Sections

Services

Information

UK United Kingdom

The News Limited paywall dilemma: how to avoid competing against yourself

You could almost feel sorry for newspaper owners. The internet is smashing their hard copy advertising revenue and they have yet to work out how to make money out of their online editions. It is just over…

News Limited CEO Kim Williams has been forced to change tack on the online newspaper paywall model for the company’s metro mastheads. AAP/Joe Castro

You could almost feel sorry for newspaper owners. The internet is smashing their hard copy advertising revenue and they have yet to work out how to make money out of their online editions.

It is just over a year since News Limited moved its Melbourne Herald Sun tabloid to a “metered” online paywall model. Now News Limited has announced that the Herald Sun, together with Sydney’s Daily Telegraph, will be moving to a different pricing model later this month.

Interpreting the move

At first glance, it looks like the “freemium” model - where some articles are free to all readers and other articles are locked and available to subscribers only - has failed. Indeed, as more newspapers around the world move to a metered model, it could be argued that the industry is converging on a “winning” pricing strategy for the internet.

Such a conclusion is at best premature and at worst wrong. News Limited is not going to adopt a pure metered model. Instead, it will have a “hybrid” model. As noted in The Australian, “some premium sports content will only be available to subscribers”, so there will be a hard paywall for some content and a “try-before-you-buy” model for other content.

News Limited is also allowing itself plenty of wiggle room. It is rolling out the model to the Adelaide Advertiser and Brisbane’s Courier Mail in June. But, News Limited claims “the models will vary across Australia depending on the local market”.

An alternative conclusion is that online newspapers have no idea what to do and are grasping at straws. I think that such a conclusion is reasonable for some publications (and I suspect Fairfax fits into this category).

However - in my opinion - News Limited CEO Kim Williams knows exactly what he is doing. Williams is establishing an internet sports “channel” based on Foxtel’s suite of Fox Sports channels: and he is pretending that it is an online newspaper.

Evidence

The announcement is merely the latest step in a strategy News Limited has been following for the past year. This strategy included gaining 50% of Foxtel and 100% of Fox Sports. As I noted when the acquisition was announced:

News Limited is expanding. It is grasping new technology with both hands and bonding traditional and alternative news outlets together.

The other key element in News Limited’s paywall announcement was not the pricing model but rather the change of focus. The online publications will be under a separate “news +” brand. As Kim Williams stated:

…subscribers will have access to their local masthead with enhanced local content as well as to our entire national news, lifestyle, business and sport network, delivered across all the devices they love.

The “local masthead” will simply be a local brand name used to sell a national product. And that new product is likely to have lots of video, sourced predominantly from Fox Sports.

So my conclusion from the paywall shift announcement is simple. News Limited is just continuing on the path it set itself on at least a year ago. That path will replace online editions of its newspapers with on-demand video based around sports content. It will have some video news, some “text articles” and some local content. But it will be a subscriber-based, online video channel.

Will this business model work? Only time will tell. There is a lot of free sports content available on the internet already, and News Limited is going to have to fight against other owners and providers of video sports content such as Telstra. To work, the model will need to have enough unique content to encourage online viewers to pay the $4 per week full digital subscription.

The model has risks for News Limited. To the degree online subscribers can access Fox Sports content through their “newspaper” subscription, they will not need to access it through Foxtel. However, News Limited own 50% of Foxtel, so if its online model works then it will undermine the profitability of its pay TV business.

In this sense, News Limited faces a problem of effectively competing against itself. If news+ is a great alternative to pay TV, News Limited wins through news+ but may lose money overall. So News Limited wants news+ to succeed – but not too well.

Therefore, instead of making news+ a high quality online service, News Limited will be tempted to limit the content on news+ to avoid undermining Foxtel. Of course, if it does this then news+ is less likely to be successful.

So while news+ is a bold move, News Limited is faced by a conflict that may kill it. How does it make a successful new media company that does not compete too hard with its old media?

Finally, what does all this mean for the print newspapers?

This announcement is their epitaph. It suggests that News Limited really sees little future in hard copy newspapers. They will continue until their revenue falls to a point where they are unprofitable. Then they will die. But don’t worry: you can always switch to news+.

Join the conversation

23 Comments sorted by

  1. George Michaelson

    Person

    I think this works for News Ltd because of the tight binding of sports to FoxTel, (in the group) and the fan/loyalty relationship which means if you follow team <x> you want commentary which reflects the values of team <x> and the in-depth knowledge of the sport. I'm not a dyed-in-the-wool sport person, so this "strategy" can't win on me because I don't have foxtel and I am not going to translate my errant support for the 'pies (I know. Eddie is a duckhead. But, one day he'll move on and it will…

    Read more
  2. Zvyozdochka

    logged in via Twitter

    I feel sorry for newspapers and "journalists" like I felt sorry for slide-rule manufacturers.

