By Ted Nesi

PROVIDENCE, R.I. (WPRI) – A growing number of contracts for printing and distribution gave The Providence Journal a slight bump in revenue during the first half of this year despite a deep drop in springtime advertising revenue.

The Journal’s total revenue rose to $46.7 million during the six months of 2012, an increase of $597,000 or 1.3% compared with the first half of last year, according to a Securities and Exchange Commission filing this week by its parent company A.H. Belo.

The share of total Journal revenue that came from advertising fell below 50%, a symbolically important milestone in light of newspapers’ historic reliance on advertisements to pay the newsroom’s bills. Printing and distribution contracts’ share of revenue jumped to 13% and circulation accounted for 37%.

The Journal is one of many papers with a changing revenue mix, said Ken Doctor, a media analyst with Outsell. “All are seeing rapidly increasing percentile contributions from circulation – or what we should call reader revenue,” he told WPRI.com. “Projo is at the leading edge of change, probably due more to ad decline than [its] digital circulation program.”

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By Ted Nesi

PROVIDENCE, R.I. (WPRI) – The Providence Journal’s finances brightened during the first three months of this year, as the paper used higher circulation revenue and more third-party printing work to offset another sharp drop in advertising.

The Journal’s revenue totaled $22.7 million in the three months ended March 31, up 3% from $22 million in the same period last year, according to a regulatory filing. That performance helped offset weakness elsewhere within its Dallas-based parent A. H. Belo, which said companywide revenue slid 7% in the first quarter.

The Journal’s first-quarter contract work nearly doubled to $2.8 million year-over-year as the paper distributed more national and local newspapers and landed new commercial printing jobs. The paper’s circulation revenue also posted a healthy gain of nearly 6%, rising to $8.6 million.

Advertising is no longer the bedrock of The Journal’s business that it once was, contributing only 49.5% of total revenue in the first quarter. Ad sales through March 31 fell to $11.2 million, down nearly 10% from a year earlier, with declines in all categories. Digital advertising on ProvidenceJournal.com slipped 7% to $1.5 million compared with 2011.

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By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Advertising sales at The Providence Journal plunged by more than 60% over the last six years, forcing Rhode Island’s top newspaper to eliminate a third of its work force and to rely increasingly on subscribers and printing contracts to pay the bills.

The Journal’s total revenue dropped for a sixth straight year in 2011 to finish at $95.1 million, down 5% from 2010 and off 43% since 2005, parent company A.H. Belo disclosed in an SEC filing. Lower advertising and circulation sales were partly offset by $3 million in new printing and distribution contracts.

Journal publisher Howard Sutton declined to comment on the results. “The printed Journal has adapted to changing times, intensifying its focus on local and regional news and carefully managing its cost structure to match lower revenues,” A.H. Belo CEO Robert Decherd wrote in an op-ed on Feb. 26.

The Journal sold $52.9 million worth of advertising in 2011, down 11% from the prior year, with retail, preprint and digital lower but classifieds higher. Advertising has fallen a dizzying 61% at the paper since hitting $136.5 million in 2005, though last year’s percentage decrease was the smallest since 2007.

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A.H. Belo executives gave no explanation Tuesday for why The Providence Journal’s sales trailed those of its two sister papers in 2011 and didn’t say if they’re satisfied with the response to its new website.

In a short conference call with investors, A.H. Belo CEO Robert Decherd and his management team outlined no plans for the Providence paper and didn’t indicate when the company expects to start charging Web and iPad readers for its new electronic edition created by Olive Software. The company’s Dallas Morning News flagship started charging last March.

Only one investor asked A.H. Belo executives questions during Tuesday’s call. Chief Financial Officer Alison Engel promised “a robust update” about its “subscriber content strategy” on its next investor call, which will likely happen in April or May. An executive said in November The Journal will launch its paywall this year.

The Journal suffered the largest year-over-year drop in advertising revenue during the fourth quarter among A.H. Belo’s three papers, the company said. Ad sales surpassed expectations at the Morning News and Press-Enterprise of Riverside, Calif., during the three months ended Dec. 31, Decherd said.

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The Providence Journal’s new website is drawing a smaller online audience than the one it replaced in October, according to two companies that track Internet traffic.

