News Corp reader revenues

The chase is on as traditional media searches for reader revenues — persuading readers, listeners, viewers to pay directly for digital content, rather than rely on the indirect funding of advertising. After about 15 years of catastrophic decline in advertising and print circulation, there’s almost a giddiness in the air, a sense that there is a way out of the crisis for mass media.

The boomlet in reader revenues is flattening out the declining income curve, at least temporarily. In their latest quarterly report, News Corp boasted “strong paid digital subscriber growth at mastheads” while in their earlier mid-year report, Fairfax Media said “net paid digital subscriptions [had] recorded their strongest uplift in four years”.

But to hope that readers can substitute for advertisers in major publications is to ignore the math, as The New Yorker’s Ken Auletta, says in his book Frenemies, released last week.

Unlike traditional audited circulation numbers, News Corp’s latest report cites “internal data” to claim 409,000 digital subscribers. Reports from the company last year indicated that about a third of their subscriptions are for The Australian and the remainder balanced between the five metropolitan mastheads, particularly the AFL-focussed Herald Sun.

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Fairfax Media’s February report said it had 283,000 paid digital subscribers across The Sydney Morning Herald, The Age and The Australian Financial Review. Both Fairfax and News claim “trust” is driving take-up, with Fairfax CEO Greg Hywood pointing to “positive trends in consumers’ willingness to pay for trusted and quality content” and The Australian’s page two report this past Saturday stating, “Trust brings us more readers than any point in our history”.

Claiming the “trust” mantle highlights a fundamental of a media funded by reader revenues: it’s a very different business to the advertiser model. The advertiser model is business-to-business, where you aggregate as many readers as possible so you can on-sell them to advertisers. Reader revenues is the far more complex business-to-consumer model, collecting and nurturing readers one by one, with “trust” as the commodity.

It doesn’t appear we can expect these digital subscriptions to offset more than print circulation decline. As Hywood says in his mid-year report: “Overall circulation revenue was modestly lower, benefiting from strong growth in paid digital subscriptions and increases in cover prices, offset by declines in print circulation volumes.”

While News Corp says circulation and subscription revenues are up 7%, it attributes this to the US and UK operations, along with that old accounting stand-by, “currency fluctuations”.

Not all digital subscriptions are equal, particularly once boiled clear of start-up offers. Most have benefits packaged up: with The Australian (for $384 a year) you also get the Wall Street Journal plus the Weekend Australian home-delivered. The SMH and Age cost less — $182 a year — but for an extra $208 you get the iPad app and the weekend papers. The AFR is more corporately priced at $708.

The News Corp tabloids set you back $336 with the local weekend papers thrown in. Part of the boost in News Corps’ March 31 numbers seems to have come from a package deal targeted at AFL and NRL supporters with a “Full on Footy Pass” including both the tabloids’ content and Fox Sports for $520 a year. Is this a newspaper or a Foxtel subscription?

This is discretionary expenditure in a competitive space, where the competition is ultimately for time. The digital world may be effectively infinite, but our time isn’t. So the competition also includes Netflix and Spotify (each about $216 a year) and, of course, News Corp’s bete noire, the (free-to-air and online) ABC which, together, put a real lid on potential reader revenues for commercial media.

That lid is driving much of the attacks on the ABC, including the government’s notorious “competitive neutrality” review.

The costs also threaten to constrain news consumption to those who can afford it, and we’ll see news content shaped to fit that wealthier market.

Putting the publicly available subscription numbers and subscriptions price together with what we know about price elasticity, suggests that there is a reasonably hard ceiling of total reader revenues in Australia of somewhere around $300-$400 million. Compare this to the $2.7 billion of total newspaper (print and digital) revenues last financial year.

Those are the numbers Australian media can’t ignore.