I don't think the paid online portion is so large a part of their revenue as to affect their overall earnings. The main reason is SPH management thinks that by restricting access online they can protect the circulation of the paper edition which is the source of their ad revenues, and this is very important to them as their other businesses are not yet of the scale to replace the cash from the newspapers operation. Globally, newspapers have been facing declining print circulations and have had to close or cut costs severely. ST is actually doing quite well all factors considering, but this is changing.
As for improving the political reach, allowing free online access will not solve the issue on PAP having no political reach into the minds of the young voters. Those who are inclined to support the party, are mainly those whom have benefited from their largesse (or those who is still buying into the story that LKY is a great man - he was, but he is now a changed man). The rest opposes the party for various reasons of their own, so you cannot possibly cater to a single constituency, or buy them via pork barrel politics which is the norm in middle class politics.
The young generation also consumes news in a very different way - they source them from many places online and do not rely on a single platform (think news app like Pulse on tablets). So a free online ST will have only part of their bandwidth, if at all. To reach the young the PAP will have to do enough to bring genuine online support for them across platforms, which is nearly non-existent today. The PAP leadership has no clue on how to do this, otherwise the YPAP internet brigade would not exist. At any rate, they cannot compete against the tens of thousands ranting against the party online, even if they are 1000-strong and are posting 100 times each a day.
An obvious global remedy would be good policy making and leadership that they can defend robustly across platforms without smoke bombs and red herrings, but sadly both are now lacking from the PAP of today.
PS, I define young as P-65, but mostly p-70 onwards, based on personal experiences.