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.

Peter Fray

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