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this is where I speak my brains about content / media / research / data

Category: paywalls

March 26, 2010

£1 a day for the Times: your 10 year free trial is coming to an end

News International have announced that their Times and Sunday Times paywall will be either £1 per day or £2 per week. So if you’d been hoping for a radical new vision of a lean digital newspaper model you’d be disappointed, because £1 per day has been chosen purely because that’s what the print edition costs.

The overwhelming message is that News Int are satisfied to drive people back to the newspaper, rather than try to develop an independent digital content business. Murdoch, Brooks etc aren’t content to give up their print advertising revenues, and anything they can do to prolong that they clearly will.

Shouldn’t come as a surprise really. When The Sun started to dip below the 3m circulation mark News Int immediately acted by slashing the paper’s cover price (now down to 20p). There’s a track history of moving aggressively to preserve the company’s core revenue-delivering products.

So … in a few months when media commentators point to Times Online’s inevitably plummeting traffic figures and declare the project a failure, you’d be better off looking at their print circulation figures if you want to know what News Int are thinking.

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March 7, 2010

State of Pay: paid content in the UK vs Australia

I’m moving back home to Sydney in a couple of weeks (looking for a job too … anybody need a great insight manager??) and that means I’m spending a lot of time looking at the industry in both Australia and the UK. What I see are some striking differences.

Working in the commercial department of a UK newspaper publisher, the talking point of 2010 (as it was for 2009) will be the great paywall debate. How to make online content pay the bills, in the face of declining revenues from offline businesses, is the issue that keeps my colleagues awake at night, and charges discussion at conferences, on Twitter, and on blogs. The industry has tackled the challenge head on, with big differences emerging in the way different groups are responding to the issue.

The UK online publishing scene is quite different from that of the UK. For a start there’s a bigger footprint: the top 10 UK news sites reach 62% of the population, compared to 42% for Australia’s top sites (according to Doubleclick Google Ad Planner). There are 10 national newspapers in the UK, compared to only the Oz and the AFR in Australia. With all these mastheads jostling for traffic and ad budgets online, and user promiscuity *very* high, it makes for frenetic competition. So it’s no wonder UK newspapers are desperately experimenting, investing and trying new business models.

Of course News International (the Sun and the Times), under Rupert Murdoch have announced a while ago their intention to charge for content in 2010, and the Sunday Times have started laying the groundwork with their Times+ subscribers club. In the opposite corner the Guardian has forcefully criticised News Corp and announced it will continue to experiment with the commercial opportunity of free content. This is based on guardian.co.uk’s massive user base – 35m unique users and climbing – and the likelihood, once the New York Times retreats behind a paywall, of the Guardian becoming the biggest English-language newspaper in the world.

In other areas the Guardian is experimenting with paid content, however, and their iPhone app has been downloaded an impressive 100,000 times at £2.39 (about $4 AUD). Major competitor the Telegraph has launched a venture called Project Euston with a staff of 50(!) and a budget of millions to explore new (not necessarily news-related) digital opportunities. The Telegraph looks more likely to launch a new e-commerce site than it does a news venture. The paper I work for, the Daily Mirror, has been pursuing a strategy of ‘niche-ing’ the core content areas it specialises in into standalone digital properties. So football content has been hived off the main site into a separate domain called mirrorfootball.co.uk and celebrity content into 3am.co.uk. In so doing the Mirror’s created a more rewarding, targeted experience for users, driving loyalty, and (hopefully) created a more valuable environment for advertisers too.

All in all, it’s a hive of activity, especially so when compared to Australia. Of course, the News stable will be following Murdoch’s dictat on paywalls. And Fairfax, with the luxury of watching News play their hand first, announced they would likely do the same. The main difference is Fairfax will go with a ‘freemium’ model where basic access is free and users pay for a more premium experience. Both news groups have invested in content, of course, with News launching thepunch.com.au and Fairfax following shortly after with nationaltimes.com.au (which *seems* to have got a slightly underwhelming reception from media people, although I personally think it’s a good site which will find its audience … but check the comments at bottom of this mumbrella story).

