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Jun 7, 2011

The great News experiment begins

As expected, today at the Mumbrella360 conference News Limited’s Richard Freudenstein announced that the company’s Australian newspapers will erect paywalls for some of their content online.


So the great experiment begins. As expected, today at the Mumbrella360 conference News Limited’s Richard Freudenstein announced that the company’s Australian newspapers will erect paywalls for some of their content online.

As reported in The Australian today, the experiment will begin in October with The Australian. As yet undefined “premium” content will go behind the paywall, while “breaking news, wire stories and broad interest stories” will remain free.

The price of a digital subscription will be $2.95 a week, including iPad and Android app, website and mobile site, and you will be able to get all this plus a print subscription for $7.95 a week. Compare this to The Age iPad app, which will cost $9 a month from the end of this year. The packages are not directly comparable — you get more on more platforms with the Oz — but the Oz is also the more expensive by a whisker.

Freudenstein claimed in his speech that The Times paywall experiment in the UK has been a success — that there is more revenue from the smaller number of paying audience members than there was from advertising playing to a mass audience.

But in Australia, he said, the mix of paid and free content has been adopted because Australian media websites make more money from ads. The free content is designed to draw that revenue, and also to act as a marketing device for the subscription content.

Perhaps. I suspect the “freemium” model (where did they get that word?) is also a reaction to the more sophisticated experiment introduced by The New York Times — the porous, metered approach to paywalls, about which I have written before.

So will it work?

So far only The Australian has a firm date for the erection of the paywall. The tabloids will follow, we are told, but there are no dates or details.

This is logical. If News Limited has a product that is special enough to attract subscribers online, then the Oz is it. No matter what we think of its recent odd and singular history, its self-obsession and its weird and nasty campaigns, (some in the industry are saying that The Age in Melbourne would sell 10,000 fewer copies if The Australian was less weird)  The Australian also contains high quality content and serious commentary that cannot be easily obtained elsewhere.

But is it special enough? Nobody, including News Limited insiders, knows for sure.

Meanwhile, there is a keen recognition within the company that not all the tabloids can cut it behind a paywall. They are too generic. Too much of their news content is freely available elsewhere.

The paywall experiment is likely to be trialled first for those tabloids that are in monopoly markets, such as The Advertiser in Adelaide and The Courier-Mail in Brisbane. My hunch is that the latter title will be the first to try paywalls.

Yet at the same time, those titles have been increasingly syndicating copy within the group, and losing their local touch.

In Adelaide, you will find more newsy local journalism in the News Limited-owned Messenger suburban giveaways than you will find in The Advertiser. Yet the Messenger papers have always been free, and nobody is suggesting charging for them. So why pay for the ‘Tiser online?

The ‘Tiser also faces competition in the online environment from the independently owned InDaily, and The Courier-Mail has online competition from Fairfax’s Brisbane Times.

I expect we will be waiting much longer to see a paywalled Daily Telegraph in Sydney or Herald Sun in Melbourne.

Add to this the fact that,  as Steve Allen from media strategy company Fusion pointed out to me this morning, the News Limited tabloids in monopoly markets have not done any better in circulation stats than those titles that face competition. In fact, some have done worse. So on what article of faith can we believe that people will pay?

And how much will they pay? Nobody knows the answer to these questions. There is one view that says the price should be lower, so that the numbers of subscribers will be higher — trying to retain the best of the mass-media business model and the new niche “private club” approach.

Allen said he was “inclined to believe” the claims about the success of The Times paywalls but “boy, it would be nice to have some transparency. It would be lovely to have some metrics, so we could actually see what is being done. We get that it is difficult, we understand that. We understand the need to shift to a new revenue model, but when they don’t tell us what is going on, it is very hard to trust what you are being told blindly”.

Allen also says he has heard what commonsense suggests —  that News Limited is keenly aware that the Fairfax iPad app released this month is well ahead of the News Limited product, and that “they have some catching up to do”.

What to make of it all? We should be hopeful, and sympathetic, to the new models being introduced at News Limited and Fairfax. The need to migrate to a new business model is just that — a need. There are no choices here. And if we want high-quality journalism, we must support experimentation.

But we must also be realistic about what it means. And that is a story of decline, in which the old media companies, if they survive, will be of declining influence and face competition from all sides.

While what News Limited claims about The Times may be true, revenue is different from profit. Without transparency, it is hard to know what the claims actually mean.

Some back-of-the-envelope calculations:  Let’s be  generous and assume that The Australian digital paywalled edition achieves 30,000 subscribers at $2.95 a week, or $153 a year. (Note that News Limited claims The Times in the UK has 79,000 digital subscribers, on a much bigger population).  That’s $4.6 million in annual revenue. Take away a hefty wack for Apple. Take away staff and the (admittedly low) fixed costs associated with hosting and uploading content, and marketing. Add on some revenue from advertising behind the paywall — probably not a huge amount — and advertising on the free-to-air site (which we know is presently peanuts, though it may do better in time).

