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Newspaper site paywalls: dribbles of gold, not rivers

The grand experiment on erecting paywalls for news content online took another step yesterday, with News Limited releasing figures — sort of — for how many people have signed up for digital subscriptions to The Australian.

Meanwhile the Herald Sun has erected its paywall, relying largely on religion (AFL football) to drive subscriber numbers.

Fairfax broadsheets stand at the edge of the paywall pool, dipping their toes into the water, watching their playmates and deciding whether to leap.

Sadly, it is too soon for the News Limited pioneers to declare “the water’s fine once you get used to it”.

The figures released by The Oz were presented as a success, with 40,000 subscribers to digital deals of various kinds, while print circulation held steady. But the devil is in the detail.

Of the 40,000, 10,000 were existing print subscribers who took up a free 12-month digital pass. Well, why wouldn’t they?

And the 30,000 remainder includes a whole load of different kinds of subscribers, including an unknown number who have bought a replica edition under various advertised deals.

The 30,000 comprises print and digital bundles and tablet apps, and we don’t know how many were already buying the paper, and how many are new.

As for the no drop in print circulation — how many of those copies are actually earning a profit? I have been told that tens of thousands of the giveaways are delivered under various cheap deals at below cost. That won’t matter to advertisers so long as they are read, of course. But still.

So the revenue numbers from the digital experiment at The Australian are for the moment impossible to calculate. Buying a replica edition can cost just $2. Buying a full print and digital package over a year could be bringing in $413. We don’t know how many are in which camp.

Insiders, who don’t know the total numbers either, are taking a stab at the lower end of the spectrum.

It is, as the company admits, very early days. Those who signed up for free three-month trials when the digital pass was launched have only recently been hit for the cold hard cash, so the numbers are bound to be fluid.

The Herald Sun has a free two-month digital pass trail deal out there, so the shock of ponying up cash hasn’t come into that deal yet.

Meanwhile Fairfax figures, which were released last month, show drops in hard copy circulation partly but not wholly a result of that company deliberately stripping back the loss making free deals. Also, as Mumbrella has calculated, the figures suggest that of the many who have downloaded the apps for the papers, only about 5% are using them every day — which says something about preparedness to pay, should Fairfax broadsheets ever choose to leap in to the paywall pool.

Conclusion? Too soon to say, but there is no evidence here that paywalls can transform the current situation — a paper making a substantial loss in the case of The Oz, and a break-even at best situation for most editions of the Fairfax broadsheets.

At best, digital subscriptions will be one more modest revenue stream — not rivers of gold, but dribbles of dollars. With a recovery in the advertising market, the picture will look healthier all round, but the industry is having to adjust to the knowledge that everything is changed, changed utterly, and the good old days are not coming back.

Painfully, we are seeing an end to the magical thinking that has accompanied cool new toys like the iPad. Magical thinking along the lines of: “If only there was some way of carrying on as we always have done.”

The future for legacy news media is, quite simply, smaller. Fairfax CEO Greg Hywood admits as much, while assuring everyone that Fairfax Media does have a journalistic future.

No room for gloating here. The change management challenges faced by our leading newspaper executives are awesome, in the proper sense of that word. They deserve cheers more than jeers for tying to bring it off. Although it would be nice if they were a bit more transparent.

Meanwhile niche media — including The Australian Financial Review, Crikey and a welter of online specialist publications — are making profits, mostly modest, with subscription-based online models.

Specialist media is the growth area, and we can expect in the long term that the legacy models who choose paywalls will increasingly scramble to find their niche.

6
  • 1
    Schnappi
    Posted Saturday, 17 March 2012 at 5:47 pm | Permalink

    Having given the murdoch press away some time ago,and with rhinehart now the major shareholder at fairfax,have been clicking on very little of their stories,articles.
    Think I can survive with crikey,abc and google news to keep up to date about whatever tv news does not cover.

  • 2
    LJG..............
    Posted Saturday, 17 March 2012 at 8:30 pm | Permalink

    SCNappi - the Murdoch paywall can be easily got around by cutting and pasting the hyperlink into google search.

  • 3
    Schnappi
    Posted Saturday, 17 March 2012 at 9:54 pm | Permalink

    LJG

    Ok,but should get the headline in google news,most I do not click on,as think they are unauthorised polls ,whch news ltd used to do and probably still does,which means they have an article for comment,but never publish any comments which gives them a poll I believe is unauthorised and deceitful.

  • 4
    Oliver Townshend
    Posted Sunday, 18 March 2012 at 6:40 pm | Permalink

    Took the 3 months Oz deal, but as I principally only wanted to read George Megalogenis, and the occasional article my mates link to on Facebook/Twitter I couldn’t bring myself to cough up. I think $100pa is the most I’m prepared to pay, and I’d rather have the Financial Times, Crikey, Ny Times before the Oz.

  • 5
    Bill Williams
    Posted Monday, 19 March 2012 at 10:00 am | Permalink

    Margaret,

    The statistic missing from your essay is the number of free online subscribers (before the 3 month free offer that is) the Australian has successfully converted into paying subscribers. If, as I suspect, the Australian has lost more than half of its free subscribers as the result of trying to get them to pay then the loss of advertising value would probably mean the experiment was a failure.

    When accountants are given too much say in online strategy the can easily stuff up a good thing. A free online subscription to the Australian means that all the people who can’t buy the Australian can read it…..making the advertising promise and value to the Australian’s advertisers is significantly increased.

    If forcing the Australian’s online subscribers to start paying causes most of them to discontinue their online subscription, the reduction to the overall capital value of the business when measured by the total number of readers may be greater than the revenue generated by those subscribers who are prepared to pay.

    This happened in reverse when the clowns at Telstra decided that “the Trading Post” could be converted from a newspaper (that people read) with an online search engine to expand readership reach into an online search engine by itself. These strategic fools destroyed the value of the business they bought by making the assumption that a search engine is an improved sales vehicle than a newspaper. They didn’t even provide an online version of the newspaper that readers could still read, turning pages….and in the process discovering items they wanted to buy that they weren’t even searching for…..like jousting sticks!

  • 6
    Elworthy Brent
    Posted Tuesday, 3 April 2012 at 6:06 pm | Permalink

    Those with long memories of the media will think back to the days when community newspapers were sold on subscription (albiet modest in comparison to their daily cousins).
    Every time there was a round of sub increases (all papers seemed to do around the same time of year), the little rags lost a greater proportion of their readers.
    It took their owners (including Fairfax and News, or their ancestors) years to catch on to the fact that a larger and more secure advertising market awaited if only they would abandon old ways.
    As it was, subs didn’t even cover the cost of the newsprint - never mind the ink, distribution costs, rent, journos…
    Now every community paper in the land goes to every letterbox. As much as you might malign them, if you’re an advertiser who needs to reach every household in a particular catchment they are a cost-effective option.
    In today’s internet age, the answer for news gathering organisations seems obvious - go for the numbers (of eyeballs, that is). Once you have captured a loyal readership that represents a majority of a valuable demographic - even if obtained at considerable cost - you can charge advertisers for access to it.
    Having said that, the calcs of value vs cost are way different now. Nevertheless, charging readers to access material is the way of diminishing returns.

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