Guest post: If the content is good enough, people will pay

News Digital Media’s Richard Freudenstein today gave Sydney’s Advertising & Marketing Summit his vision for the future direction of the industry. In this extract from his speech, he discusses the future of content.

I’d like to talk a little bit about the future of journalism online, and then charging for content.  

Richard Freudenstein NDMAs the world turns digital, almost every industry has been affected.

The internet has opened up incredible opportunities for businesses, but it has also brought significant challenges.

Content creators – including newspapers, magazines, online, TV and radio – have had to watch as others replicate their content, often negating the need to visit the original site.

More often than not, these bloggers and third party sites then sell advertising on their sites, thus making money from content without investing in its creation or reimbursing those who did create it.

I’ve heard the argument that these sites pay their dues by linking to the original source, but the reality is that the very aim of these sites is to aggregate enough content from different sources so that people don’t need to visit the original site.

There’s no doubt that the best way for traditional publishers to compete is to be even better at producing unique and compelling newspapers, magazines, websites, mobile sites or any other platform.

But contrary to what you might think, we think it is great that anyone can start a website and get involved.

In principal, we think blogs are a great idea – in fact many of our journalists have them. And we are delighted by the success of The Punch.

The problem is that even the best intentioned amateur blogger doesn’t hold the same standards of accuracy or accountability as a professional journalist.

Many bloggers write up rumours and half-truths as fact, confident that there will be no repercussions if they get it wrong.

Inevitably these inaccuracies quickly spread and you get a situation like we had the last month, when huge numbers of people believed a rumour started on Twitter.

Let me play you a short video…

The Colbert Report Mon – Thurs 11:30pm / 10:30c
Jeff Goldblum Will Be Missed
www.colbertnation.com
Colbert Report Full Episodes Political Humor Jeff Goldblum

My point here is that, whilst there most definitely is a place for alternative media and commentary, we have to protect and support quality journalism.

Because, when a big news story breaks we inevitably turn to the traditional news brands.

If a massive story broke, right now – another 9/11 or Victorian Bushfire… what would you do?

My guess is you’d do one of three things – go to a world-class news website, turn on the TV or turn on the radio.

And when you wake up tomorrow, when you want a thorough rundown of the day’s events, with insight, context and educated opinion?

My guess is you’d return to a world class newspaper – be it in print or online.

Of course you’d also check Twitter, discuss events with your friends on Facebook or MySpace, and check your favourite blogs to see what was being said.

But when it comes down to it, people want the news, and they want news they can trust.

The problem is that such news is very expensive to create.

Here in Australia, most of the expense of investigative journalism, insight and educated commentary has been borne by the newspaper industry.

Almost inevitably, the biggest domestic stories are broken in newspapers, with TV and radio reduced to reporting on what the newspapers are reporting.

But online advertising revenues simply aren’t making up for what may be lost from newspapers. Something has to change.

Which brings me onto my final topic – charging for content.

Right now, this is probably the issue I get asked about most.

It has become a topic of conversation at BBQ’s and dinner parties, even for people not in the industry.

Friends, family, and even people who I’ve just met, they all want to know the answer to three questions –

  • One – when is News going to start charging for content?
  • Two – how much are we going to charge? and
  • Three – do we really think anyone is going to pay for it?

Well, these are the biggest questions facing most large publishers around the world right now.

The problem is that the traditional advertiser-supported model is not enough, by itself, to pay for the level of investment in journalism that society needs.

So to make up the difference we have to look at charging for content.

The question is having been given it for free, will people now pay for online news content?

The first thing to remember is that people happily pay for news every day.

Indeed nearly 19 million newspapers are bought in Australia every week.

So clearly there is a healthy market for news.

Encouragingly, a recent report by PriceWaterhouseCoopers found that two-thirds of readers across the six countries surveyed are willing to pay for general online news content.

But of course, they are only going to pay if the content is of value to them – that is, it’s relevant, compelling and unique.

This is what News is looking at right now. And if anyone can get it right, we will.

