European, U.S. media paywall providers join forces

(Corrects paragraph 14 to show that McClatchy is a client of Press Plus, not Piano)

* Europe's Piano Media to buy U.S.-based Press Plus

* Papers, magazines erect barriers to their websites

* Shift in U.S. market ahead of Britain, continental Europe

* Press Plus co-founders Crovitz, Brill to leave

* Piano hires former WSJ exec Kelly Leach as CEO

By Leila Abboud

PARIS, Sept 9 (Reuters) - Piano Media, a European paywall software supplier, has agreed to buy larger U.S. competitor Press Plus for an undisclosed amount as newspapers and magazines increasingly charge for content on their websites.

Kelly Leach, a veteran executive from News Corp's Wall Street Journal will lead the merged company as chief executive. She aims to double revenue in the next year by advocating that Europe, Asian and Latin American publications go the way of North American ones to erect paywalls.

"There is the realisation among publishers now that online advertising cannot be their only revenue source so paywalls are becoming increasingly important," Leach said in an interview.

The Wall Street Journal pioneered charging for its website in the late 1990s, followed by the Financial Times in 2001 and New York Times in 2008, which created so-called "metered" paywalls where users were allowed a small number of free stories before being prompted to subscribe.

In the past few years, smaller U.S. newspapers and magazines also adopted paywalls as a means to boost sales as advertising revenue fell. Analysts estimate that about half of U.S. dailies now charge for their websites.

Between 2003 and 2013 the Internet's share of global advertising rose by 17 percent, while newspapers' share fell 14 points and magazines' share fell by 5 points, according to market researcher Zenith Optimedia.

Some 560 publishers hired Press Plus, which was founded in 2009 by former Wall Street Journal publisher Gordon Crovitz and journalist-entrepreneur Steven Brill.

They sold the firm to print company RR Donnelly & Sons in 2011 for a reported $45 million and grew to take some 90 percent of the U.S. market.

The success of paywalls has led to an historic shift in U.S. media with subscription and reader revenue bringing in more than advertising. The New York Times earned about 60 percent of sales from readers versus advertising last year, said analyst Ken Doctor, while the U.S. industry overall is on track to reach 30 percent from readers next year.

"In U.S. it is now the exception for newspaper websites to be largely free, and we're confident this is going to happen around the world," Crovitz said in an interview.

"The UK is about a year behind and the Continent about eighteen months."

Crovitz and Brill said they set out to find a buyer last year to help Press Plus expand internationally and to pave the way for their own departures.

Piano, which is owned by private equity firm 3TS, stepped in. The company is best known for erecting a country-wide paywall in Slovakia in 2011, selling access to more than 50 websites for 3.90 euros a month.

Piano has 27 publishers with 73 websites using its software, including Newsweek, McClatchy newspapers, as well as German, Spanish and British outlets. Press Plus has about 40 publishers with 558 sites using their software, largely in North America.

Although the companies declined to publish revenue or profit figures, they said that Press Plus is about 9 times bigger than Piano in terms of revenue.

Leach said the deal would create a more geographically balanced company, poised to capitalise on changing practices at newspapers, magazines, and web-only outlets outside North America.

Brill and Crovitz plan to remain with the company at least through the end of the year but will then leave.

Analyst Ken Doctor questioned whether Piano and Press Plus would really end up being that profitable given that they are vendors to often parsimonious media companies.

"Paywall technology companies are consolidating now because it's a tough business: they operate on revenue share and fees, but it remains a small business overall," Doctor explained.

"Publishers do not want to give these tech companies a slice of growing pie."

Crovitz said that Press Plus's expertise gleaned from its entire customer base allowed it to advise media companies on how to best profit from moving to a paid model on their websites.

"How you set up a paywall - how many articles to give away, whether to charge for mobiles and tablets separately - can have a huge impact on how much money it generates," he said.

(Additional reporting by Jennifer Saba; Editing by David Evans)