The sense is that both newspapers are moving in lockstep on this issue. Which is fine, and not a criticism – the paywall route is obviously much more likely to be successful if all your competitors are doing it too. And newspaper circulations aren’t in the steep decline we’re seeing in the UK, so the need for radical solutions is less. But if you had to guess where the next exciting model for online newspaper content will come from, you’d have to say it’s much more likely to come from the UK than Australia …

… or will it? Because one of the really exciting things I’ve seen in Australia, that I definitely don’t see to the same degree in the UK, is exciting new content startups like this, this, this, and this. All launched by ex-’big media’ journos, all no doubt run on a shoestring budget, and all punching far above their weight for traffic and attention, and, I’d guess, ad budgets. With journalists-as-entrepreneurs very much on the new media agenda, these are some of the more exciting content experiments I’ve seen, and an area where Australia genuinely does seem to be leading the UK. Makes you proud to be Australian!

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January 28, 2010

3 reasons the iPad won’t save newspapers

A big slice of the Jesus Tablet presentation yesterday was taken up with the New York Times’ SVP for Digital, Martin Nisenholtz, demo-ing the NYT’s iPad optimised app. Apparently the app was thrown together in 3 weeks (!), but already looks like a fantastic interface for looking at content, and one I personally will certainly purchase for myself. Nisenholtz said “We’re incredibly psyched to pioneer the next generation of digital journalism. We want to create the best of print and best of digital, all rolled up into one”.

But will the iPad save newspapers? Will it help publishers crack the paid content puzzle, and get people buying news content again, like the good old days? I really, really don’t think so, much as I’d like to believe it. Here’s why:

1. Readership. Newspapers are/were a genuine mass market medium. I mean really, really mass: the majority of the country used to purchase one every day. Even 10 years ago national daily papers in the UK sold almost 13m copies a day, which at current prices translates to ~£6m in revenue every day. In the year 2000 daily newspapers made £1.8bn in cover sales. To put it in context, the Daily Mail sold about £400m, while Coca Cola sells about £500m. Serious business, and that doesn’t even include advertising revenues.

In total, over the last 10 years the daily newspaper market has lost about £465m a year in cover sales. Now … let’s suppose, generously, that a newspaper might make £10 from the sale of one iPad app. In order to cover that shortfall App store would need to sell 46,000,000 newspaper apps to cover that shortfall.

The reality is, however great it looks, the iPad will probably still be a niche item. If they do really well, Apple might sell 2m in the UK. Of those, let’s say 1.5m buy a paid-for newspaper app (this is unlikely but still possible, considering the Guardian has sold 70,000 iPhone apps in the first month). That’s still only £10m to share between 10 daily papers. Handy new revenue line, but a long long way from revolutionising your business.

2. Competition from the internet. The iPad is, according to Jobs, the “best web experience you can get”. From what I’ve seen, it looks it, and that’s enough for me.

This is the difference with the iPhone, and its stunning success as an app platform. The iPhone apps are vast improvements over what you could expect using the iPhone’s net browser – intuitive, quick, nice to use. But if the iPad is built with the internet in mind, will people convert to a paid-for newspaper app when they can look at the same newspaper’s website for nothing? Some people will, including myself, for the small incremental benefits you will no doubt get from an optimised native app. But I bet a whole lot of people will be satisfied with the “best web experience you can get”.

3. Fundamental structural industry problems that remain un-addressed. The newspaper industry is in trouble because its structures and costs are way out of proportion with a digital age. It’s not in trouble because consumers were waiting for a nice piece of kit to read newspapers on.

When digital distribution means a one-man operation can start a site that competes on the same stage as national newspaper sites with hundreds of employees, there’s a big problem.

And unfortunately, the economics of iPhone/iPad content app distribution will be exactly the same. While big publishers will get in first with apps, pretty soon the smaller guys, the startups, will start to compete in the same space. And their apps will probably be free as well, and then you’ll be back where you started, except you spent £100,000 on an above the line marketing campaign for your app and they didn’t. And there you go

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January 25, 2010

Alan Rusbridger: so where’s the Guardian sleepwalking to, exactly?

Alan Rusbridger, editor-in-chief of the Guardian has been in the news today discussing, yes, paywalls. Quoted at length but full article here:

The Guardian editor-in-chief, Alan Rusbridger, has delivered a riposte to Rupert Murdoch’s campaign to introduce paywalls to newspaper websites, claiming that it could lead the industry to a “sleepwalk into oblivion”.

