Paywalls go up – Staff numbers go down: a tipping point for Australian news media?

Ownership concentration dominates Australia’s Mass Media

The past 12 months have been a pivotal time for Australia’s mainstream news media. Having seen off controversial regulatory reforms that would have relaxed some cross-ownership controls (but also introduced more onerous oversight of press standards), harsh business truths and painful economic reality have returned, in the form of cost-cutting, new digital subscription models, and foreign competition.

The failed regulatory reforms generated public, industry and political debate around ownership concentration and the lack of media diversity; cross-ownership and the impact of media convergence; the need for revised rules around mergers and acquisitions; and calls for more control over media standards.

What does Australia’s Fourth Estate currently look like?

There are two daily national newspapers, and 10 daily capital city newspapers; all but one of these 12 titles are owned by just two companies: News Limited, and Fairfax Media. Only Sydney and Melbourne have more than one daily local newspaper. Together, News and Fairfax account for about 88% of print media. Both companies have significant interests in broadcast media. The sole “independent” daily newspaper is owned by Seven West Media, itself a major TV broadcaster. As further evidence of Australia’s concentrated content ownership, Seven West has a joint digital venture with Yahoo!, while its rival network broadcaster, Nine Entertainment has a similar joint venture with Microsoft. Prominent in the ownership mix are the names of Rupert Murdoch (News Limited), James Packer (Consolidated Press Holdings) and Kerry Stokes (Seven West Media) – each of whose companies have various interests in Australian pay TV. Meanwhile mining magnate and Australia’s richest person, Gina Rinehart has been buying into both Fairfax (along with John Singleton, a key figure in Australia’s advertising and radio industries) and Network Ten (along with James Packer and Lachlan Murdoch).

Another layer of complex media cross-ownership comes in the form of Australia’s regional TV networks. The main regional networks (WIN, Southern Cross and Prime) each have content affiliation agreements with one or other of the three metropolitan networks (Seven, Nine and Ten), and each have separate interests in radio. Just to confuse things even further, the owner of WIN, Bruce Gordon is a major shareholder in Network Ten, and in the past week it has been reported that he is open to merging WIN with either Nine or Ten. Not only would such a merger lead to further concentration (subject to regulatory approval), it would also see a re-alignment of the metropolitan and regional content agreements; and given past criticism of of reduced local and regional TV news content (and the closure or consolidation of local TV news rooms), I would imagine that without suitable regulatory provisions, local news content will be even further reduced.

What are the news media doing in response to current market challenges?

First, both News and Fairfax have announced staff cuts in an effort to offset declining circulation and advertising revenues from their print editions. The overall results have seen: departures by high-profile journalists; centralized news-gathering operations; outsourced sub-editing; re-alignment of print and on-line assets; and the closure of some local and regional titles. Most recently, Australian Associated Press (AAP) announced that newswire staff numbers are being reduced by 10%. AAP (whose largest shareholders are News and Fairfax) is a major provider of news content and sub-editing services to the mainstream media. The staff reductions among in-house editors and journalists have raised concerns about quality and diversity in Australia’s highly concentrated news media. Partly in response to this perceived decline in editorial standards, The Conversation (a not-for-profit venture, backed by a consortium of universities) was launched in 2011 as a platform for in-depth, objective and authoritative news analysis and commentary.

Second, both News and Fairfax are in the process of building subscription paywalls around their digital content. Fairfax has operated a paywall around its business title, the  Financial Review, for several years; but like News it is introducing freemium models for broader on-line news content. In their latest investor briefings, News and Fairfax have outlined a renewed strategic focus on digital platforms, although neither have given definitive timelines for sun-setting their print editions. Personally, I am somewhat confused by the different subscription models on offer (print, on-line and tablet editions) and what I can access as a subscriber to one or other platform (and as a domestic or overseas reader).

Third, UK publisher Guardian News and Media has launched an Australian edition of its online newspaper. Free to readers, the site is funded by local advertising, and supported by a combined UK/Australia editorial, production and commercial team. As with News and Fairfax, I’m confused by the commercial model for digital content – is there a dedicated Australian subscription within the tablet edition? – and I doubt whether the Guardian Australia can compete effectively with domestic news coverage. The Guardian claims that Australia is one of its largest markets outside the UK, but I wonder if that readership mostly comprises British backpackers wanting to check the latest results from the English Premier League… The Guardian Australia, along with The Conversation has benefited from the staff downsizing at News and Fairfax to co-opt some leading journalists and editors to its cause. Meanwhile, The Conversation has launched a beta site for the UK.

And the rest?