The total number of visitors and page views to ProvidenceJournal.com/Projo.com were both down 32% in the 10 weeks ended Dec. 24 compared with the 10 weeks before the new website launched, figures from Experian Hitwise show. The paper switched to the new, scaled-down ProvidenceJournal.com site on Oct. 17.

ProvidenceJournal.com/Projo.com averaged 300,241 U.S. visitors a week between Oct. 22 and Dec. 24, down from Projo.com’s 439,013 weekly average between Aug. 13 and Oct. 15, Hitwise said. Average weekly page views declined from 1.3 million to 884,706 over the same period.

Separate figures from Nielsen also showed a decline in The Journal’s Web audience.

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It’s looking like 2012 may be a make-or-break year in the long history of The Providence Journal.

With revenue and circulation still falling precipitously, the Projo is poised to bet big on pushing readers back to print by forcing those who want all its content to either subscribe to the print edition or read it in an electronic format that’s an exact digital replica of the dead tree version.

The strategy is risky, to say the least. The new ProvidenceJournal.com’s debut was met with withering criticism, including from the paper’s own commenters. The e-edition software developed by Olive Interactive remains buggy (the share tools stopped working on Firefox 8 for Mac earlier this month) and its article pages don’t even say that you’re reading a Providence Journal story. There are still no Projo iPhone or Android apps. It’s all a marked contrast with the award-winning new BostonGlobe.com, also launched this fall and also charging readers.

Journal management is notoriously tight-lipped, so it’s hard to judge if the new website is meeting their expectations. Compete.com says the paper’s unique visitors on the Web plunged from 425,486 in September (on Projo.com) to 233,091 in November (on ProvidenceJournal.com). But take that with a grain of salt, since Compete’s numbers are notoriously unreliable.

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The Providence Journal will take a first step toward charging readers online next month, but the new system won’t look like the one at the Dallas Morning News – yet.

The Journal will roll out a “premium-content-light” system in August, A.H. Belo executive Jim Moroney told investors during a conference call Thursday, without providing further details.

But a full-scale paywall like the Morning News’ will not be put in place until the Projo finishes installing a new content-management system.

“It’s what [The Journal] can do easily without going the full boat that Dallas did, because of this technology issue,” Moroney said.

“Until that gets in place, it really doesn’t make sense for [The Journal or sister paper The Press-Enterprise] to take this step, because they’d have to go through a tremendous amount of work to put it in place, only to turn around do it all over again,” he said.

The paper is also expected to debut a redesigned website and a corporate rebranding soon. The Journal’s executive editor, Thomas Heslin, directed questions about the changes to the paper’s publisher, Howard Sutton. Sutton did not immediately respond to an e-mail requesting comment.

Moroney said the company is pleased with the results so far at the Morning News, which began charging digital readers March 8. Over 73,000 consumers have linked their print and online subscriptions, he said. Unique visitors to the paper’s website have declined about 15% and page views have fallen about 15%.

The Journal’s executives began talking about a paywall publicly more than a year and a half ago. The most recent details came in a report last October that described a sort of “Diet Projo” system, with short summaries of longer print stories posted online. But it’s unclear whether that is still the plan.

A. H. Belo posted a net loss of $6.8 million, or 32 cents a share, for the three months ended June 30, compared with a net loss of $171,000, or a penny a share, a year earlier. Revenue dropped 6% to $114.5 million, with advertising sales down 9%. That was partly offset by a $5.4 million property sale.

There was some good news for The Journal in the earnings report. A.H. Belo said the Projo’s advertising sales didn’t fall by as large a percentage as at its other two papers, the Morning News and The Press-Enterprise, though circulation revenue fell at The Journal and The Press-Enterprise. The company also credited a 7% increase in printing and distribution revenue “primarily to increases … in Providence.”

During the call, A.H. Belo CEO Robert Decherd declined to forecast how the publisher’s sales will be going forward.

“Like all of our peer companies, we hope that revenues are going to stabilize during the second half of the year, but … things have been very uneven insofar as revenue patterns are concerned,” he said. The company benefits from having a healthy balance sheet and dominance in its major markets, he added.

