Web & News: The Financial Times is the world's digital trailblazer among significant old world newspapers and the defeatism of the free model is giving way to a sustainable one for some. However, continued disruption is inevitable for many others.
"The dead-tree competitors are trapped and we are coming in for the kill," Jim Cramer, a co-founder of TheStreet.com financial website and current presenter at CNBC, the business news television channel, said at a tech conference in 1999.
Almost a decade later, beleaguered US magazine leaders were being told by Eric Schmidt, Google chairman, that the Internet would become a "cesspool" of false information without traditional newspapers and magazines. "Brands are how you sort out the cesspool," was the smug remedy from the chief of the main digital gatekeeper of their markets.
A changing landscape
The Financial Times today is predominantly a digital publication, having pioneered the metered model where the paywall is activated after accessing a quota of free articles.
Last September the FT had a verified circulation of 690,000 with digital-only subscriptions at 476,000, which have grown at an annual rate of a third.
The FT's newspaper circulation has more than halved from the 446,000 average circulation in 2007 while in 2013 digital content revenues in the Financial Times Group, which includes a 50% stake in the Economist Group, exceeded print content revenues for the first time. The FTG has made a profit every year since 2005. About 30% of the 214,000 newspaper circulation is in the UK.
The Economist has a 1.6m circulation with 10% digital-only—the latter standalone option only became available in recent times. More than four-fifths of total circulation is outside Britain and the American circulation accounts for over half of the total. Digital subscriptions are growing at 20% annually.
For the quarter ended last September, Dow Jones reported a 2.6m global sales average with The Wall Street Journal accounting for 2.2m, including 702,000 digital-only. Barron's magazine generated an average 419,000 globally including 120,000 digital-only.
In the same quarter digital-only subscribers to The New York Times rose by 44,000 to 875,000 or 41% of the weekday average circulation.
Ryan Chittum of the Columbia Journalism Review wrote last February that Gannett, which owns 81 US newspapers including USA Today (which has a circulation of over 4m when inserts in 35 regional papers are counted): "You have to have a strong newsgathering operation to justify charging online in the first place. Gannett [ ] has a well-earned and long-established reputation for high margins and poor quality."
In 2012 the group had 46,000 digital subscribers and didn't disclose 2013 data.
The Washington Post, now owned by Jeff Bezos, Amazon.com founder, is in a strong position to improve its digital appeal.
In the UK, The Times and The Sunday Times have 170,000 digital-only subscribers—up 12% year-on-year—at £6 a week or £53m a year.
Video clips of popular sporting events are an important lure but the cost of rights is not published.
Meanwhile, Axel Springer, Europe’s biggest newspaper publisher by circulation, had 296,000 digital subscribers at the end of the third quarter, a 13% rise from the previous quarter. Bild, the German tabloid, had 240,000 subscribers while Die Welt had 56,000 digital subscribers,
Bild had an average circulation in the third quarter of about 2.4m and Die Welt's daily level was 208,000 while Welt am Sonntag was at 401,000.
The leading newspapers in China, India and Japan have yet to experience digital disruption.
The Yomiuri Shimbun, Japan’s biggest selling, has almost 10m in daily sales, and as in the US, home delivery is a key feature of the market.
Digital delivery platforms are not cheap and the FT acquired a startup to produce an app that saves it paying Apple 30% of the subscription—advertising revenue is typically lower than in print while paywalls for general publications can wall off young people who already get their news free from Facebook, RTÉ, BBC or Bloomberg.com.
The free Mail Online, with 193m unique users worldwide earned £62m from online advertising in the year to last September and targets £100m by 2016 while at The Guardian in the year to March, digital revenues continued to show strong growth, up 24% to £69.5m but the newspaper lost money.
Newspaper Association of America data show that total ad revenue peaked at $49.4bn in 2005 and was at $20.7bn in 2013 while circulation revenue fell from a peak of $11.2bn in 2003 to $10.9bn in 2013.
Advertising now accounts for only 44% of revenues in the Rupert Murdoch-controlled News UK and it also accounts for less than half of revenues of The New York Times (NYT).
