SCALING CAPITAL NEW YORK’S PAYWALL: It’s been about six weeks since Capital New York started charging for access to about 80 percent of its content, which focuses on New York-centric news on City Hall, state politics and media. Called CapitalPro, the paywall was erected in February after readers were given free access to all of Capital’s stories and morning briefings for nearly two months. Since then, buzz — at least in the media world — has been critical of the site, which boasts it provides an insider’s take on the industry. For one thing, critics pointed to the overabundance of media news already out there, as well as the economic health of the industries Capital covers. Unlike its parent company, Politico, whose Web site is a must-read for monied Washington lobbyists, trade organizations and politicians, Capital covers local government and spendthrift media companies. Also, Capital, which was purchased in September, has yet to burnish its brand, as Politico did, before it installed a paywall.

This story first appeared in the March 25, 2014 issue of WWD. Subscribe Today.

Capital cofounder Tom McGeveran brushed off the notion that the media news space is saturated, offering: “You could say there are a lot of burger joints in town, but what’s the threshold of burger joints that says there are too many?”

McGeveran admitted that Capital still needs to “find its place” in the media landscape, but noted that his bosses at Politico have given him time to work out the kinks.

According to the site, an average subscription to CapitalPro costs $3,500, but media sources told WWD they were offered a variety of rates. When one large media company rejected Capital’s offer of $5,000, the deal was then reduced to $2,500. That still was too high. Another media company was offered a media rate of $1,000 per user, which that firm agreed to. As for other revenue, Capital is “close to break-even” on its monthly print magazine, said McGeveran, who noted that companies buying ads in the magazine are offered the incentive to “piggy back off of Politico.”

Advertisers in Capital’s first print issue included the Real Estate Board of New York, the New York Library Association, the Long Island Association, New York City Charter School Center and the Civil Service Employees Association, which ran an advertorial on sexual predators. While Capital declined to provide figures pertaining to revenue, Web traffic and number of subscribers, chief revenue officer Roy Schwartz noted that the site is 20 to 50 percent ahead of internal expectations. For the most recent quarter, which included sales from the paywall, ad and subscription revenue was up “10 times” over the fourth quarter of last year, said Schwartz.

Despite those statistics, the uncertainty surrounding gated media content is still a concern.

“We’re trying to figure out what’s working and what’s not working in media,” said Politico cofounder and executive editor Jim VandeHei. “I think we can carve out a space in New York. I don’t care how many other publications are out there.”

What will ultimately drive subscriptions is how Capital covers media, VandeHei said, adding: “I think a lot of media coverage is wrong. A lot of reporters are too gullible. Media reporters do not have a tough, scrutinizing eye.”

Asked to elaborate on Capital’s business progress in view of its reporting thus far, VandeHei declined to comment and offered: “I just want a clear indication that within three to five years that we will be profitable. I don’t know if Capital will be a $10 million company or a $40 million company. The challenge for us at Capital is to make sure we pace our growth. Can we make media work? Can we make policy work? Once we realize that, we can add other things [coverage areas].”