After all the Wall Street Journal is the only newspaper in the world to successfully find the balance between free and paid content with over one million paid subscribers online.

So, we’re spending a lot of time looking at our newspaper content and the paid digital model.

We’re looking at every part of our portfolio and doing a good deal of consumer research in different countries,

Assessing how many people are likely to pay and how much they would be willing to pay.

And then we’ve got to work out the best method of delivering that content to them across multiple platforms.

As you can imagine this is a complex challenge.

I’m part of a global steering committee which is leading groups in New York, London and Sydney.

The guidelines are to be bold and come up with industry changing ideas and products.

We’re encouraged by developments in other mediums.

Subscription TV is a great example of customers willing to pay for a service when it has more compelling content and delivers it using better technology than the free alternative.

Pay TV is in more than 90% of homes in the US, over half of homes in the UK and around a third of homes in Australia.

In each of those markets at some stage all television was free and in each of those markets the common wisdom at the launch of pay TV was that it would fail.

Online video is another example.

As you probably know, Hulu is going gangbusters in the States – inventory is sold out and in many cases is selling for a higher rate than traditional TV.

But even its success and that of other free sites like YouTube is set to be eclipsed by the rise of paid video content – that is downloads, digital rentals and subscription services.

A recent report in the United States found that this year paid online video revenue – which includes services such as Netflix WatchNow and Xbox Live Video Store – is set to overtake free and advertiser supported video for the first time.

So the opportunity is there – people will pay if they are given good reason to do so.

You have to make the content compelling and then package it and market it in a way that is relevant to the individual.

We’ve done a lot of work in assessing the value of our newspaper content and the best way to deliver it online, but there’s a lot more to do.

Certainly nothing is imminent here in Australia, but when it happens it will be big.

We will be platform agnostic – content is king and we want to be providing content for whatever platform is out there, provided the terms are fair for us.

That includes your computer, your TV set, your mobile, and any of the myriad of portable devices that are coming in the not too distant future.

We don’t have any intention of building e-readers ourselves, but we are in close contact with the key manufacturers

The really interesting e-readers are probably a couple of years away but the potential is enormous.

Imagine a high-definition full colour e-reader, containing all your favourite newspapers and magazines from around the world, not only managing your subscriptions, but also making recommendations for other content you might be interested in.

It will deliver high definition ads,

Which, when touched, will run a video, give detailed product information, download a brochure, or run a price comparison across local retailers.

An exciting proposition, I’m sure you’ll agree.

Indeed, uppermost in our minds is that whatever the platform is, it must work effectively for not only our readers, but also for you – our agencies and advertisers.

We’re confident that the combination of print, online, mobile and e-reader presents a terrific opportunity for advertisers.

We’ll have a large, highly engaged opt-in audience,

Who are open to advertising messages,

And with their permission, we’ll have their full registration details – location and demographic details,

We’ll know their consumption habits,

And we’ll be able to target them across multiple platforms.

Talking about a product that is as exciting to publishers as it is to advertisers is, I think, probably a good place to finish.

I returned to Australia and joined NDM three years ago. In that time, I’ve been privileged to at the centre of the unprecedented growth of online.

The digital economy has exploded – reaching a mass audience far quicker than TV, radio or newspapers ever did.

I’m confident that this growth will continue and with it will come opportunities for marketers that would have been unimaginable just a few years ago.

  • Richard Freudenstein is the CEO of News Digital Media. Prior to returning to Australia he was chief operating officer of subscription TV operator British Sky Broadcasting

Comments


  1. Nathan Bush
    29 Jul 09
    11:14 am

  2. Full marks to Richard for explaining how News intends to convert into paid subscribers – it’s much more than those who have come out and said it will be paid for but not detailed why. However, there’s a fair way to go in terms of quality of news before it is worth paying for (and I’m not talking about the format). PR releases regurgitated and recycled reality TV stories won’t cut it for paid news. But lets start at spelling headlines right OK… http://xrl.in/2sjd

  3. Gordon Whitehead
    29 Jul 09
    11:49 am

  4. Richard just do it!

    But I’d like to ask – If they want to charge for content will the big media players pay for content and news they source from other internet site or doesn’t that count?

