People like to talk about first mover advantages, but sometimes being first can be a disadvantage. As in, brave experiment and at best partial success.

Thus we see, in the past week, the remaking of The Australian Financial Review paywall. The AFR, under previous chief Michael Gill, was the first newspaper in Australia — and one of the first in the world — to introduce a paywall system for content online. And everyone enjoyed rubbishing it.

Nobody is rubbishing it now. Rather, many have joined the great paywall experiment, with the view that this represents part of the key to long-term news media sustainability now close to consensus thinking.

Yet at the same time, the new management at The Fin are proclaiming a “revolution”, implying that the old regime had it severely wrong. It’s spin, of course. But let’s examine the elements.

The old regime, which introduced the paywalls at The Fin, has gone — with Gill and editor Glenn Burge pushed out by the new Fairfax CEO Greg Hywood last March. Meanwhile, there are new writers, many of them poached from The Australian.

But central to the “revolution” is adjustment to the paywall. This revolution is largely about the less-than-subversive notion of price cuts.

The advertising blurb proclaims:  “After five years we have a better understanding of how to get it right … The cost of web-only access is being priced to market and substantially reduced.” Well, yes.

Certainly there were problems with the previous way things were done, but it was in the days when nobody knew anything about paywalls.

When the paywall went up, The Fin removed itself from the online conversation. It removed its articles from online databases, such as Factiva. It fought court actions against those services that sold summaries of the articles online. It was all very rigid, and very costly.

The price of subscribing to what was promised to be not only newspaper content but also a suite of financial analysis tools was unreasonably high, even for a publication that sells to people most of whom can tax deduct their subscription, or charge it to the boss.

Then, at first, the website didn’t work as well as one might have wished, slow to load and cumbersome to use. Within Fairfax there was much talk about how Gill had chosen to go his own way with all this, rather than using the teams who were behind the other Fairfax online presences. Gill made few friends, and had plenty of enemies.

But was he, at core, wrong? I think that when the history of these times is written, Gill will be seen as a pioneer who paid that first mover penalty.

In the past few weeks, Gill has defended his record in an Inside Story pieceHe makes a convincing defence, as well as having some interesting things to say about media brands more generally. Says Gill:

“We hear much about the ‘brand’ and audience that is built by going online. By implication, people seem to assume that this is valuable. Generally it’s not. Which is why so many publishers have taken lately to trying paid content models … When you get stuff for free, you get what you pay for. And that’s why news resources are pressured. The Australian Financial Review’s approach was different for two reasons: first, the business of The AFR had always relied heavily on pricing, including especially cover price revenue. Its niche is small in number, but valuable. The second reason was that our research consistently delivered a clear message: the product and its content were the key to the digital business.

The AFR has been profitable for all of the past fifteen years and in some of those years its profits were record numbers. In that time the Financial Times, The Wall Street Journal, The New York Times and many others have reported losses.”

In his introduction, Gill accuses me, and others, of describing his paywall pioneering as a “disaster”. In fact, I never said that. In my  2007 book The Content Makers, I said “the business model works” in relation to The AFR. Also: “The main reason for its success is surely faith in its core business — providing content that is useful and relevant to its audience.” On the paywall model (recently introduced when I wrote) I quoted others speculating that it was a disaster, but said on my own behalf: “I think the example of the Review gives us reason to be optimistic.”

Those remain my views, although I do think the execution of the strategy at The AFR has left a lot to be desired. I may, in my later media reporting, have used the word “disastrous” to describe the execution, though I can’t remember doing so.

Four years later, I think we can say The Fin was right and ahead of the game to try paywalls, but wrong in how it went about it, including the pricing regime and the web execution.

Now The Fin is unlocking more of its content, and engaging in social media. New applications for mobiles and iPads are under way.

Under the new “revolutionary” model, you can buy The Australian Financial Review in hard copy, plus access to the website for $65 a month Monday to Friday, with weekend subscription another $10 on top of that. Website-only subscription costs $59 per month.

Compare this to The Australian, which (once the three-month free trial period ends) will charge $4.50 a week ($19.50 a month) for a “digital pass” to its content plus weekend delivery of the hard-copy newspaper, or $7.95  a week ($34.45 a month) for a digital pass plus newspapers delivered Monday to Saturday.

Do the maths. The AFR is still around twice as expensive as The Australian. Which means it will have to be twice as good, one would have thought. Hence the poaching of writers.

A safer conclusion would be that despite The AFR proclaiming its revolution includes setting a price in line with the market, nobody really knows what the “correct” price will be, nor what people will pay for, nor, indeed, whether the paywall experiment will work in Australia at all.

Signs out of the US are that the paywall at The New York Times and The Wall Street Journal is “working” in the sense of being sustainable. But those papers are very special brands indeed. What will work, at what price, and with what cost base, in Australia? Everyone is still experimenting.

Into this mix, and of particular relevance to the financial press, we have players such as Business Spectator which considered a paywall model on launch, only to decide to be free-to-air.

The AFR is a very particular business model, effectively taxpayer subsidised due to the ability to claim a tax deduction. The measure of all these things will surely be whether the journalism is useful, to the point of being indispensable, to its target audience.

We’re still working out exactly what that might mean, but it is a fair bet that innovation will be key. Which means more first movers, more experimentation, and inevitably, some failures and mixed successes.

Throw forward five years, and imagine what the next “revolution” at The Fin might look like. If only we had a crystal ball …

Peter Fray

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