Even if the model succeeds, it does not add up to a business capable of supporting hundreds of journalists. Rather, you are left with very modest profits if you assume a staff of perhaps 12-20 journalists providing the content. Yet if the content is not high quality, the basis for the whole thing is at risk.

Things may improve as time goes by. I suspect they will. But there is no real reason why an established media company can do this kind of niche thing better than newcomers and the less well established.

Freudenstein also said that The Australian will pay close attention to social media, and building a community around the paid subscription, referencing The Times and its air of an exclusive, high-end loyalty club.

The picture you are left with is a niche business, hopefully sustainable, serving high-quality, exclusive content to those who are sufficiently engaged.  But The Australian will not be the only such business. There will be many niche competitors.



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34 thoughts on “The great News experiment begins

  1. wilful

    There will be many niche competitors.

    Gosh, can we think of any in Australia? Crikey I don’t know if we have any!

    Maybe some email based news and analysis daily circular. If there was a business model.

  2. Gavin Moodie

    I don’t like periodic subscriptions for most things (Crikey excepted). For the Australian I would far prefer pay per view – paying for articles I identify as interesting. It would also be critical for me to be able to copy and store paid content electronically – the crap on line application of the Australian Financial Review is too terrible to contemplate.

  3. Scott

    Gavin Moodie – I think this will be the end game. Pay per view with mocropayments for particular content. Or opt-in subscriptions to particular interest streams..i.e Sport, Business etc
    This will be the future of news media.

  4. Gavin Moodie

    Thanx Scott. I would also gladly pay a subscription for my section of particular interest. I already have a free RSS feed and would be happy enough to pay for that. But it would be good if the Australian improved its RSS service: often content is put on the RSS feed days after it is published on line and even in print, and sometimes they seem to miss relevant content altogether.

  5. twobob

    Pay money to be told bull$hit!
    From the oo no less?
    What a farce.

  6. Ataraxi

    Well, if it results in less “quality” journalism from the Oz being foist freely upon the public, then I’m broadly in favour.

  7. david

    Murdoch will not get 1 cent from my family, never ever.

  8. ggm

    those titles have been increasingly syndicating copy within the group, and losing their local touch.

    No kidding! But I’m glad you said ‘increasingly’ because I suspect Rupe has been leveraging his international brand holdings far far far longer than we’ve realized. Making an entire page of the OZ a clone of the WSJ and re-factoring his overseas print stories is just doin’ bidness as far as they’re concerned. Why pay a stringer if you can steal in-house?

    Oh, and the courier has become sufficiently vituperative, slanted and one-eyed that you will find almost nobody in Brisbane who seeks to deny that its a shill for an anti-Bligh position, on any topic. The floods completely floored them, because they had no choice but to adopt a more neutral stance. Thank goodness ‘can-do campbell threw his hat in the ring so they can go back to what they do best: mindless labor-bashing. (did you know Labor causes cancer? The courier does!)

    The free sheets are going gangbusters. Another overseas trend which frankly I cannot fathom: why sh*t in your own nest as a defensive posture?

    I want somebody to take the News Ltd annual report apart. It is not credible for News to claim retained profits. They have a legal obligation to fess up to their risk of exposure to declining ad revenue and longterm asset value. There are no secrets from money. I think the second generation is going to find that daddy has spent the Inheritance on MySpace.

  9. Stevo the Working Twistie

    I got really excited for a while when I first saw this. I could put up with a bit of midless Penberthy or Blot drivel if it meant a bit of extra cash. But wait, they want ME to pay THEM?


  10. Oscar Jones

    Very interesting. The Australian has been ahead of the game with it’s digital version (why is Fairfax so slack in that department ?) but how many will really pay for their on-line content ?

    Normally I would, but the way the Oz has gone over the last 3 years or so with it’s blatant swing to the right and it’s outrageous twists of the truth it has totally devalued itself as a commodity.

  11. Pete

    Payments that are cheaper and more friendly to those on low income when compared to… compared to… hey, Crikey. I can see myself buying the occasional week here or there. Money that Crikey *could* be taking off me right now.

  12. davidk

    I cannot think of anything News could offer that I would be willing to pay for. Not a single thing.

  13. calyptorhynchus

    So, I wonder if they will put the truthful reporting behind the paywall and the lies, opinion-masquerading-as-analysis and Coalition spin outside, or vice versa….

    oh wait….

  14. leone

    Why pay for The Oz when you can get all their copy free from ‘your’ ABC. Most ABC news these days is word for word from the Murdoch press.

  15. Holden Back

    Gavin Moodie, this may interest you if you haven;t already seen it:

  16. BSA Bob

    I know I should take a serious interest in this but I can’t. The more Murdoch content Rupert sticks behind a paywall, buries, shreds or dumps at sea the better we’ll be. Anyway, Leone at 3.45 is right.

  17. Gavin Moodie

    Thanx Holden

    The reference is to John Lanchester’s essay ‘Let us pay’ in the London Review of Books volume 32 number 24 pages 5 – 8 on 16 December 2010. It is 17 screens or 6,098 words in the old money.