  5. Bruce
    29 Jul 09
    11:56 am

  6. It’s ridiculous to point the finger at twitter over the Jeff Goldblum death report.

    The whole story never would have gotten legs if Channel 9 hadn’t broadcast it, and people following twitter that morning already knew it was a hoax before Channel 9 showed their silly video montage.

  7. Nick Dalla Riva
    29 Jul 09
    11:57 am

  8. Look, its pretty bloody obvious what to do. Stop thinking about newsPAPERS and start thinking about news STORIES. You are all so hung up with the paper part, get over it!

    Yes your content needs to be high quality. But people have until recently, largely assumed that the accuracy and integrity of major news media already exists. So there is no additional quality benefits to readers.

    So here is he deal. (Can’t believe I am giving this away for free!)

    Its the long tail model Apple have brought to itunes. I mean seriously. Lets say the newspaper has 100 stories. Today I pay $2 for that. But I only read 10 stories and glance over the rest of it. (I just paid 20cents a story distributed buy a Newspaper) But the cost of creating the stories is variable based on the complexity, the size of the market. But, in the internet world the costs of distribution scale dimish rapidly.

    The answer, let people buy news stories and investigated stories. The journalists have a career path and the users can buy what they want. There is a funding model that says $0.15c per story (cheaper than a newspaper, but with greater margins and distribution scale) and $0.47cents for investigations and $1 for black saturday – ongong story rights etc.

    The advertisers get highly target audiences as well as run of network.
    Then the News media set up micorpayments services and start taking a small percentage there too.

    Step 1 – Stop thinking about mass newspaper distribution strategies and start thinking about mass story distribution strategies.

    Step 2 – Deliver on the above model and enjoy yhre financial success.

    Step 3 – Start to drive additoinal revenue models. Pay for back stories, pay for printed editions, create a news story for your 60th birthday blah blah.

    All the best
    Nick

  9. Bruce
    29 Jul 09
    11:59 am

  10. “the level of investment in journalism that society needs”

    That whole phrase is loaded… I wonder what that level would be and if the CEO of a large, expensive news organisation is the best person to judge.

  11. Jenene Freer
    29 Jul 09
    12:05 pm

  12. So many comments to make, but might hold myself back.

    One I have to make…..nice to see News Digital valuing their content. Will this go as far as to see them stop dropping their pants on the CPM’s? Or was that just an “end of financial year” thing? ;0)

  13. Nick Dalla Riva
    29 Jul 09
    12:20 pm

  14. Actually let me add.

    Of course if the content is good enough people will pay. But what price! Sell stories at $0.01 cent if you have to and then stop generating the crap that doesn’t sell. Every journalist will have a brand power, every story a value and the two will come together in a variable price model. But for now make it easy to buy (micropayments) and make it easy to store and access.

    Actually, imagine the potential impact on the quality of search results for Google. Now theres something to think about. !

  15. Rino Breebaart
    29 Jul 09
    12:24 pm

  16. The change to a paid content model is coming. It is inevitable, necessary, because free content isn’t sustainable: it reduces everything to the blog level. But it won’t happen until making small payments, and making them very easily, is facilitated by the paypals of the world. Payment fees need to be negligible for the provider, or scaleable/subscription-based. Once that’s sorted, users will be happy to pay a small fee for great content. And great content will be rewarded again.

  17. Campbell
    29 Jul 09
    12:25 pm

  18. Agree with Nathan. Yesterday’s Herald Sun had about six pages of Dancing With The Stars plugs. Last week was All MasterChef, All The Time. Like the shows, but won’t pay to read PR releases. Perhaps the Wall Street Journal model works because they don’t do that?

