Saving Central Europe’s Newspapers

"The Internet will be to my generation of journalists what alcohol was to our predecessors," wrote Slovak journalist Tomas Bella on his blog, – "a destroyer first of thought and then of productivity, destructive of both the capacity to reflect and to react. Just like alcohol, it seems an inevitable part of the job."

Bella belongs to that generation of journalists who experienced the bitter transition to democracy in Eastern Europe. For six years until 2006 he covered the IT beat for the largest serious Slovak daily, Sme, before he moved on to the daily’s online operations.

Five years later, he moved on, joining Piano Media, Central Europe’s new business model that could save the region’s media from extinction.

When Piano Media brought together all major Slovak publishers under the same roof in May 2011 to sell their content online, I, like many others, was sceptical. But during the past year, Piano Media has met targets, expanded into Slovenia, and even gotten a hefty infusion of capital. Its launch into the 38-million-strong Polish market in summer puts the company in a new league.

 

A tested formula

Co-founded by Bella and Marcel Vass, a Slovak entrepreneur with advertising expertise, Piano Media bundled the content of a dozen of the country’s largest publishers, who produce more than 50 websites. In January, the company expanded to Slovenia, signing a deal with eight Slovenian publications, including all the major dailies.

Then in July, the company began operations in Poland, where it offers 42 websites that include mainstream newspapers, magazines, and even the Polish public service radio. Bella is now in talks with publishers in a dozen European countries to expand its business as early as year-end.

The company’s financial model mirrors the cable television sales formula, in which customers pay a monthly subscription rate for a clump of channels, many of which they never watch. Piano Media’s subscribers pay once and have access to all the content offered by the paywall operator in a single market. Weekly, monthly, and yearly subscriptions are available. Piano Media keeps some 30% of the income and distributes the remainder to the outlets.

Media outlets put only part of their content behind the wall. The Polish edition of Forbes, for example, locks away only about 10% of its content in the Piano Media box, mostly commentary and analysis. Subscription fees are kept low to attract readers. In Poland, clients pay the equivalent of €4.60 a month. In Slovakia, the company increased its subscription fee in March by 25% to about €4 per month.

The company hasn’t released detailed figures, but it claims to have achieved its financial goals so far. In its first month in operation in Slovakia, for example, Piano Media netted €40,000 ($49,000). In Slovenia, it pulled in sales revenues worth €26,000 in the first month.

 

A mentality battle…

The paywall as a business model for journalism is not new, but where Piano Media saw potential was the market as a whole.

The main problem is the mentality rooted in the communist days in Central Europe and with the Internet elsewhere that media content is free. In Slovakia, this is not a social or economic issue, but philosophical, Bella says. On the other hand, many young, connected readers have a hard time finding the information they need, and they are willing to pay for it. In Poland, for example, some 40% of printed content is not accessible online, according to Piano Media’s research.

"General news, sports, general business news, weather, horoscopes and those sorts of things are simply impossible to monetise. If they were placed within a payment system, users would simply turn to another site to find them," said David Brauchli, Piano Media’s spokesman. Often half of any publisher’s content can’t be found elsewhere. That is what Piano Media tries to sell.

Another problem Piano has faced is the still-infrequent use of credit cards in the region and the widespread belief that using them online is dangerous. To get around this, Piano arranged with mobile phone operators in Slovakia and Slovenia to allow customers to pay for subscriptions via text messages, with the providers pocketing a fifth of each payment… and a life buoy for journalism.

The company does not reveal subscriber numbers, but more and more publishers have been impressed enough to sign on. On average, participating websites earn about €1,100 in Slovakia and €1,500 in Slovenia per 100,000 monthly users. Some publishers can make twice as much.

The company will continue its expansion: With a boost of €2 million from Central Europe’s 3TS Capital Partners, Piano Media is seeking additional smaller markets that have a critical mass of outlets, 20 or so, where audiences have similar tastes, bundled into a subscription package.

Where it works, it offers a solution for an industry in disarray and could help journalism become a viable profession again.

Marius Dragomir is a London-based analyst.