    There is information everywhere - those with particular analytical skills will at some stage in the future be paid directly. For example; I would pay to purchase The Colbert Report or The Daily Show directly over the internet. I would pay to read George Monibot directly, or Glenn Greenwald. This might be a fractional cent/per unit, but I'd be happy to do it. I'd rather that than the hidden product tax of advertising.

    What our society needs to tackle is the pathetically poor critical thinking skills imparted to children in education at the moment.

    Would we be having discussions around the effects of advertising to children (junk food/gambling) if they were more capable of asking questions of why they are being told something?

    report
    1. Dennis Alexander

      logged in via LinkedIn

      In reply to Zvyozdochka

      I don't buy your assertion that kids have any worse critical thinking skills than adults or that the implicature of current education being less effective than previous education holds any water. If it held, Alan Jones would have no audience and News Ltd would have been out of business years ago. More likely, kids have the same cognitive miserliness thresholds and behaviours as adults: sometimes they think about things and sometimes they don't, occasionally when they think about things they think well by some criterion or another. Finally, what exactly constitutes 'critical thinking' is at best contested and more generally poorly and idiosyncratically understood if at all.

      report
    2. Zvyozdochka

      logged in via Twitter

      In reply to Dennis Alexander

      Primary school children used to be exposed to "Behind The News" an ABC-TV production about the mechanics of news production. The show is still on, but the local primary schools in our area do not do media studies.

      A simple definition of 'critical thinking' is that proposed by Lucius Cassius "cui bono" or (roughly) "who benefits?". We wouldn't live in a world of Ltd News, climate change denialism and right-wing agendas if children were taught this skill explicitly.

      report
    3. Greg North

      Retired Engineer

      In reply to Dennis Alexander

      " I don't buy your assertion that kids have any worse critical thinking skills than adults "
      You were no doubt a super adult child analytical critic Dennis.
      Must have been carried over from the previous life I expect.

      But really, you cannot possibly feel that every child and even for that matter most adults do not keep on building knowledge and their abilities with critical thinking.

      report
    4. Dennis Alexander

      logged in via LinkedIn

      In reply to Greg North

      Greg, I was talking about kids today. Critical thinking does not necessarily improve with age - it is a skill and atrophies if not used, hence my comment about "cognitive miserliness": nobody thinks critically all the time, which is why we as older people (50+ here) tend to think kids are so much less whatever than we were or are - we don't ask ourselves about our evidence, our sample or critique our own reasoning, we just assert it. Zvyozdochka, BTN is seen differentially at schools and while…

      Read more
    5. James Hill

      Industrial Designer

      In reply to Dennis Alexander

      And Adam Smith argued that a free-market could not exist unless buyers (of all ages) were educated in their own best interests in order to distinguish those interests from the interests of the sellers.
      His objective as a Moral Philosopher was to understand commercial society and better it.
      (see the connection to "commercials" there?)
      But she'll be roight moight!
      Try the Wealth of Nations for some critical thinking, especially the article on "The Expenses of the Sovereign for The Education of Youth".
      That'll exercise some "brain" muscles you haven't used for a while.

      report
    6. David Thompson

      Marketing Research

      In reply to Dennis Alexander

      Denis, the current generation of kids in our schools have the worst critical thinking skills in our recorded history. The international slide screams this. The curriculum has been dumbed-down so much that most of the kids who are admitted to university nowadays have to be given remedial lessons to catch up. They are clueless.

      report
    7. David Thompson

      Marketing Research

      In reply to Zvyozdochka

      Zvy, when I was at school in the 1980/90s, we sat exams requiring us to critique Chaucer, Shakespeare, and Milton. Nowadays, kids get cartoons, mummie bloggers, and low-rent Hoyts films.

      report
    8. David Thompson

      Marketing Research

      In reply to Dennis Alexander

      Dennis, the main problem is that the kids who go into teaching nowadays, even one generation ago would have left school in Year and got jobs at the Water Board or Telecom as clerks or fitter and turner apprentices.

      report
    9. Anna Young

      Project Manager

      In reply to Dennis Alexander

      Dennis, I think you're underestimating the power of advertising on impressionable minds that do not have the experience or have not yet passed the developmental thresholds needed to be able to discern the pursuasive intent of advertising. I think it's naive to assume that children can think critically (by whatever definition) about consumer choices in the face of the avalanche of advertising they are exposed to.

      Learning to think critically in an academic sense is a whole other matter and that no doubt comes in due course for those interested enough to learn the skills but these skills are neither inherent nor do they automatically translate to becoming intrinsic in each person's thinking process.

      report
    10. Dennis Alexander

      logged in via LinkedIn

      In reply to David Thompson

      David, a few places on any given scale isn't much of a slide. Most of the so-called slide is because of the efforts of places like Finland and Singapore to improve their kids' education, not that we've learnt anything from that. Not all university entrants require remediation, but universities are accepting students from further down the academic preparation indicator list (ATARs), so we might expect that some at the lower end might not be as prepared as those at the upper end. Again, you assert…

      Read more
  3. Mark Jablonski

    logged in via Facebook

    100 years ago there was a blacksmith in every village centre. They were hubs of the community - often community leaders! - and were universally respected tradespeople, producing everything of metal a worker, farmer or housekeeper could need.

