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Free sites, ‘freemium’ models boost newspaper revenue

Two developments in the UK and one in the US last week have placed further doubt on the rigid paywall models adopted by News Corporation.

For the first time, the free Daily Mail website broke into profit in the six months to June, and the Financial Times had more digital subscribers with its so-called “freemium” model than actual subscribers to the paper itself. Meanwhile, The New York Times reported a stunning 81% jump in digital subscribers at the same time for the June quarter.

The Financial Times was an early entrant into the paywall idea and it is clearly paying off. In the six months to June, owners Pearson say the paper’s digital subscribers grew 31% to “more than 300,000” paying readers compared with a year ago, while the print circulation fell more than 50,000 copies to 297,225 (from 356,194). That’s almost 600,000 digital and analogue subscribers to the paper at the end of June.

In February Pearson reported the number of digital subscribers was 44% of total paid circulation as the end of December, or 267,000 — a 33,000 rise in the six months. The jump in digital subscribers offset the fall in analogue sales in the six months so the total number of subscribers/sales was 599,000 at the end of June, up 2% on the figure a year ago and about the same as it was in all of 2011.

The number of registered users for the FT climbed 29% to 4.8 million. Mobile devices now account for 25% of traffic to FT.com, while there are 2.7 million FT web app users. Pearson said that ”digital and services accounted for 50% of FT Group revenues and content revenues accounted for 61%” in the June half year. The figures for the end of December were 47% and 58% percent respectively. Pearson said revenue from digital and services “will exceed” that from traditional publishing activities by the end of this year.

Pearson also has a very strong, digitally-based education services business. But for newspapers in Australia and elsewhere the growth of the FT’s digital subscriber base is the real story. It shows what can be done, but it takes a lot of time and effort.

At The Economist Group, in which Pearson owns a 50% stake, The Economist’s worldwide print and digital circulation increased by 5% to 1.62 million (at March 31 2012). Pearson said: “The Economist is now read on more than 500,000 tablets and smartphones each week, and economist.com generated an average 35 million monthly page views (12 months to 30 June 2012).”

Penguin, Pearson’s publishing arm, saw ebook revenues up 33% and now almost 20% of Penguin’s revenues. But Penguin profits almost halved to 22 million pounds (from 42 million) thanks to the impact of Fifty Shades of Greyand The Hunger Games which helped cut sales at Penguin by 4% to 441 million pounds. Fifty Shades sold more than 30 million copies (ebooks and analogue) in the six months, according to Pearson’s estimates.

The New York Times last week revealed it enjoyed a surge in subscribers for its freemium paywall: an 81% increase in digital subscribers to 509,000 paying readers at the end of the June quarter, compared with the same quarter in 2011. That compares with the paper’s average weekday print circulation of 779,731, according to the most recent data for the March half year from the US Audit Bureau of Circulations. That’s closing in on the number of digital subscribers for The Wall Street Journal, which has long been the leader in the paywall business in the US (it also has a fremium model).

The Journal had a print circulation of 1.57 million in the six months to March 31, and it had 552,288 digital subscribers, according to the Audit Bureau of Circulations. At its current growth rate, the number of digital subscribers to The Times will exceed The WSJ’s figure in the current quarter.

In London, the Daily Mail and General Trust Group said the Mail Online was set to be profitable this month for the first time. Stephen Daintith, DMGT finance director, said revenues for the year to September are forecast to rise to 25 million pounds, with a forecast of 45 million pounds for the 2012-13 year.

The company said the Mail Online digital revenues jumped 69% compared with the level a year ago. The rise is digital revenues offset a 5% fall in ad revenues for Associated Newspapers (mostly the Daily Mail and Mail on Sunday) which left total ad revenues unchanged on the third quarter of 2011.

While a commendable effort, it also illustrates how low ad rates on the Mail Online are compared to the analogue newspapers and how much work the industry has in boosting them to offset the long-term decline in newspaper ad revenues and circulation losses. Daintith said the company was starting to see a rise in revenue from the Mail Online’s US operation, where it has around 40 people working.

2
  • 1
    David Spice
    Posted Monday, 30 July 2012 at 1:47 pm | Permalink

    Point one: Revenue is not profit. Point two: The Economist pricing is as crigid as it gets and it’s been rising.
    Summary: Traffic is only a measure of cost and user price has become the driver of profit.

  • 2
    shepmyster
    Posted Tuesday, 14 August 2012 at 5:04 am | Permalink

    Let’s hope Murdoch continues with his failing ways. He’s looking like Randolf Hurst more & more everyday. The sooner this American is stopped from meddling in our politics the better. What’s a man described by the British Parliament as “not a fit and proper person” doing owning 70% of our print media anyway.

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