“If we turn our back on all this and at the same time conclude that there is nothing to learn from it then, never mind business models, we could be sleepwalking into oblivion.

“If you erect a universal pay wall around your content then it follows you are turning away from a world of openly shared content. Again, there may be sound business reasons for doing this, but editorially it is about the most fundamental statement anyone could make about how newspapers see themselves in relation to the newly-shaped world.”

The Guardian editor told an audience of academics and journalists in London that it is more important than ever to focus on journalism: “If you think about journalism, not business models, you can become rather excited about the future. If you only think about business models you can scare yourself into total paralysis.”

Now contrast with this article, also from the Guardian:

Guardian News & Media managing director Brooks told staff in a memo posted on the company intranet yesterday that the current rate of losses at GNM, which publishes the two national newspapers and the guardian.co.uk website network, which includes MediaGuardian.co.uk, was “unsustainable”.

Brooks added that GNM was losing £100,000 a day, a rate that its parent company, Guardian Media Group ”cannot afford”.

In July Guardian Media Group has posted a pre-tax loss of £89.8m for the year to 29 March, with GNM reporting an operating loss of £36.8m.

I yield to no man in my conviction that the Guardian and guardian.co.uk are absolute first-rate media organs … but do you really want business advice from the organisation that’s losing £100,000 a day (yes! every single day!)? The truth is these days you can’t and shouldn’t keep journalism and business models in distinct silos, never letting them communicate with one another. That’s how things used to be done, back when newspapers were making truckloads of money. It’s all part of the same conversation, and so it should be. (A good start would be by guardian.co.uk moderators not deleting my entirely inoffensive comments on their site, I assume because I gently poked fun at Rusbridger …)

Here’s to more, and better, thinking about and discussion of business models, and less sleepwalking to oblivion, or wherever the Guardian is heading.

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January 19, 2010

2 big things for the FT to think about

Financial Times’ chief exec John Ridding has been in smug mode recently, talking about his paper’s success in making the paid content game work. In his words, progress from the FT’s online paywall and £2 cover price has been such that “[this] year will be the first year that revenues from content overtake revenues from print advertising. The way things are evolving, content revenues should overtake all advertising revenues by 2012.” (Yeah … if things just keep evolving in a predictable straight line. Which obviously happens all the time when talking about online media…)

Lots of commentators have sagely contributed to the discussion, noting that there is a “healthy market for business-critical information [such as that delivered by the FT and Wall Street Journal] … it’s the kind of unique information decision-makers will pay for.” So it’s assumed that niche, specialised publications like the FT are virtually immune from the whole paywall kerfuffle.

(Even Clay Shirky gets in on the act, claiming that WSJ paywalls are working because “financial information is one of the few kinds of information whose recipients don’t want to share.” Balls. Plenty of people want to share what they read in the FT. It doesn’t contain super secrets that help you make millions (unless I’ve been reading it wrong – I only read on weekends), it’s just an authoritative source of news that business-types read so they have something to say to each other…)

Now, the FT is doing OK, since it’s cushioned by (a) a wealthy audience and (b) corporate customers who are way less price sensitive than average newspaper readers. But the pressures that are being exerted on newspapers still apply to the FT; if not right now, they soon will be, screwing up John Ridding’s profit predictions. Here’s 2 big reasons for the FT to be cautious:

1. Competition. At the moment the FT is virtually unassailable in its position as the country’s most authoritative business publication. This places it in a strong position amongst an audience that wants the most authoritative voice with which to impress their friends, and makes it difficult for new competitors to emerge (look at City AM…).

But it’s not impossible – consider this example from Australia. The Australian Financial Review (AFR) used to be the only game in town for daily business journalism in Australia. They also operated a fully paywalled website, afr.com, with lots of corporate subscribers. 2 years ago a free, online-only competitor launched: Business Spectator. The key to BusSpec’s appeal is in its talent – if you were to ask the man in the street who the top 3 business journalists in Australia are, in all likelihood the answer would be Alan Kohler, Robert Gottliebsen and Stephen Bartholomeusz. These three, led by former AFR editor Kohler, leveraged their own personal brands to launch a significant competitor to afr.com that is currently heading towards profitability, employing 2 dozen journalists and giving afr.com an absolute bath when it comes to traffic. (it’s also a great site).