Elsewhere, News, Fairfax and other smaller publishers are building specialist digital content, particularly in business, finance, politics, property, motoring, careers and sport. Most of these assets are funded by advertising and sponsorship, or underwritten by cross-media promotion. A number of these outlets appear to source their content from unpaid bloggers and commentators, as a way of offering free marketing and audience exposure to their writers.

Despite the latest failed attempts at regulatory reform, I expect to see plenty of activity within Australia’s news media (once we get past the forthcoming federal election), fuelled by renewed debates over ownership concentration; the realignment of cross-media interests (especially among Australia’s media barons and billionaires); and the re-positioning of print vs online vs mobile.

Disclosure: the author does not hold a financial interest in, or have a commercial arrangement with any of the publishers mentioned in this article..

Fairfax Media – Trading Up???

As an unintended postscript to last week’s comment on the FT, which referenced the Australian Financial Review, Fairfax Media is reported to be selling its stake in the New Zealand on-line auction site, Trade Me. While this will dilute Fairfax’s digital revenues, it will strengthen the balance sheet by reducing debt. According to some analysts, the Trade Me growth rate had started to decline, so Fairfax is probably selling at the peak.

Fairfax is also said to be appointing a couple of senior consultants to help develop a digital growth plan, as part of the overall strategy to address declining advertising sales.

Some data that will no doubt form part of this strategic review are the sprawling list of Fairfax assets, and the latest Fairfax Metro Media Audience Report (references below).

First, there is an opportunity to rationalize and consolidate the portfolio of assets, to yield better value from Fairfax news content and other IP, either by smarter integration and aggregation by market demographic, or improved functionality and customization by distribution channel.

Second, the Metro Media Audience Report confirms the decline in the year-on-year print audience, and reveals that visitors spend less time on the websites, with a significant drop in views for monthly video streams. At the same time, there has been an exponential growth in app downloads, mobile page views and unique readers, but probably not at a rate to offset falling print circulation or attract new advertisers.

It is highly likely that building on the initial success of its tablet apps, Fairfax will look to enhance and monetize the app offerings via localization, customization and better content curation to engage readers, especially its younger audience and the emerging “prosumer” demographic of tech-savvy users.

REFERENCES:

Fairfax publishing, app and on-line assets (as at July 2012):

http://fairfaxmedia.com.au/our-assets/PublicationsListfor2011.pdf

Fairfax Metro Media Audience Report (as at October 2012):

http://fairfaxmedia.com.au/shareholders/301112_FMMAROct.pdf

What’s in a business model???

Interesting speculation in the business media this week about whether Bloomberg and Thomson Reuters are in a potential bidding war for the Financial Times (which is not actually for sale?).

The New York Mayor seems to love the product, but hates the business model. Besides, Bloomberg is still playing around with Business Week.

For Lord Thomson of Fleet (the last remaining Press Baron?) it’s rather like deja vu – didn’t The Thomson Corporation (as was) offload all their newspapers in the ’90’s because print was so last century?

The FT was one of the first newspapers to construct a paywall around its content, and has created customer traction for a range of subscription, pay-as-you go and “freemium” sales models. It also remains a strong brand for global business news, and has a solid presence in Asia. But some commentators suggest that the pink’un is losing money, despite its on-line success, because of declining revenues from print advertising.

The main challenge for traditional business newspapers these days is not so much print vs digital (the FT has sort of got that worked out, and Bloomberg and Thomson Reuters are two of the largest online publishers for financial information). The real challenge is identifying and engaging the audience – who reads a business newspaper these days, and why, when there are so many on-line alternatives?

Despite current market challenges, Fairfax Media has always had a clear sense of its audience profile for the Australian Financial Review. As I understand it, the typical AFR reader is a C-Suite executive (current, former or aspirant), interested in what’s going on in the world and the impact of global events on their personal, corporate or sovereign wealth. In fact, unlike some other newspapers, there are no corporate or institutional customers of the AFR – all subscribers have to be individual readers, potentially making it easier to establish long-term relationships that survive career moves or other changes in personal circumstances.

However, the main difficulties for Fairfax are:

the cost of quality journalism and content in the face of declining revenues (hence the recent syndication deal with the FT in response to The Australian’s access to content from the Wall Street Journal?);

increased competition from numerous on-line entrants (most of which are free, the latest being Leading Company); and

the blurred boundary between the “personal” and the “professional” audience for informed news and commentary on a broad range of inter-connected topics – finance, politics, economics, business, technology, culture, sustainability, leadership….

All of which makes it rather difficult to see why anyone might want to acquire a newspaper business these days, unless for reasons of vanity – Baron Bloomberg of Southwark Bridge?