Digital growth points to bright future for good newspapers

Having succeeded at building paid digital subscriptions to 100,000 — more than half its total sales — how does the future look now The Australian?

Good newspapers are assured of a future provided they understand their audiences, their journalists are not at war with their readers and they have a real prospect of replacing departing advertising with revenue from digital ­subscriptions.

The improved prognosis for newspapers is great news because they remain the most powerful drivers of news-breaking and still provide a fresh daily diet for radio and television news and talk shows. The Australian has found the way forward.

Having succeeded at building paid digital subscriptions to 100,000 — more than half its total sales — how does the future look now the national daily has navigated the path from classified ads to consumer revenue?

One thing is clear: digital subscriptions at $8 a week over a full calendar year add up to more than $40 million, close to the revenue once generated by employment classified ads that have moved to Seek and other disruptive digital businesses during the past seven years. Those ads used to sit in the Tuesday IT section, the once 12-page Wednesday Higher Education supplement and the 24-page Employment section in The Weekend Australian.

As one News Corp executive remarked last week: “It is clear our paid digital strategy is right and is accelerating. It is also clear there is headroom left in the price consumers will pay.”

Display advertising at the ­national daily is broadly on par with where it was when newspaper revenues across the country peaked in 2008. It is fair to say The Australian is the first paper to take gross revenue close to where it was before the big wave of digital disruption from 2010-12. This has been accompanied by lower fixed costs on print pub­lishing and distribution and lower staff costs.

In fact News Corp worldwide chief financial officer Susan Panuccio told analysts at the release of the company’s fiscal fourth-quarter results in August that The Australian’s print advertising revenue had actually grown year-on-year.

But digital disruption never sleeps, and Facebook and Google continue to rip through the old business model for journalism, claiming 90 per cent of every ­online ad dollar. About to add to the problem in Australia will be Amazon, which threatens the ­retail companies whose advertising has continued to support traditional television, newspapers and magazines.

This will be a test for the News Corp tabloids, but even here digital subscriptions are growing strongly, led by the Herald Sun in Melbourne, with its unmatchable sports franchise. Those tabloids in print remain the nation’s circulation leaders and have been strong ­advertising vehicles for traditional retailers led by Harvey Norman, Coles and Woolworths.

Yet the success of paywalls also raises other questions: How do ­editors defend staff levels in the content generation area critical to digital and print sales, and how do commercial managers protect print ad revenue? After all, print is still the fattest part of the revenue stream.

News Corp director of corporate affairs and editorial management Campbell Reid told a Senate inquiry last week that the company still employs 2000 journalists. Many of their salaries are likely to be booked against print products even though their work also drives online content, traffic and subscriptions. No doubt media bean-counters are already preparing budget time questions asking why editorial staff in print outnumber digital staff but now produce fewer sales. Such is the logic of the ­accounting trade.

News, however, is likely to have a keen eye on ensuring it does not risk the content that drives the business in the way Fairfax Media has sometimes done. Sales decline rates at News’s tabloids have been less than half those of the Fairfax metropolitan newspapers.

News’s combined print and ­online readerships are strong, with the Herald Sun and The Daily Telegraph posting over a million cross-platform readers daily and more from their Sunday sister papers. And print versus digital figures show total sales are not a zero-sum game. One senior executive last week said print sales of The Australian were not falling at anywhere near the rate of digital increases, and print readership numbers were strong. Most digital subscribers also took out at least some print subscription as part of their subscriber bundle.

“The EMMA (Enhanced Media Metrics Australia) data is pretty consistent across the past few years and sitting well above three million a month,” the senior executive said. “Native advertising (sponsored editorial) is a complicated but growing pool of revenue, and I think we do need to market more the benefits of print brand advertising.”

One troubling area considering its enormous readership growth remains digital advertising. ­Indeed, digital-only news players such as BuzzFeed and the Huffington Post are being ­affected more than operators with print and digital streams. Oath, the ­Verizon division that oversees AOL content and Huffington Post, is planning to lay off 500 people.

BuzzFeedis likely to fall $US70 million ($92m) short of its $350m global revenue target. Mashable, valued at $250m last year, is expected to be sold to Ziff Davis for only $50m and Fusion Media Group (Gawker and The Onion) is reported to be for sale.

Operators with print and digital offerings are doing better, ­including the foreign-based news­papers with Australian digital businesses, The Guardian and The New York Times. They benefit from the fleshing out of deep content available to such sites from their sister print product.

But premium newspapers with unique news offerings and high paywalls are doing best.

The Times of London, The Sunday Times and The Financial Times in Britain, The Wall Street Journal and The Washington Post in the US,and The Australian and The Australian Financial Review here are all seeing a clear path forward.

One source at News Australia said: “While the digital pure plays have had a few notable successes here, the news cycle nationally and in the capital cities is still driven by morning print newspapers.”

He believed this was the main reason Fairfax had appeared to change course on its capital city print products, The Age and The Sydney Morning Herald. Digital success has a direct link to a morning paper’s ability to drive the day’s news agenda.

With porous paywalls, the Fairfax metros were not generating the subscription revenue per consumer The Australian does. Only the AFR was on that path.

And like all digital news sites, Fairfax was not generating the sort of digital advertising revenue that looked possible four or five years ago.

Yet with high cover prices of $3 a copy for The Age and SMH and reasonable display advertising volumes on weekends, Fairfax management, once the driver of downward circulation, had reconsidered the value of print.

So having conquered the highest mountain in the modern newspaper world, what is the next big landmark for this 53-year-old ­national paper?

Maybe digital sales passing the paper’s all-time print circulation record of 140,000 a day achieved in 2008 and total daily sales of more than 200,000? Let’s hope plenty of papers can follow.