Of course, traffic is not the only measure that matters, and afr.com would no doubt prefer to have their paying visitors than BusSpec’s free riders. And to be fair, I would assume they’re making much healthier revenues than BusSpec. But when authority and prestige rule this market niche, how long can you maintain your position when twice as many people are reading a competitor? How long until readers start to regard BusSpec as the most authoritative voice in business journalism?

There isn’t a comparable equivalent to BusSpec in the UK market. It would be like Robert Peston, Martin Wolf and Jeff Randall collaborating an a site. But with journalists-as-entrepreneurs heavily on the agenda, there’s absolutely no guarantee against this happening, which would totally poop the FT’s party.

2. The business audience is growing up. Summed up by Shane Richmond from the Telegraph:

“I think it will become harder and harder for the FT to maintain its audience as the internet generation climbs the corporate ladder. The current audience believe they are getting content that they can’t get anywhere else – and that certainly isn’t available free – but the audience of the future may already have found other, more accessible publishers to meet their needs.”

The people making the decisions about the FT’s valuable corporate subscriptions probably regard the FT as the only game in town for business journalism. They may also regard Twitter as a frivolous waste of time, blogs as poorly-informed and pointless, and think the mobile internet will never catch on. But the people under them, who are on their way to the top, likely don’t share those views. And those people, once they arrive there, will be much more likely to sacrifice their FT subscriptions for free online publishing that fills the gap.

All in all, there is no magic mix of content immune from the economic pressures afflicting newspapers. It doesn’t matter how niche your market is – the internet’s actually a pretty friendly place for niches.

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December 15, 2009

paywalls: why market research is useless

What % of consumers would pay for news content?

graphic from paidContent that speaks volumes.

It’s a collation of various pieces of consumer research on paywalls, showing various responses to the question: ‘what % of consumers would pay for news content online?’. The answers range from 5% to 48%!

Looking at it closely, I’d suggest losing the studies that don’t narrowly define the content in question as news content, since clearly people are far more likely to pay for, say, video of an exclusive sports event.

I’d also lose the studies that confuse the issue by asking about various different mechanics of payment (i.e. ‘Would you pay with a subscription? What about micropayments?’ etc) and just focus on the core issue of pay vs free.

If you do that, you’re left with just 2 of the original 8 studies … 5% and 48%!

Of course, paywalls are something that’s been informally tossed about at my place of work, as it has no doubt done at every publisher in the UK (although our CEO has been very clear it’s not being seriously considered).

I had a conversation internally at one point about whether to survey our consumers on the subject of paywalls, and we almost immediately rejected the idea as a total waste of time, since the answers given wouldn’t in any way reflect what would happen in reality. I’m reminded of surveys asking drivers if they’d pay a toll on a road they use. Almost every driver says ‘no way, I’ll just drive another route’. Then they build the toll booths anyway and, amazingly enough, all those drivers just pay the tolls.

Nobody puts their hand up and asks for a shit sandwich! Paywalls can only be tested in-market. I believe Rupert Murdoch realises this, which is why he evidently made the call early without stopping to ask anyone’s opinion. I think that’s the right way to approach this – go with your gut (even if it’s wrong).

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December 10, 2009

great post on newspaper economics

This is probably the best economically-literate account I’ve yet read of the historic problems facing newspaper publishers. It’s from a blogger called Robert Heath and I’d encourage you to read the full post here.

To quote, with important bits in bold:

Historically, the market structure of the newspaper business enjoyed a virtuous circle as depicted above. Once the sunk cost of the editorial staff is incurred, the printing press paid for, and the distribution system in place (collectively representing yesterday’s technology), the incremental cost of including an additional classified ad — or any other feature — in the daily newspaper is negligible. Hence, newspapers had incentives to bundle many forms of content in addition to their own editorial content: TV listings, horoscopes, movie schedules, stock listings, comic strips, classified ads, etc. A reader paid for the bundled product even if he used the classified ads maybe once a year, or never read the horoscope or used the TV listings. The high fixed costs, offset by the surplus economics from bundling and low marginal distribution costs gave rise to something akin to a natural monopoly…

Now imagine you’re a newspaper subscriber (maybe you still are). If you could disaggregate the horoscopes from the weather from the sports from the local news from the international news from the business news from the TV listings from the almost non-existent stock price listings, how much would you pay for the parts of the paper you actually intend to read? Probably less than the $10-$15 per week it currently costs at the newsstand. Probably less than the $6-8 per week it costs to subscribe.