More Providence Journal and A.H. Belo coverage:

• A.H. Belo’s surprising success amid the newspaper storm (May 18)
• Projo falls below $100M mark as half of ads evaporate (March 14)
• Projo union OKs new 3-year contract with AH Belo (Feb. 16)
• No reason for Belo to sell Projo with price at $51m (Dec. 28)
• Why the Projo’s finances are healthier than you think (Nov. 18)

Back in 2009, the Newport Daily News made headlines with its announcement that the paper would pull all its stories off the standard HTML-based Web and make them available only to paying customers – and only at the steep price of $345 a year for digital access, more than double the $145 charge for print subscribers.

So how’s the experiment going? Columbia University’s Graduate School of Journalism offered this update in “The Story So Far: What We Know About the Business of Digital Journalism,” a high-profile report released last week:

And then there is the Newport Daily News, a 12,000-circulation newspaper in Rhode Island.

In 2009, the News decided that it was almost impossible to make money from digital ads. “The people we hired to sell advertising on the Internet just never did very well,” the paper’s then-publisher, Albert “Buck” Sherman, told Nieman Journalism Lab. So the News took an unusual step: print subscriptions were priced at $145 a year, print/online combos at $245, and online-only access would cost $345.

In other words, by forgoing the paper, a digital subscriber was on the hook for an additional $100. And Sherman wasn’t coy about the rationale: “Our goal was to get people back into the printed product.”

Some online-only content, such as videos and blogs, is outside the paywall; the same goes for columns like “Clergy Corner” and “Advice on Pets.” But anyone who wants access to the electronic edition, which reproduces the day’s paper, must pay. The company also operates a free site, newportri.com, designed to appeal to tourists and others looking for recreational or entertainment information.

In early 2011, the News dropped the price for print and online to $157, or a dollar a month above the print-only fee. But online-only access remains at $345—a price that current publisher William Lucey III says, in an interview, “is more of a deterrent.” The amount was based on a scenario in which,“if everyone wanted only a digital product, this is what it would cost.”

The paper’s site, newportdailynews.com, gets around 80,000 visitors a month. Especially with online ad rates “dropping 20 percent a year,” that’s not enough to sustain the operation, which includes a newsroom of twenty-two people, Lucey says. Indeed, online ad revenue accounts for only 2 to 3 percent of total advertising for the paper.

After the change was put into effect, “our single-copy sales went up about 300 a day”—a bit less than 10 percent of overall single-copy sales. As the economy improves, “print is coming back. February [2011] was up 35 percent over last year” in ad sales.

And even with AOL’s free Patch site moving into town, Lucey says there are no regrets. “We found our comfort zone, and we stopped agonizing about it.” AOL, which launched the Patch site in Newport in July 2010, is sanguine: “The Newport Daily News does great work and has been a staple in Newport County for generations,” says spokeswoman Janine Iamunno. “There is room for all of us.” …

There is, in some publishers’ pay plans, an aura of frustration over the inability to convert large online audiences into advertising revenue. Moroney, of [A.H. Belo's] Dallas [Morning News], is simply being more candid than most when he notes that much of the News’s online ad space goes unsold, and so a cut in traffic to the site will have little financial impact. Others, such as Albert Sherman of the Newport Daily News, frame a paywall as a way to protect the print edition, but some print circulation has already been lost because of free alternatives.

The entire “Story So Far” report is well worth a read – there’s a lot in there about A.H. Belo, too, though as above the focus is on the Dallas Morning News.

I care a lot about the future of newspapers, as regular readers can probably tell. That’s partly because of my former life as a print journalist, partly because I find the media interesting as a business story, and partly because the 2003 book “The News About the News” – which talks about how much of of the news still originates inside papers – made a big impression on me.

I have some sympathy for the executives in charge of newspapers today, too. The media world is changing so rapidly, and in so many different ways – iPads, Facebook, HuffPo, you name it – that even a leader with the acumen of Warren Buffett would be challenged to navigate it successfully.

That’s why I can understand the intuitive appeal of a paywall to them. Readers have been paying something for the news in print for years, and digital advertising is nowhere near as lucrative as its ink-stained cousin. So why not ask them to pony up? (It sure took them long enough, as a great Onion headline pointed out: “NYTimes.com’s Plan To Charge People Money For Consuming Goods, Services Called Bold Business Move.”)

Still, one thing I wonder about is how the rise of the paywall will impact the ability of newspapers to attract their next generations of readers.

Older people who grew up with print can intuitively understand the idea of paying for the news – and also have some sense of what they’ll find inside a newspaper to help them decide if it’s worth the money. But how will younger readers know that – especially if they’re cut off from sampling it by a paywall? And with so much of what at least looks like “news” available on the Web, what will make them think a specific site is worth paying for?

