and that’s what happened,” said Matthew Mitchell, a co-founder of MediaPass. “We had to make it so easy that a publisher would say, ‘Why wouldn’t I try this?’ ”

The company has 15 employees in its West L.A. offices, developing software for processing log-in information and payments, as well as designing the appearance and features of the paywall.

The company does not charge an upfront fee for developing the payment system, taking instead a split of subscription revenue ranging from 16 percent to 30 percent.

MediaPass won’t disclose its revenue, which is tied both to the percentage it charges as well as the ability of its clients to convert readers to the pay model. The Rome show, for instance, has an annual subscription rate of $39.95 a year while Weekly World News has a base online subscription rate of $19.95 a year. The number of paying subscribers for those sites was not available.

The challenge, however, is clear, since many readers still scoff at the thought of paying for online news and entertainment.

Many newspapers are happy to convert just 4 percent of their unique online visitors – the number of people who visit a webpage, not counting repeat visitors – to paying subscribers, said Joshua Benton, director of the Nieman Journalism Lab at Harvard University.

Still, certain features, like a “leaky” paywall that allows visitors to read a handful of articles before paying, show promise.

The preference for a nuanced, rather than brick-wall, approach could add up to more business for MediaPass and other service firms, he said.

“That’s created an opening for outside services,” Benton said. “If it were just a rock solid paywall, that’s not hard to manage.”

When Mitchell co-founded MediaPass with Jeffrey Tinsley, chief executive of social networking site MyLife.com, in 2010, publishers weren’t yet sold on the idea that they could charge readers for access to their sites. He nonetheless saw an opportunity to apply experience he gained working at subscription-based dot-com businesses such as MyLife to the online media world.


Experimentation to expectation

At the time, the paywall model was most common in the financial press, with early adopters including the Financial Times of London, though it was far rarer in the consumer press. That began to change in 2011, when the New York Times rolled out its paywall model, an effort it has pronounced a success. (The change to a “leaky” paywall model at the Times cost it just 5 percent to 10 percent of its online readership, according to reports.) That emboldened many others to try out the business model.

“The paywall is going from essentially an experimentation to an expectation,” said Ken Doctor, a media business analyst in San Francisco and author of “Newsonomics.”

Doctor said about one-third of the country’s 15,000 daily newspapers are expected to have such an online payment feature by February of next year, and many, the Los Angeles Times among them, have developed their own subscription-based apps for mobile platforms.

That creates an opportunity for firms like MediaPass, which has also taken early steps into mobile app subscriptions, though it remains a nascent part of its business.

Competition, however, is strong, coming from the likes of industry leader Press+. The New York paywall company was co-founded by CourtTV and American Lawyer founder Steven Brill and former Wall Street Journal publisher Gordon Crovitz in 2009 and sold in 2011 to R. R. Donnelley & Sons Co. for an estimated $45 million. Brill and Crovitz are co-CEOs of the company, which has a deal with the McClatchy Co. chain of newspapers based in Sacramento. McClatchy said in February that its paywall generated $1.2 million last year and was projecting $20 million in additional paywall-related sales this year.

One challenge for MediaPass is that larger companies such as Press+ can often charge publishers lower rates, Doctor said. What’s more, some publishers would prefer to develop paywall software in-house rather than share subscription revenue with outside technology providers.

Mitchell said MediaPass is addressing that limitation by pursuing deals with providers of content management systems, such as the popular blogging platform WordPress, and ad networks, which can use MediaPass’s subscription feature to give publishers a package that combines software to track advertising as well as manage subscriptions.

Targeting such clients has, in turn, helped the company bring in name-brand publishers, Mitchell said.

MediaPass made a deal last year with WordPress that made its paywall software a built-in feature for WordPress’ premium platform, VIP, service.

As a result, MediaPass is now processing payments for supermarket tabloid Weekly World News, which uses the VIP platform.

Mitchell said he hopes to continue adding increasingly larger publishers.

“We’re working our way up the publisher food chain,” he said.

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