  19. carrob
    29 Jul 09
    12:40 pm

  20. WSJ works becuase it’s is niche and finance centric. In many ways the WSJ could be considered a trade publication. People in stiped shirts that drive jaguars need it. In much the same way that (say) a doctor or pharmacist will pay for their industry information.

    News, on the other hand is ubiquitous. And anything that ANY commercial organisation does will be done for free by the ABC. People won’t pay for News Ltd’s view of the victorian bushfires. They will go to the ABC. It will be well produced, come form a trusted brand, and be deliverable across multiple platforms becuase they are producing video. And at the end of the day, everything is moving to video, and this is not the domain of a newspaper hack. It’s a skill they can learn over time. Granted.

    The itunes model is not realistic either. Unless ALL commercial organisations got together globally and created the one interface. Apple may have the power to do this, but that’s about it.

    People WILL pay for compelling content. The itunes model proves it. But what they are paying for is not and never will be news.

  21. Adam
    29 Jul 09
    12:50 pm

  22. If content is available to me but for a cost on one publishers website / email / magazine / newspaper etc, however it is available elsewhere for free I will simply go to the area where it is free… why wouldnt you?

    Now, if through time I am unable to read decent, trustworthy, informative journalism for free, then I will have to start paying for it…

    The internet is currently free to use, minus the broadband fee.

    Should individual publishers charge for their sites or will a cable tv style model emerge for the net? Look at the Fox TV model. Could this exist for the internet? Could it be combined with the internet? Cable Tv and access to broadband can surely all be delivered together…?

    Something along the lines of:

    Bronze package:
    $60 a month
    Major domestic news websites
    Classified models (realestate, Drive…)
    Search engines
    Social media Australia only (Facebook and Twitter Australia.)
    Australia only internet search

    Silver:
    $80 a month
    As for Bronze plus:
    Social media sites Aus, US, Europe networks
    International news sites (BBC, CNN)
    Business sites, such as Mumbrella ;)
    Educational sites
    Wikipedia
    Youtube standard
    Australia / US / Europe internet search

    Gold:
    $120 dollars a month
    As above
    Youtube Premium
    Cable TV
    Social media worldwide
    Worldwide internet search

    Add ons:
    Adult
    Gambling
    Mainstream Sport (EPL, NBL, Cricket, Rugby, NBA)

    Rather than individual publishers charging for content will we see subscriptions to the internet based on access to certain networks / regions?

  23. Nick Dalla Riva
    29 Jul 09
    12:53 pm

  24. Carrob.
    Fairly put.
    But aren’t people paying for news today? In factm, subscribing to News today?

    In advance ! ( A model where I take you money today, and p[rovide the service inthe future, the best model!)

    I recall going to the shop and paying for the newspaper this morning?
    Why is that going to change, exactly?

    Nick

  25. carrob
    29 Jul 09
    1:25 pm

  26. @Nick. Understand what you are saying, but we are talking about web content here. There is a tangible feeling that accompanies a purchase at a newsagency when you buy a paper. It’s YOURS. That doesn’t translate to online where the feeling is more ephemeral about the information that you absorb. Even if it is the same information as a newspaper. And no. The irony is not lost on me:-)

    So to answer your question as to what will change. The number of people buying newspapers will decrease over time as peoples news consumption habits change. It’s a cultural change between age groups as well as a technological change. Thenumber of peole paying for newspapers today is less than yesterday and will be less again tomorrow. This equates to a broken/soon to be broken business model. A small percentage of people will continue to buy newspapers but eventually this will become a loss leading part of the business for the newspapers as we know them. They will stick around in the retail channel for a long time to come because newsagencys are a great marketing vehicle. The ambient advertising for your online brands that the newspaper distribution channel provides is invaluable to publishers and is something that they will not be willing to let go of lightly. They will keep doing it until the marketing value is less than the losses incurred on the dead tree product. That is some time away yet. When that day arrives you simply won’t be able to go into a newsagency and purchase a paper.

    Newspapers realise this and they want to get on the font foot by trying to make some money out of this internet mularkey. It can be done, but it requires a different form of journalism.

