The Times newspaper's website has lost two-thirds of its audience following the introduction of a paywall -- a steep decline, but not as bad as some in the media industry had forecast, the Observer newspaper said.

Citing data from Experian Hitwise, which monitors Internet traffic, the Observer said visits to The Times's website had fallen to 33 percent of the levels seen before readers were asked to register and pay for access.

It said the site had been expected to lose 90 percent of its traffic, but the drop may have been softened by an introductory offer for customers.

Neither Experian Hitwise or News International, which owns The Times, were immediately available for comment.

Rival newspapers will be closely watching the data as the industry battles to respond to a decline in circulation and a migration of readers to online news.

(Reporting by Mark Potter; Editing by David Holmes)

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