Richard Freudenstein can leave Rupert Murdoch’s News Limited knowing his work is done. He’s off to run Foxtel, after building the landmark that will guarantee his fame for many years to come: the Great Wall of Holt Street.
That’s The Australian’s new paywall — or “digital pass” as Freudenstein prefers to call it — which is the Great Big Hope for News Ltd and its nervous newspaper competitors. Around the world, circulations and ad revenues are falling as readers migrate to digital, while media groups close down titles and lay off staff. The Oz‘s “digital pass” is supposed to be the solution.
“If the paywall is successful,” says author and long-time industry follower, Brad Howarth, “It will become the model for everyone else”.
If it’s not, then we’re all in trouble, says Freudenstein: “If this doesn’t work this industry has some challenges, and that’s a scary thing for democracy, and for this country.”
Either way, the media world will be watching. “Absolutely I feel the eyes of competitors on us,” says the digital dynamo, who expects Fairfax to follow “in some way, shape or form”. And he admits he feels influential because of it.
But maybe it’s also his HQ that makes him feel powerful.
You know you’re hitting the News big time when you head up to the fifth floor of the Murdochs’ Surry Hills offices. The Power Index sat in three separate waiting areas before finally meeting Freudenstein.
We were then escorted into his enormous office to be suitably charmed by an engaging, comfortable and all too-practical smooth-talker. Freudenstein is a News man through and through, having worked for businesses associated with Rupert since 1994, and is described by various sources to The Power Index as being “dependable”, “effective”, “well-respected” and, above all else, “very, very brave”.
The economics law graduate first encountered News as a client of his while practicing M&A law in the United States. He was later snapped up to do deals direct for the US-based News Corporation, and handed the task of developing the original strategy for launching Foxtel in Australia.
“There were five of us in a room, sitting around a table with a business plan saying, ‘OK so now we’ve got to build this thing’,” he says. “That was fun.”
He jokes that at dinner parties he kept getting asked the same question: why would I pay for television when I can get it for free? Indeed there are plenty of parallels between Freudenstein’s early days at Foxtel — where he’s now returning — and the paywall he’s built at News: the first being that it took a long, long time for Foxtel to become profitable. This is a valuable lesson for News’s subscription strategy.
“The first business plan we developed had Foxtel making money in a lot shorter timeframe than it eventually did to make money,” he says. “I’ve learned to take on board the fact that these things tend to take longer than expected. But once they get that critical momentum, they just keep going.”
So he’s built this thinking into News’ subscription business plan and tells us that the revenue targets are “all very manageable” (though he won’t say what they are). He’s confident, too. “If it’s better than that, fantastic. If it’s worse, well News are in this for the long haul and will make it work.”
But others are not so sure it’s the way to go.