    That journalism is more meaningful and investigative. There’s too much content out there at the moment, and the internet doubles in size every six months. So the need that is coming through is one of editorship. I will pay, not for the news, but what’s happening BEHIND the news.

    That sort of content is valuable, and as everyone has pointed out, that is not the sort of information that news ltd is actually any good at producing. Basically, the copy that these newsrooms produce at the moment is simply not of good enough quality for hiding behind a pay wall. It is press release driven and starved of editorial funding. Tabloid journalism is a numbers game. The more hysterical and the more common your appeal the more people buy your product. That is the antithesis of where the internet is heading.

    It’s chicken and egg stuff, because news have to firstly convince us that they have content worth paying for before they will get consumers paying for it.

    And don’t even get me started on how advertisers online are not prepared to pay a reasonable amount for the right online reader……..

    Sorry. Rant over.

  27. Ben Shepherd
    29 Jul 09
    1:41 pm

  28. Don’t people already pay for content online … ISPs bill customers every month. Costs me around $79 a month.

    I reckon most of the population are of the belief they are actually paying for content online …

  29. Tamzin
    29 Jul 09
    1:44 pm

  30. To Nick – on certain mobile portals in Australia, customers already are charged on a ‘per story’ basis. I am afraid there is nothing new there. Customers also have the option to go ‘off-deck’ and get their news for ‘free’. In the end, as was outlined in the article, relevancy and the way the content is marketed will drive usage. If it’s made easy to use and compelling, people are still happy to pay for content.

  31. Inky
    29 Jul 09
    4:09 pm

  32. Having just looked though both of Melbourne’s daily papers (Tuesday’s), I am at a loss to understand what it is, exactly, that a consumer might consider worth purchasing in online form. The daily snoozathon on the opinion page of the Age? The Herald Sun’s latest, breathless recapping of the previous evening’s TV gameshows or the daily full pages devoted to cute doggies, horsies, polar bears or pussycats? Isn’t this fishwrap content the reason newspaper circulations are declining and advertisers deserting them? Are consumers are going to pay for this stuff? I think not — not now, not ever. The New York Times tried charging for access to op-ed content, but neither brand nor byline produced any worthwhile income. The only organisation likely to endorse News’ paid-content push would be Fairfax, which would see its UBs increase exponentially.

    Fraudenstein can talk a good game now, as it is exactly what Rupert wants to hear. But I doubt he will be standing so tall after a month or two of such an experiment.

  33. The J
    29 Jul 09
    4:35 pm

  34. Consumers have all the power.

    Publishers rely so heavily on advertising revnue, if they were to make people pay when they can still get content elsewhere, they would loose traffic… no traffic means no one to advertise to. Without anyone to advertise to there’s no advertisers and no advertises equals no revenue…

    Unless the move was industry wide and people had no option but to get their news from a paid source, then this model will be very short lived.

    JD

  35. John Grono
    29 Jul 09
    5:30 pm

  36. I agree with Nick’s comments. Carrob, when I bought the newspaper with the bushfire coverage I paid. I also went to the ABC (paid for by taxes) as well as the FTA news (paid for by ad dollar), and SkyNews (paid for by my Foxtel subscription) as well as on-line … to sites that were basically offshoots of one of those sources above.

    You comment that tomorrow less people will buy a newspaper than today and it was less than yesterday. I agree with the reading of the market – and that is what concerns me regarding journalism per se. However, may I add the corollary to that statement. The number of people who bought online news content today is the same as yesterday’s and the same as tomorrow’s – none. (Well, virtually none or at least at an unsustainable level). What Freudy is pointing towards is the day when “none” becomes “some” then it becomes “lots” then it becomes “most” then it becomes “all”.

