News for premium publishers is optimistic

On February 22, Mark Day wrote a piece here on the future of ­paywalls, bouncing off Financial Times research published the ­previous week ­that pointed to the parlous state of the digital ­advertising market worldwide.

Mark’s piece contained one optimistic sentence about the digital world: referring to the ­latest emma readership data in Australia, he wrote “The Australian and the AFR are up, confirming the long-held belief that demand for quality publications will be maintained longer than general-interest titles.”

Indeed, I can confirm that as editor-in-chief at the time, this is exactly why I volunteered in 2011 to launch News Australia’s first paywall ahead of metro dailies. Last Friday week, The Australian declared weekday digital subscriptions of 77,371 and relatively stable Monday to Friday print sales of 101,980. The Australian’s chief executive, Nicholas Gray, is confident digital subs are on the way to 100,000 and believes 200,000 sales a day across print and digital is quite achievable. What Gray will not discuss is digital ad revenue. But across the industry it has been declining, which is no surprise. Many of us predicted it. After all, the barriers to entry for digital publishers are almost non-­existent and every blogger and podcaster is now competing with mainstream print media companies for ad market share.

Yet the news for premium publishers is much more optimistic because consumer revenue is growing quickly. Publishers of unique news are pushing hard on print cover prices, and paywalls are working at this end of the market. When the paywall was launched at The Oz three years ago subscriptions were $3 a week. That is now $8. Growth is not slowing and actual total subs are now more than 80,000.

Over at our rival, The Australian Financial Review, editor-in-chief Michael Stutchbury, this paper’s former editor, is focused on consumer revenue. The paper’s cover price has risen to $4 and digital subs cost $708 a year.

While the AFR does not break out digital numbers, Stutchbury is happy to say: “The print product is resilient, digital subscriptions are growing and total consumer revenue is strong. In fact, subscription revenue is up 10 per cent or so on budgeted growth.”

Both national papers were badly hit by the loss to the internet after 2011 of national recruitment advertising, particularly senior federal and state government public service jobs. That migration started not long after the display ad market hit the wall following the global financial crisis.

It was the perfect revenue storm and classified recruitment advertising that had filled The Weekend Australian and the Friday AFR largely disappeared. But total consumer revenue on both papers is up, and on The Oz it is 40 per cent more than it was before the GFC. On top of that both papers have lifted revenue from commercial partnerships, such as The Australian’s with GE, Shell on the Innovation Challenge and Chevron. Both are lifting revenue on their conference businesses.

At the AFR there is also a focus on B2B through Fairfax Media site ­licences that give individual businesses the ability to provide Fairfax content to staff. So while neither Gray nor Stutchbury will reveal details, it is safe to say both national titles are dramatically above where they were three years ago in revenue terms. In that sense, paywalls have indeed proved a saviour if your news is not of the commoditised variety. And the market seems to be ­coping with aggressive pricing.

Stutchbury referred to the words of Rupert Murdoch in 2009: “When Rupert said, banging his hand on the table, ‘We are no longer giving our content away for free’, he changed the equation.”

Stutchbury also pointed out the AFR was a local pioneer in charging for online access, although the price point before his return to the paper at $1100 has been dramatically lowered to increase traffic.

Gray quotes an unlikely source to back his optimism: Crikey media writer Myriam Robin wrote last September of an Essential Media poll that she interpreted as a negative. Her spin was seven out of 10 Australians over 18 would not pay for online news.

Of course that means three in 10 will, and if you are targeting an older, wealthier reader than 18-year-olds, the poll left plenty of room for paywall growth. She quoted former Fairfax ­director of strategy Gautam Mishra as saying people often don’t really know what they are prepared to pay for online. Indeed.

Gray picked up the point. “I reckon 27 per cent of people over 18 saying they might pay for ­digital news (provided there is something unique about it), which by my maths is 4.4 million people, is pretty good. And that number will grow,’’ he said.

So how about the News Corp tabloids and are they learning anything from The Australian’s success in consumer revenue? The city-based metro titles are seeing a clear tapering of circulation declines and are looking to limit their print declines to a maximum of 3 per cent a year. That slowdown and continued growth in digital subscriptions are allowing the metros real consumer ­revenue growth and total paid audience growth.

Damian Eales, managing ­director of metro and regional publishing for News, says: “The metro business is now a consumer revenue growth story.”

Now reflect on a piece by Media editor Darren Davidson in this section last week. Davidson calculated ARPU (average revenue per user) across several digital platforms to show Google and Facebook are eating the lunch of traditional publishers by repackaging their news. He calculated Google’s at $46.10 per user and Facebook’s at $14.65. By adding in Domain, Fairfax ARPU was $31.80. News would not give its figures but new-wave digital pure-play publishers such as The Guardian ($2.06) and Buzzfeed ($1.11) were a long way behind.

Now if I think about The ­Australian, based only on 80,000 paying subscribers, that number is somewhere between $300 and $400 per user. But the paywall is not ubiquitous and even if you use the full 1.5 million unique audience, ARPU at The Australian would still be about $20. Yet this is without RealEstate.com.au, and Domain was included in the Fairfax number. The News Corp Australia metros have moved from metered to freemium and are lifting paid digital subscriptions, so the figure across the company could be as high as $50 per user. That would be an enviable number for any media business.

And that tells this old newspaper editor there is a reason to think paywalls can help save the news media model — provided publishers do not give everything for free to predators such as ­Google and Facebook. Just as they gave everything away when they first put their products online for free 10 years ago.