Probably a lot less.

This is the problem faced by the newspapers. Bundling is a pricing strategy that delivers surplus economics to the supplier by enticing customers to buy more than they would if the bundled products were sold separately. By weight, the majority of your local newspaper (and its website) is information sourced from third parties (ads, stock listings, classifieds, lightly edited excerpts of corporate news releases, etc.) readily available elsewhere on the internet (see note 2). By allowing readers to disaggregate the newspaper’s traditional bundle of content, the internet may be exposing the market value … of the original editorial content produced by the publisher itself.

As publishers experiment with revamped online pricing models they may find that the true value of their original content will give horrifying meaning to the term micro-payment. No newspaper has a monopoly on “the news”. It certainly has no monopoly on the third-party information it republishes. The newspaper industry suffers from a notion that it should enjoy monopoly economics on content (“Hey, that’s copyrighted!”) when in reality its historical monopoly was a distribution channel and much of the profit was based on aggregating and organizing other people’s content. In the internet age, that distribution monopoly no longer exists and others, like Google, do a pretty good job of aggregating third-party content.

So, in summary, newspapers had a monopoly (or with the national press in the UK, a near monopoly) on distribution. Printing presses are very expensive and thus out of the reach of most. They exploited this monopoly by bundling content and charging a higher price for it. So my daily newspaper today has 68 pages – I could never read the whole thing in a day even if I wanted to. It has news, sport, classified ads, obituaries, letters, TV listings and lots of other stuff, all in a big bundle. Even if I wanted to read only 2 pages I am still forced to pay for the remaining 66 pages due to a distribution monopoly that means I can’t get the information anywhere else. And that’s how the newspaper industry used to make its money – by selling a bundled package to a wide variety of consumers (and then selling this bundled advertising package to a wide variety of advertisers).

Couple of things I take from this:

1. A lot of the publishing industry’s claims about the ‘value’ of their copyright is just hot air, based on a fallacy. The newspaper industry’s version of this story is that 1) they make intrinsically valuable content, and (2) the internet is destroying this value because Google and others are giving it away for free (sometimes in the face of copyright). What the analysis above shows is that the content was never that valuable in the first place, it was the distribution monopoly and the bundling economics that produced the value. And that’s now been destroyed by the internet. So what we are now seeing is the transparent ‘true’ value of content. And, disappointingly for the publishing industry, the true value lies somewhere between ‘not very much’ and ‘nothing whatsoever’.

2. Micropayments = a Whole World of Pain. Micropayments are the current fashionable idea in the UK for structuring a paywall. But losing the advantage of bundling economics means consumers only pay for those parts of newspapers they actually value. Here’s an interesting exercise: ask a newspaper executive which of their content producers would make a profit if they were considered as independent P&L centres. Which journalists could set up as independent businesses and sell what they do to consumers/advertisers for profit? Which photographers? Which subeditors?!? Tell them that’s what they’re facing with micropayments – every one of these guys needs to be responsible for generating profit. Then watch them break out in a cold sweat.

In the UK sense, it’s guys like these that *might* be OK – the Jeremy Clarksons and Charlie Brookers of the world (in fact, all columnists who already sell their content for profit in book form). But there would be a really, really, extremely long tail of journalists and content producers with absolutely no chance of paying their way. Depressing huh?

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December 3, 2009

key things publishers need to understand about Google part 2

The last couple of days has seen a number of new stories in the belaboured News Corp vs Google debate, ever since the search giant modified their first click-free policy for subscription sites. Here’s a couple more things newspaper publishers don’t seem to understand about Google

1. Google gives you sales leads. As succinctly put by Josh Cohen from Google News in this morning’s Guardian:

“Each new click, each visit, each page view, each reader they get, represents a business opportunity,” Cohen said. “Think of it as a lead, whether you are a broker or a newspaper you want those people coming to the front door, you want to be able to get the opportunity to sell something new: whether that’s a subscription or that’s an advertisement, it’s a real opportunity. In any business you want as many leads as possible.”