    Lanchester argues in conclusion –

    ‘I feel equally certain in saying that what the print media need, more than anything else, is a new payment mechanism for online reading, which lets you read anything you like, wherever it is published, and then charges you on an aggregated basis, either monthly or yearly or whatever. . . . and I also want to feel free to read anything else which catches my eye, whenever I feel like it – I just don’t want to have to think about paying every time I click on the article to read it. I want a monthly or yearly charge, taken off my credit card without my having to think about it. . . The charging process has to be both invisible and transparent: invisible at the moment of use, and transparent when I want to see what I’ve paid. ‘

    That would suit me very nicely indeed.

  18. John Ryan

    The only 2 things that would make me even bother to pay for view with the Murdoch empire is 1 his Obit 2 the jailing of Murdoch executives including James over the phone hacking in the UK.
    And I should think the subsequent break up of NEWS LTD,even then I would think twice

  19. 3578871ea074bdf4ed98dc021da22a9e

    I would rather pay my hardearned to sites like crikey and not give a cent to the mongrel manipulator Murdoch and his biased rubbish so called newspapers.

    I havent bought any News Corp products for at least 10 years and I aint about to start now.The thing I look forward to the most is when Murdoch eventually dies is the breakup of News Corp.

  20. Daniel

    You mean I have to pay money to read about OUR KYLIE’s newest concert or whether Lleyton and Bec are having another baby??????????

  21. fredex

    I would buy the OO willingly if it were worth the price [mind you it wouldn’t be the OO then, would it?].
    It is’nt so I don’t.
    I have no reason to believe a paywalled version would be any better.
    So I will respectfully decline the opportunity to avail myself of that option also.

    What the geniuses haven’t been able to figure out is that if they offered something of value then people would be willing to pay that value for that product.

    My estimation of the value of Ltd News product is that it is worth less than zero and as they seem unwilling to pay me money to read their crap I don’t.

    Betcha I’m not alone.

  22. Jeremy Williams

    the oz is mean, nasty, dishonest and petty in its campaign on its critics I look forward to it trying to compete when it actually has competition

  23. Malcolm Street

    The Oz isn’t like The Times, which has a large circulation and has for generations been Britain’s journal of record, a reputation it’s largely retained despite Murdoch’s ownership.

    The Oz, OTOH, is a partisan rag in the worst Murdoch traditions that outside its natural rabid Tory constituency is widely regarded as a bad joke and has low circulation.

  24. poroti

    For two decades I bought a copy of The Australian everyday. That is until the tsunami of articles from writers from the Institute of this or the Center for that took over. Never buy them now and it is nothing to do with the “new media”. Why the feck bother when all you had to do was look at the headline then look at the bottom of the article to see which institute or center the writer came from and you knew exaclty what they would say. No matter the topic was it would all be the “activist judges” or “progressives” fault. I only read Roops papers on line for the couple of gems he still employs. Pay for it ? Nah !

  25. Captain Planet

    What is really so revolutionary and / or new about this “Freemium” concept?

    Crikey has free and premium (subscriber only) content.

    I am struggling to see the difference.

    While we are at it, can somebody please enlighten me about something;

    Why is the Australian referred to as “OO”. It may be a dumb question but I need to know now.

    Oh, and I believe that the actual analysis and quality reporting (such as it is) will be the stuff you have to pay for at the Australian online, and the fawning conservative misinformation will be free. Just to ensure that the blatant political agenda of Murdoch’s antipodean flagship still has maximum impact.

  26. Pete

    OO = Oz Online… at a guess.

  27. Malcolm Street

    Capt Planet and Pete – I believe OO stands for Opposition Organ. It’s a follow-on from the Howard-era nickname of GG – Government Gazette.

  28. Pete

    Thanks. Though the less I’m reminded of Tony’s organs, the better.


    If the Awfulstralian is a wretched rag now, just imagine what tosh it’s going to be feeding its tea party patrons when they’ve actually got to pay for it.As the audience for moderate views diminishes the feedback loop will put their strident rubbish content up to full volume.

    In the words of Spinal Tap, it will go all the way to eleven.

  30. Bela

    So now we can pay to have climate change denial and obsessive refugee bashing rammed down our throats.

    Not likely. As with many other contributors above, I gave up on it after about a year into the Rudd government when it crossed the threshhold and became a trumpet of the Coalition.

    Not worth it for free, nor will it be at any price unless they have an epiphany of some kind and return to some balance. Until then, the thought of paying for Janet Albrechtsen or the Shanahan family’s school fees, to say nothing of lining the pockets of the appalling Christopher Pearson, is too much.

  31. Hugh (Charlie) McColl

    I thought it was Olfactory Onanism.

  32. Sexual Lobster

    The more content they put behind the paywall, the less influence they will have.

    I also like the micropayments idea, but we need to move past the paypal model which carries excessive fees for transfers.

  33. Cuppa

    When the OO and Daily Telegraph start charging money Their ABC might as well also, as the content is often indistinguishable.


  34. Dan Gulberry

    By “indistinguishable” Cuppa above means straight out cut and pasted.

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