    Today, in my town of 250,000 people, there is one blacksmith, operated by volunteers and artisans who create tourist-trap knicknacks of wrought iron (though that sounds like I'm selling them shot; they're really very good).

    The blacksmith as my great-grandparents…

    Read more
    1. James Hill

      Industrial Designer

      In reply to Mark Jablonski

      Regarding that disapearance of blacksmiths, Roman merchants visiting Britain pre conquest were amazed to find that every village had its own "free" blacksmith.
      Meanwhile, back in the original evil empire the master and apprentice system which produced the British experience had been replaced by conquest and slavery for the supply of blacksmiths, hence the rarity of blacksmiths in the empire and the wonderment of the Roman traders in Britain.
      100 years after the conquest of Britain, under Caligula, those Roman merchant princes had enslaved the population under the lash of the tax farmers, with the resulting interest rates running at 100%.
      But will "Interest rates are too low" Joe, our upcoming tax farmer, according to the polls, like anyone discussing the actions of his cultural predecessors?
      You won't read about it anywhere in the school system he and Tony attended.

      report
  4. Greg North

    Retired Engineer

    Somehow Stephen, I reckon newspapers will find that attempting to introduce internet fees will be like bolting the barn door after the horses have bolted.
    All that free fodder has I expect developed expectations of freedom that are heavily ingrained in most internet users psyche.

    There are so many alternate sources available on the internet that the freedom options are where people will migrate to, especially in tighter economic times where they may put a higher value on their currency.

    report
  5. James Hill

    Industrial Designer

    And they have deliberately killed their news market by "writing crap",( to quote the nation's elected PM), that no-one wants to read or buy, all in support of their preferred political candidate.
    An economic death wish if ever there was one.
    Just as their polling indicates that the economy itself is on a death trip as voters vow to commit economic suicide in September by inviting in the GFC with a change to the conservative recessionary austerities ruining the rest of the globe.
    We will be left…

    Read more
    1. James Hill

      Industrial Designer

      In reply to James Hill

      " the rest of the world" from which, according to the "News", Australia exists in splendid isolation.
      What GFC???

      report
  6. Leigh Burrell

    Trophy hunter

    I didn't hesitate to pay for an online subscription to The Australian and haven't considered cancelling. At $3 a week it's great value. My particular interest was in their comprehensive investigative coverage of the AWU fraud and Gillard's involvement in particular at a time when the rest of the MSM had been bullied into dropping the story. There will always be demand for publications that dare to print what others won't. Frankly, I'd happily pay double what they're asking for right now.

    report
  7. Gavin Moodie
    Gavin Moodie is a Friend of The Conversation.

    Adjunct professor at RMIT University

    I don't like any of the charging methods the newspapers have offered so far. I prefer pay per view like journal articles: you read the heading and abstract or opening par for free and have to pay for the rest. And if I'm paying for it I want to be able to store it on my local file, not the rubbish system that the Australian Financial Review used to have.

    report
  8. Don Williams

    Water Policy Analyst

    News do seem to have a coherent online strategy, which would offer strong incentives for diehard sports fans to sign-up.

    This contrasts with Fairfax, whose online obsession with celebrity gossip and lifestyle fluff conflicts with Fairfax's claims to serious reporting and commentary. Fairfax's previous customers are unlikely to find the bulk of the online content relevant to them.

    So, whereas News have thought through a strategy, which will be tested in the market, Fairfax seem doomed to irrelevance, as they become just another presence in a crowded online space.

    report
  9. Michel Syna Rahme

    logged in via email @hotmail.com

    Without going back to check the exact dates, as far as I am aware, Murdoch through News Limted purchased Climate Spectator from Alan Kohler sometime in 2011/2012, in my opinion he purchased this website for many reasons other than to profit. Giles Parkinson did an impressive job as editor of Climate Spectator until his resignation, and I would have liked to have been a fly on the wall surrounding that later period to know exactly all the reasons why those resignations took place.

    News limited…

    Read more
  10. Mike Stasse

    retired energy consultant

    I don't read Limited News papers because they're full of crap. So why would I pay to read them online...??

    report
  11. Michael Bolan

    Systems practicioner

    The mainstream media (MSM) have another serious problem and it is that much of what they present is worthless pap. They rarely pursue stories that would educate and deliver more choices to readers (i.e. add reader value) instead they report on non-news, like their ideas about who could/should win the next election, or the difficulties that people receiving massive public monies (e.g. politicians, forestry etc) are having.

    Rarely are articles focussed on what people really need to know. Hence, whatever their fee charging fantasies, they are unlikely to make much money by presenting the same tired twizz to readers who are internet and Google savvy!

    report