“Newsonomics” author Ken Doctor made this point in a post last month. “Newspaper companies going paid,” he wrote, “are going to have to fight the inclination to focus disproportionately on transitioning their print customers to digital customers, while paying too little attention to the masses of 25-to-39-year-old potentials who never developed the print habit.”

I’ve got a lot of friends in that demographic, very few of whom have what you’d describe as a “news habit.” A handful are voracious consumers of information, reading a host of different sites, sharing links on Facebook and generally taking advantage of the breadth of content on the Web. But the majority of them don’t engage much with the news at all – certainly not to the extent that they’re going to feel the need to pay for an individual website if they feel they can get their fill on free sites, TV and radio. They’re probably the sorts of people who, years ago, would have subscribed to the local paper as much for the classifieds, coupons and movie listings as anything else; I doubt news on its own will be as tempting a proposition for them.

Then again, paywalls come in many flavors – from the “hard” paywall of The Times of London to the porous “pay fence” of The New York Times – so I think it may be possible for newspaper executives to find a smart way to tackle this challenge. I just hope it’s on their minds as they put their plans together. What do you think?

The Providence Journal’s sister paper, the Dallas Morning News, will begin charging readers to access some of its content online next month, the paper reported today – and the Morning News’ plan may signal what The Journal’s “Diet Projo” paywall plan will look like when it starts later in the year.

The Morning News will offer two subscription packages:

Print+digital: The price of a print subscription, which buys delivery of the newspaper plus full access to its digital offerings, rose 13% to $33.95 per month ($407 annually) on New Year’s Day. That’s slightly less than a Journal subscription, which currently costs $416 a year.

Digital-only: The price of a digital subscription – which buys a daily e-edition, stories behind the paywall on DallasNews.com, and iPad and iPhone app access – will be $16.95 per month, or $203 annually.

So what’s going to go behind the paywall and what will remain available to anybody? “Subscriber content will include proprietary news and information produced by The News,” the paper explained. “Headlines, breaking news, most blogs, obituaries, classifieds and nonproprietary content such as syndicated wire stories will remain free.”

The Morning News’ iPhone and iPad apps, which will use The New York Times’ new Press Engine platform, will launch on Jan. 18, the same day a redesigned version of its website goes live. (The Projo’s apps and a new Projo.com are also supposed to debut later this year.) The Morning News says it’s working on Android and BlackBerry apps, too.

A free trial period for all the Morning News’ digital content will take place from Jan. 18 to Feb. 14. After that, online readers will be asked to subscribe if they want full online and mobile access.

“Newsonomics” author Ken Doctor, whom I interviewed for my story last week about the Projo’s valuation, told the Morning News he expects about six major metropolitan daily papers to be charging by midyear. The New York Times and the NYT-owned Boston Globe both plan to start doing so within a few months.

“If the product is substantial enough and meaningful enough in people’s lives, then I think they’re willing to pay for it,” Doctor said. “The biggest question I think is metros that have cut back so substantially that they have brought into question their value proposition to their readers.”

Update: The paywall announcement wasn’t the only news out of A.H. Belo. The company also said it has finished splitting its pension plan off from regular Belo (which spun off its newspapers into A.H. Belo in 2008).

I’m not an expert on corporate pension accounting, but the Morning News’ story on the transaction implies that A.H. Belo will need to fork over $53 million to its pension fund this year. That would be about 65% of the $81 million in cash and equivalents the company had stockpiled as of Sept. 30, which may help explain why A.H. Belo’s execs have been so hesitant about spending that money.

Another one of the local newspapers controlled by News Corp. mogul Rupert Murdoch has pulled up the gates around its content online.

The Cape Cod Times put its CapeCodOnline.com site behind a paywall two weeks ago, following in the footsteps of its sister paper, The Standard-Times of New Bedford, which made the same move last January. Murdoch acquired both papers when he bought Dow Jones & Co. in 2007 to win control of its crown jewel, The Wall Street Journal.

At CapeCodOnline you can view up to 10 “articles, videos and galleries” per month for free – three without registering and seven more if you sign up. Then you hit the paywall.

