Australian Newspapers wake up call

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Australian Newspapers wake up call
Wednesday, May 20, 2009, 03:02 PM
An industry wake up call
Rupert Murdoch finally made the clarion call for the whole newspaper industry when he said the current model for newspapers is malfunctioning and that News Corp had to lead the way and charge for accessing content.
I have been arguing that the newspaper model was broken for the last few years at industry conferences and in the media. In particular that the newspaper industry faces a unique combination of threats from cyclical advertising revenue downturn due to the economy, too much debt and most importantly a structural shift in the industry. Newspapers have cannibalised themselves by moving from being paid circulation driven, supported by advertising, to providing their expensive content for free on the internet.

Nearly three years ago in August 2006 The Economist ran the cover story “Who killed the newspaper?” outlining that the old media newspapers had the most to lose from the internet, falling circulation and that ‘advertisers were following readers out the door’. The Economist predicted that over the next few decades half the world’s general papers may fold and the headline expressed “a cause for concern, but not for panic” however that panic has now arrived.

I have used The Economist’s picture of the newspapers being on the edge of a cliff for the last two years as my opening slide for lectures including when addressing the newspaper’s own industry conference (PANPA) in September last year .

I wrote in Crikey at the time when the GFC had not really got going of the imminent death of newspapers, of the “bleak situation that I saw for newspapers as circulations and readership fell, damaged by changing reader habits and the growth of the internet” and at that time I was seen as the Antichrist in the industry.

Murdoch has not so much created new industries but has had an extraordinary ability to dramatically alter the business models of existing industries by leading the Aussie invasion of major UK newspapers, of combating the unions at Wapping (which are now also killing US newspapers), of turning around the failing UK Pay TV industry to lead the world and of creating a highly successful fourth commercial television network in the US.

At the Wall Street Journal the number of print copies sold daily is nearly identical to the number of online subscribers at just over one million each. Though the cover price of the WSJ is A$2.80 the effective price paid is far lower as the US newspaper industry heavily discounts direct subscriptions. An annual printed copy subscription is A$220 and online A$146 but News does not have the costs of printing, distributing and newsstand commission for the online version. The net circulation revenue would be fairly similar but at this time the printed version would attract far higher advertising revenues.

In comparison an annual subscription to the printed Australian Financial Review is $900 (and $1300 from the newsagent) compared to the printed WSJ subscription at $220. The AFR online is $540 a year versus the WSJ online at $146 and Fairfax wonder why the AFR online has so few subscribers.

Consumers no longer are prepared to over pay for content. Free downloading has killed the music industry and damaged the movie business. Free local papers are prospering and free evening papers are hurting the paid papers, free Wikipedia has crippled encyclopaedias, Freeview television has been a great success in the UK, free YouTube an international hit and relatively free VOIP and Skype have transformed long distance calling.

iTunes has demonstrated that if you charge a fair price many people will pay to legally download music. The AFR charging $3.30 for a single newspaper article is crazy when we can get the best financial stories from around the world for free.

The only chance for quality newspapers to survive is to charge a minimal subscription price, or a micro payment for individual stories, that the consumers consider fair and easy to access. The newspaper companies then have to build a substantial local and international online subscriber base using the low cost internet distribution to create a viable business model.

Only one in 300 people in the US buy a WSJ each day and one in 240 buys a Financial Review in Australia.

Murdoch has the opportunity to lead the world in bringing quality journalism to the masses and reinvent the newspaper business model.

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