    The trick as someone pointed out is how do you charge for it and recoup the money – PayPal? While it is daunting it is not impossible. I recall earlier in the year when the state government abolished toll booths and made everyone get an ETag. If you wanted to use the Harbour Bridge or a toll road you had to set up an account, deposit some funds into it, hook it up to a bank account so the ETag account could be automatically topped up, and away you go. Conceptually, there is no reason why if we can do this for our highways why can’t we do it for our “information superhighway” (sorry for resurrecting such a ’90s term). All I can say is, please don’t let the RTA get involved!

  37. Adam
    29 Jul 09
    5:38 pm

  38. Google: ‘women becoming more attractive. ‘ (or click on my name…)

    I have found: news.com.au, daily telegraph oz, telegraph uk, times uk, dailymail uk, various other science and news sites. This is an example of a press release being sent out and being picked up by the news sites.

    If news ltd started charging I could still find this article elsewhere. (Unless the content News Ltd were offering was really that good? is it? Can it be?) Based on what they currently blurge out – I wouldnt lose any sleep if they closed down their free sites – I will simply go elsewhere…

  39. inspiredworlds
    29 Jul 09
    5:46 pm

  40. I believe that there is a business model behind people paying for online content. The examples that he raises are quite relevant with subscription tv. Offer readers compelling news and an enhanced experience and they will be prepared to pay.

    Newspapers shouldn’t be offering everything for free like they currently do. They are shooting themselves in the foot. Hence, it can work if they adopt a freemium model – basic news free, premium content paid.

    As Richard rightly puts it, there is a cost of producing the news. However, I disagree with his point of aggregation sites though. They do drive traffic to the original websites. I think the best examples are Digg, Huffington Post, Crickey, etc….

    I blogged about this recently as well http://inspiredworlds.com/2009.....ournalism/

  41. Smithee
    30 Jul 09
    10:11 am

  42. Who remembers the great “register to view” experiment on news sites ? Remember how you had to register (for free) on Fairfax sites to read content ?

    Even when registering only took about 20 seconds and was FREE, it proved a disastrous failure and was abandoned.

    Do these same organisations (the Fairfax/News Ltd duopoly twins) now think they can try this again, but get people to PAY !?

    It ain’t going to happen.

    The only content people will pay for is the absolute highest-quality specialised content. That is the opposite to what News Ltd produces. They specialise in low-quality mass output regurgitated from wire copy and press releases.

    For most of their tabloids they rely on mild titillation and celebrity entertainment news. People will never pay for that because there are so many sites out there run by individuals and fans that obsessively follow that field for free with greater devotion than any journo.

    News Ltd have spent the past five years online chasing themselves downmarket, cutting locally-produced content, using homogenised network copy and relying on infotainment stories for hits.

    Does Freudenstein really belive that any News Ltd publication in Australia – including the Australian – can shift into reverse and start producing exclusive high-quality material that people will buy ?

    While simultaneously cutting costs ?

    And competing with the always-free ABC ?

    It will be very entertaining to watch them try.

  43. Robert Wong
    30 Jul 09
    2:48 pm

  44. For my money Ben Sheperd (above) has it right. Consumers already pay for content though ISP Broadband providers – just like paying for papers or magazines – it’s just in megabytes. Let’s see $69 a month for Broadband is around 5 x $ 7.5 magazines and 30 x $1.5 newspapers a month. That’s alot of content.

    It’s companies like Telstra that should be paying for content to be displayed on their Network – lots of luck. Newspapers and TV stations used to own the medium, now they don’t, and they themselves are are the program content on Telstra and Optus’ mass media channel.

    It’s always been those that own the medium that command the lion share of the revenue – because there are significant barriers to entry and significant deep pockets involved. News Corp can’t win with such low barriers to entry. No wonder News owns a good part of Foxtel’s cable.

  45. John Grono
    30 Jul 09
    7:27 pm

  46. Robert, isn’t expecting the ISP to pick up that tab a little bit like expecting the car dealer to pay for all your petrol? I get your thinking – just not sure of the logic.

Trackbacks/Pingbacks

  1. kindle news updates – end July « Kindle Review – Kindle 2 Review, Books