Fairfax Media focuses on subscription business as source of revenue
Fairfax Media is turning to a subscriptions business as the media company looks to new revenue models following the decline in the print industry which has seen print publication circulation tumble, taking with it print advertising revenue.
Speaking at the Publish conference Fairfax CEO Greg Hywood stressed the company was in “really good shape” after severe cost cutting over the past three years, adding: “It’s not conventional wisdom that it’s in good shape, but it is in really great shape.”
He said there had been a transformation in the business with changes in revenue streams, with subscriptions now making up around 50 per cent of revenue, stressing the company was now “debt free” after being $1bn in the red two years ago.
“If you look at the metro business now, when I first started the breakdown in revenue was 85 per cent advertising, 15 per cent subscription,” he said.
“Now it’s closer to 50:50. What you’re saying is there is a focus around building a subscription business.”
He pointed to the company clearing out its unprofitable circulations, adding whilst circulation had gone down by a third, the prive of subscriptions had gone up 50 per cent, “and we had our first rise in subscription revenues in ten years” as a result.
Hywood said the opportunities of a subscriptions business are “enormous”.
“You’re selling print subscriptions, you’re selling digital news subscriptions, we’ve done a joint-venture with Nine around streaming video-on-demand, we can bundle those subscriptions.
“We can bundle all sorts of subscriptions into that package and then you build a very strong subscriptions business over time, that becomes a real focus,” he said.
On the subscriptions model Hywood said it is important to get the pricing right, bundling content together and to keep churn down “because people do churn”.
On the Stan investment, Hywood told the audience Fairfax Media had invested $50m “real dollars” in the business.
“There’s plenty of capacity for us to support that business quite apart from its normal marketing budget,” Hywood said.
“This is another element, media companies, particularly of our scale and size, have the ability to get behind a business like this and run it hard.”
For how the joint-venture benefits Fairfax, Hywood said it is the ability to build a subscriptions business.
“For Nine it’s access to our subscriber base, for us it’s the ability to bundle and build a subscriptions business. It’s also the fact that this is a good space,” he said.
When quizzed on fears around the launch of Netflix locally, which yesterday formally announced plans to launch down under in March 2015 , Hywood said he does not expect Netflix to take a monopoly of the market.
“It’s a big market. I don’t think anyone would expect there to be a monopoly in this market,” he said.
“There will be content differentiation and certainly our focus on local Australian content is a differentiator.”
When asked on how he responds to claims he has talked down the value of print and damaged the local industry, Hywood described the criticisms as “bizarre”.
“I had no idea that I was that powerful that with a few comments I could bring down the whole print industry. It’s bizarre,” he said.
“60 to 70 per cent of the audience comes into our business in digital means, we have to meet the demands of that audience. We are committed to print for as long as it is a strong and positive cash flow for the business. We are not about making losses.
“The integrated publishing business that we now have, there’s a print component, digital platforms and different revenue streams, we are very confident that is a long term sustainable business with multi-platform components.”
Addressing why print and digital content are differentiated with more celebrity content online, Hywood said each platform has a differentiated audience with different needs, with the extra celebrity content responding to its audiences “multi-faceted interests”.
“In terms of the websites and the differentiated content well yes, each platform has a differentiated audience with differentiated needs,” he said.
“20 per cent of the print audience use the digital platform and it’s a slightly older demographic, so you do adjust the content and the fact that there is celebrity content goes to the fact that people have multi-faceted interests.”
On Fairfax’s focus to claim number one Nielsen online rankings and suggestions a skew to more celebrity content online interpreted as an attempt to claim that top ranking, Hwyood quipped “Everyone likes to win, why wouldn’t you win if you could win?
“It’s a very important motivating force.”
Miranda Ward
Miranda Ward worked for Mumbrella from 2013 to 2017, eventually becoming deputy editor. Miranda joined Mumbrella in September 2013 from Sky News.
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Interesting… Especially in light of my “quite high” consumption of SMH content in the last week without hitting a subscribe message… Did they forget to turn the paywall back on after the bush fires last week?
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then they’re in big trouble – their subs service is shocking.
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Rubbish. The subscription share is up because the ad share has collapsed. There is zero evidence of profit growth. In fact his reference to revenue growth in events typical hywood spin. They already had most of that revenue and the margin on events is tiny.
When property advertising finally goes Fairfax will struggle to pay Hywood’s salary. Even if he is the last on the payroll.
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I’ve always backed Fairfax, but the handling of my subscription is just downright terrible. In many ways its like they don’t want my business, odd.
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the service level on the subs is well below where it needs to be for the $25pm price point. The price and service feel like they are based on entitlement not market reality.
Personally I feel that as a price is too high and will need to drop 50-75% to be mass. Costs me $25 pm just to read Fairfax content but I can pay Netflix $10 pm and basically get all the filmed content in the world.
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Why would anyone pay to read the SMH or The Age when you can read Socialist Weekly for free? Same content.
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Dear Mr Hywood – The only winners are Google and Facebook.
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It’s pretty amazing that the SMH is no.1 in the news website rankings, despite the paywall (even if it is somewhat porous). If I were Fairfax I’d be pushing that win a lot more and reminding advertisers and readers that they are at the top.
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You took the words out of my mouth @ Undertone. ANd if Fairfax really believes that subscription revenue will save them, then they are in dire straights. Print Subscription revenue is falling – no question. Digital Subscription revenue is tiny by comparison and growth has slowed to a trickle. Let’s hope Hywood has another trick up his sleeve. Fairfax’ bottom line and debt position has certainly improved in the last couple of years — but that’s been driven entirely by radical cost cutting and asset sales (to which there is a limit), not by revenue growth. And to argue that tAustralia is a “big market” that can sustain multiple streaming video players is nuts. Australia is a tiny market – it will support one and possibly two streaming video businesses, no more.
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50 million down the drain with Steven. Oh wait, I mean Stan.
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Greg Hywood is totally delusional. It was an incredibly difficult and frustrating process just to subscribe to the print SMH, it didn’t arrive even when I received an email saying my subscription had been processed and credit card charged.
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Similar story for me Vortex09, but it’s longer and less entertaining read. Last straw was when the paper didn’t arrive and I sent them a message. I didn’t get a reply, but did get a “how do you rate our service from 0-10” email. Don’t know why they bother with all those numbers above 0.
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There is nothing wrong with subscription sales for news publishers. But the content mush be quality, not just said to be quality and the subscriber must believe they are important and getting value for their money. Given the Fairfax track record of the past three decades of declining quality it would seem Hywood is living in a dream world of his own making.
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Hywood says his subscriptions opportunity is “enormous”. So why is his pricing strategy so flaccid? He suggests that the Fairfax rich is a bundling opportunity. Earth to Hywood: have a closer look at your web demographics.
By the way: your brands are all sick because the products are unwell.
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