NYT reported that third-quarter digital advertising revenue was $38.2m, a 16.5% increase compared with the third quarter of 2013—27% of total advertising revenues.
The main trigger for the rise in digital advertising was so-called "native" advertising that is paid-content usually produced by journalists.
The NYT is reported to be planning extra advertorials to lure users of mobile devices because half of digital consumers arrive via mobile devices. But just 10% of digital advertising derives from mobile.
Last August, TechCrunch the online tech news site began a story on an online news rival: "BuzzFeed makes the majority of its money on ads that pretend to be content, but can it keep up this charade?"
BuzzFeed was valued at $850m after a $50m fund raising. The valuation of the New York Times Company is about $2bn.
Last year the Pew Research Center said that the 30 major US digital news organisations and 438 smaller ones—the vast majority of which started in the past decade—had produced almost 5,000 full-time editorial jobs. It cited a loss of 16,200 full-time newspaper newsroom jobs and a decline of 38,000 magazine jobs in 2002-2012.
Meanwhile Facebook wants publishers to deliver content that it will host in return for a revenue share.
David Carr of The New York Times wrote last October that the social network would have all the key consumer information while "media companies would essentially be serfs in a kingdom that Facebook owns."
In 2008 The Irish Times removed its six-year old paywall and last October Liam Kavanagh, managing director, announced that a metered paywall will be introduced in 2015.
The Irish Times Ltd reported a pre-tax profit of €5.4m in 2013 and Kavanagh said the company expected €8m in digital revenues in 2014. Group revenues rose 3.6% to €84.4m in 2013, boosted by a rise in contract printing.
The free RTÉ.ie service with over 70 staff and access to continuous general, business, sports and entertainment news content, remains the main impediment for private media firms to raising revenues from general digital consumers.
Nevertheless, there is no alternative to embracing digital and focussing on the long-term just as Jeff Bezos has done at Amazon.com.
In a small market lacking a global brand and with little realistic potential from the Diaspora, the main challenge is to survive in the medium term as the metrics of the transition are challenging.
The free lunch wasn’t invented when Microsoft crushed Netscape, its upstart rival, in the browser wars but it will take time for people to adjust their media consumption to the common economics of price and preference they abide in their daily lives.
Justin Ellis, an editor at the Nieman Journalism Lab, wrote on data from hundreds of US newspaper paywalls where 1m monthly unique visitors would typically produce 5,000 payers—“if you’re a top performer, maybe 10,000 or 20,000."
Irishtimes.com received 3.5m unique user visits in January 2013 tracked by Google Analytics (which is an estimate). The New York Times (NYT) received 41m unique visits last September with 28m from the US.
Also in 2013 a survey by a polling firm found that over the course of a week, 767,000 Irish adults engaged with Irish Times print and online content.
The NYT now has a 2% conversion rate and in late 2013 Axel Springer said that its conversion rate was 1.1%.
The NYT's attempt to make prices more palatable, by slicing up content via its NYT Now app—after a free period, just $2 per week for selected stories for smartphone users—and NYT Opinion app, have not gained traction.
Irish media firms should also be aware that business will not pay premium prices for just news and opinion.
Quality content can seldom match outrage for attention while facts contend with settled beliefs, official distortions and recycled myths.
However, two decades after the advent of newspapers on the web, it’s time for journalists to use links to credible sources.
Rupert Pennant-Rea, Economist Group chairman and a former editor of the eponymous magazine/ newspaper, commented on publication of 2014 interim results: "The lesson we draw from the past six years or so is clear: rather than spending a lot of time and money trying to slow the decline in print advertising, we should concentrate on boosting other revenues. Please don’t be tempted to think of victory—there’s no such thing as 'victory' in today’s media industry, just good and bad ways of adjusting—but we are encouraged to do more of what we have been doing."
John Cassidy, economics columnist at the New Yorker magazine, wrote in 2012 that quality news content is likely to increasingly become a market for the well-off: "The bigger picture is that, despite all the naysayers, quality newspapers do appear to have a future—albeit as luxury goods. After all the turmoil of the past decade, that’s kind of encouraging news."
© Copyright 2011 by Finfacts.com