As Cohen said, every person Google delivers to news sites represents an opportunity to monetise that traffic through either advertising or paywalls. Publishers should want that traffic, the same as any web startup selling something online desperately wants as much as traffic as possible – it’s the storefront. Failure to monetise traffic is down to the publisher and their business model, no-one else.

2. SEO is not the enemy. Yesterday, Matt Kelly from the Daily Mirror (my employer) was speaking about how the Mirror’s strategy is to develop sites that

“perform well for humans, not search engines … If that means It means putting journalism first, and SEO second, then, as a journalist, I welcome that.”

First of all, who do you think use search engines? Humans, that’s who. Lots of them, in fact – approximately 80% of all journeys on the internet begin with a search. So the goal is to create sites that perform well for humans AND (humans who use) search engines – there is no contradiction here. A well-optimised sites is engaging and useful for users,as well as being easy for them to find – what’s not to like?

Search engines are today’s newsagents. They distribute your content and display it for the users who go there. You need to have a well-optimised site that looks good in Google the same way that newspapers need a standout front page with a great picture and headline to grab people’s attention when they’re buying a bag of crisps. Good, simple, easy to understand tabloid newspaper values.

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November 13, 2009

why are your ‘digital natives’ happier to pay for news?

two pieces of research here both saying the same thing. First of all from PaidContent/Harris Interactive, pcukthis chart that shows that 13% of 16-24s would pay to keep reading if their fave news site started charging. This compares to 35+ readers, where only 1%-2% would do the same.

Then from Continental Research:

“In our research, 26% of 16-34-year-olds were prepared to make micropayments, compared with 18% of those aged over 35″

So that’s interesting. Wouldn’t you think that the, *ahem*, ‘digital natives’, who never bought a newspaper, who think that it’s their right to get free music/movies/news, would be least likely to pay?

Could be that the digital natives are also native to online payment – iTunes, asos, amazon, ringtones, yada yada – that paying for content comes more naturally to them. And for the older demographics, who think of the internet as an inferior substitute for TV/paper, and who are too scared to pay for stuff online. I think there’s an interesting project in the offing on young vs old attitude to news content and perception of value.

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November 11, 2009

“the internet doesn’t exist”

happened across some excellent points, well made, by the Australian business journalist Alan Kohler (for my money one of the best business journalists on the planet) on his excellent business spectator site.

Kohler breaks down the key issues around paid content in a really simple, really persuasive analysis, that deserves to be read more:

[News Corp digital media exec Richard] Freudenstein replied: “Quality journalism comes at a price. Although they play a key role in the digital age, even the best-intentioned citizen journalists and bloggers cannot provide the same service. Journalism is not a commodity …”

Actually, it probably is a commodity now, Richard, after 15 years of publishers, including you, giving it away and, more importantly, the appearance of vast numbers of non-journalists happily producing high quality “content” for nothing or very little.

And is there any standard qualification for the “quality journalist” who produces it, so I know that what I’m paying for is worth paying for?
The problem is that publishers like News Corp never did anything to define or distinguish their journalism to stop it becoming a commodity.
Everyone talks about “quality journalism” but what is it? I have my own ideas about that, but is there a definition written down anywhere that I can check against what I’m reading to determine whether it’s “quality journalism”, not a commodity, and therefore “should come at a price”?

 

The lesson for News Corp and other publishers is that there is no intrinsic ‘value’ in what they produce other than what readers and users see in it. And readers and users are pretty agnostic as to whether the person who wrote it went to journalism school and is demanding a paycheque, or they’re just an enthusiastic amateur. It may be some time before consumers are prepared to get their knowledge of the wider world from, say, trending topics on Twitter, but it is possible, and undoubtedly on the increase.

Here’s another excellent quote from same piece:

It is a colossal miscalculation to think that consumers distinguish between stuff they read on paper and stuff they read on a website, and that they have somehow decided they will pay for one and not the other.

There’s a lesson here for those who claim that consumers “demand” free news online and will never pay for access. They don’t demand any such thing, they just take it because it’s there. If all news sites started charging for access, then they’d pay as the consumer desire for news is still there, and consumers already pay for news in paper form.

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