The pricing is a little byzantine. If you subscribe to the print edition, full access to the website costs an additional $20.28 per year. For non-print-subscribers, the options range from $128.96 annually for the e-edition and 10 monthly pageviews up to $178.88 for unlimited access to the Web and mobile versions of CapeCodOnline.

“More and more people are turning to the Web to read their news and information,” Peter Meyer, president of the Cape Cod Media Group, said when he announced the new policy. “We need to monetize that in some fashion and this seems like the best way.”

One Nesi’s Notes reader who has already hit Meyer’s wall sent along this screenshot after he unhappily realized he’d wasted one of his 10 free monthly views on a story that turned out to be only two sentences long:

That actually points to one of the problems that paywalls cause for publishers – it forces readers to think hard every time they click on a story. (“Do I want to waste one of my allotted views on this?”) The paywall gets in the way of the story, and creates anxiety for the reader.

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The Providence Journal’s publisher, Howard Sutton, issued a memo yesterday explaining what’s happening with the paper’s long-gestating plans to make readers start paying for some Projo.com content, Dave Scharfenberg reports. Although Projo executives have been cagey about what they’re planning – and they never speak to the press – this looks like an evolution of their paywall strategy, not an abandonment of it.

The old plan was apparently to keep some of the paper’s lengthier local stories off the free Web altogether – no HTML version would go on Projo.com at all. According to Scharfenberg’s report, the new plan is to post short summaries of those stories online, but only offer the full versions to print and (eventually) electronic-edition subscribers. Think of it as “Diet Projo.”

With print circulation and revenue still plummeting, the question is whether this will help The Journal stabilize its finances. Off the top of my head, I can’t think of any other paper that offers abbreviated stories online with full versions available to subscribers. I asked Dan Kennedy, the Northeastern professor and prominent press critic, what he thought of the idea, and here’s what he said:

The Journal is sacrificing its website in order to bolster its print edition, which is where it makes most of its money. I understand why Journal managers are doing this, but it’s a short-term solution that could prove harmful in the long term. I also wonder whether it will even accomplish anything. Newspaper readers are skimmers, and a headline and brief synopsis of a story may be all that they want.

That’s a good point. Although I know all of you linger over each lovingly chosen word that appears here on Nesi’s Notes, in most cases people skim, skim, skim.

In fact, what the new Projo.com strategy reminds me of most is The New York Times’ TimesDigest, a nine-page synopsis of the daily paper the company publishes primarily for cruise ships and hotels. (Here’s a PDF example of it.) “TimesDigest indicates that making New York Times stories shorter while retaining their essential news value ain’t really that hard,” Slate’s Jack Shafer wrote in 2007. Will some people be content with an online “ProjoDigest” and opt to skip a subscription?

There were other interesting tidbits in Sutton’s memo. The Journal has retained two of Providence’s savvier firms to help it move forward: ExNihilo is designing a new version of Projo.com slated to debut next summer, while Nail Communications is helping the paper “strengthen the graphical representation of our brand.” And the release date for the paper’s new iPhone and iPad apps, which will use the NYT’s new Press Engine system, also has been pushed back a bit to next summer.

It looks like 2011 will be the Year of the Paywall for the newspaper industry, with The New York Times and its sister paper The Boston Globe among those planning to stop offering their entire print edition for free online after New Year’s. I’ve reached out to a few other media analysts to get their thoughts on the Projo’s plan, and I’ll update when I hear back.

The Projo’s paywall plan may be in some sort of holding pattern, but other papers in the region aren’t sitting still. A top executive at The Boston Globe’s parent company says the company could announce plans to start charging for Boston.com before New Year’s, the Boston Business Journal reports:

When asked about paid models and iPad subscriptions for Globe content, NYT Co. CEO Janet Robinson had this to say at a Wednesday conference sponsored by Goldman Sachs:

“We are moving pretty quickly in regard to the Globe as well. There is more work — we have certainly done more work in regard to NYTimes.com. But the Globe has a paid app out there. In regard to big picture, you’re going to be seeing introduction of apps going in this quarter, in fact, in regard to Boston.com. But from a standpoint of evaluating what we plan on doing in regard to paid models, they are, that is under evaluation right now, in fact.”

The metered model, as explained by NYT Co. senior vice president of digital operations Martin Nisenholtz, is basically where a certain amount of content articles are provided free on a running, 30-day basis. And after they hit that number, readers are asked to subscribe.