Fairfax ‘could drop newsprint’ when broadband rolls out
One way for Fairfax to raise its profits could be to eventually stop printing its newspapers and transition readers to a paid online model, says broker Merrill Lynch.
The comments come in an analysis of the newspaper sector reported, ironically, in Fairfax’s Sydney Morning Herald today.
The analysis looking at the effects of the planned national broadband network on publishers, says that costs would fall by 45% if Fairfax drops its print editions and that it would need to persuade readers to pay $12.50 a month to receive its output online. As well as the SMH, Fairfax owns The Age in Melbourne.
According to Merrill Lynch, Fairfax – with the strongest mastheads – would have the best chance at making such a strategy work while West Australian Newspapers, now controlled by Kerry Stokes, is worst positioned.
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Huh, they needed an analyst to tell them the facts that are staring them in the face? They don’t need a crystal ball for this one, a rearview mirror would provide enough!
Oh, and small typo Tim – newpapers, but maybe it was your subtle message – new papers??
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“it would need to persuade readers to pay $12.50 a month to receive its output online.”
How does that work?
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…and so it begins
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Thanks, Annette typo corrected. Never wrong for long is my (borrowed) motto…
It’ll be a bit of a stretch to ask Sydneysiders to pay 12.50 / month. They’ve treated their online audience like children for ages and I’d say that they’ve a lot of goodwill to recover before they can start charging for the celebrity shite, reposted internet memes and lifestyle/ sport gumf they’ve served up to now.
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The recent PWC report (“Moving into multiple business models”) suggests that people *might* pay for online content, but with an important caveat:
“Free content is abundant online and consumers would choose free content when the quality was comparable or sufficient for their purpose”
So you’d have to ask – just how unique is the SMH and Age content when all other sources of news, sport, entertainment and business are taken into account?
WSJ.com currently offers subscriptions for US$1.99 per week (about A$2.50 per week). Makes $12.50 a month seem a bit ‘exxie’ …
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SMH is lucky that i read their stuff for free – and even then, its only just hanging in there.
In between the increasingly tabloid editorial, the controversial offensive extremists like Miranda, and the intrusive advertisements that they can’t even sell at full ratecard listing, fairfax is lucky to keep its readers.
The hardest question is do i spend a buck and a bit on a paper or a share? Yeah, neither – they’re going nowhere without a big change, which they won’t be able to pull off.
Oh, and if you think charging is going to work, you have absolutely no clue. But hey, we know that already from all the cash you pumped into F2 😛
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Good luck fairfax. You have no chance.
No newspaper has succesfuly moved into a pure online model from a print model. Web traffic decreases enormously. Loosing the branding that a print mastheead gives an online product is incalculable.
Fairfax must then provide readers with something that they are unable to find elsewhere and is valuable enough to pay for.
That would mean unique editorial. Naturally as a news organisation Fairfax covers things that no one else will cover and provide for free? Oops. My fault. Every other media will provide it for free so maybe Fairfax will do it BETTER.
But of course they won’t. Their journalistic ranks have been decimated. They have no product that people are willing to pay for. After all, the AFR is a walled garden. last I heard they had 6,000 or so paying online subscribers. The AFR couldn’t exist as an online model so why on earth could the SMAGE? It’s even less specialised.
Bottom line. Whatever the SMAGE want to do in new media the ABC will do equally professionally and with even better resources.
This rubbish is so typical of an analyst who obviously has no real publishing experience. LOL Bankers.
Look at the great job they are doing over at CMH……
Fairfax must make the SMAGE work without the net or end up trading in an unprofitable print business for an unprofitable online business.
Someone from Fairfax willing tell me how wrong I am?
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Yes, Carrob, your “comments” are little more than a rant. Frustrated journalist much?
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No Peter.
Succesful publisher that once worked at Fairfax. It’s not a rant as much as a statement of facts. Perhaps you could show me using some of that smug fairfax superiority (which is kinda like that Channel 9 superiority, which I see is working out for them REAL well at the moment), exactly what the plan at Fairfax is?
The operating margins on the SMAGE are a “couple of percent”. And you’re going to lose at least another 20% of your classified advertising next year. That makes the mastheads unprofitable. Faced with decreased revenue you will be forced to cut costs further, but that is not a limitless exercise.
I am just a smart guy who understand the media business. And the SMAGE is not something I would invest YOUR money in.
But the delicious irony of all this is the head in the sand attitude of the people who work at Fairfax. When this thing falls over (and it will), it’s going to be catastrophic.
News is better placed. Basically because they have traditionally had 2/10 of bugger all of Fairfax’s classified advertising marketshare per masthead. On aggregate News may have more classified advertising but it’s spread over many titles and they have been forced to build a more efficient publishing model that is less reliant on classified advertising per title.
Fairfax on the other hand has had the rivers of gold and the internet is going to kill it. What people fail to take into account is that a successful classified advertising business needs lots of other classifieds around it. The decline of classifieds is not linear. It’s simple. I place my classified because there are loads of other classifieds around it and ipso facto there must be lots of buyers reading it. Once you reach the tipping point almost all will go at once. I don’t think Fairfax is too far from that point. In fact, the only classified advertising that is saving them is vendor paid advertising. And that is an entirely different kettle of fish. Vendor paid advertising allows your friendly local real estate agent/recruitment agent to place large ads using their client’s money. There is an enormous amount of wastage in those ads, as their primary purpose is not to sell a house/fill a job. It is to promote the Real Estate or recruitment company. And consumers are wising up to it. Think about it. Why do most houses in Sydney get sold by auction? Becasue by LAW you have to pay for the advertising of the property in advance. It’s a sweet deal for the agents!
Anyway like I said. My comments are not a rant as much my way of explaining to the simple folk like “Media Analysts” at investment banks just how they are living in delusion land.
But please Peter. Explain to me how I am wrong and how this strategy will work?
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Fairfax! Don’t lose your standing as the largest “handheld” data provider.Otherwise it would mean no more mornings in the sun, toast in hand, a cappuccino, and my favourite boardsheet spreadout before me. It’s always been my respite from technological gadgetry.
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Carrob
I guess I wouldn’t describe myself as a “smart guy” so I hope you’ll just bear with me here…
Maybe I’m missing something, but I didn’t see this report as having been written by Fairfax…it’s an analyst report. And I think they were talking about 10 years down the road. Who the hell knows what anything to do with media will look like then.
I don’t know of anyone at Fairfax who believes people will pay for news content online (except maybe the folks at AFR, but that’s another story). And I think everyone also agrees that the newspapers need to survive, even if they are in a different form, which I think is likely.
But I am somewhat mystified by the vilification directed at the Fairfax websites – they attract the biggest audiences and continue to grow traffic, they have the longest time on site and pretty much everything you get in the paper you can get online (in addition to all the tabloid stuff that people seem to freak out about). It’s fair to question the business model of free content, but from a consumer perspective, what’s the problem?
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M,
Understand what you are saying, but my scarcasm is directed (in equal parts) to investment bank analysts who write these reports and Fairfax managers who believe in them.
I am not villifying Fairfax’s websites. The fairfax websites are OK. I don’t hate them. They are about as good as most other newspaper websites worldwide. In an Australian context they are very good. I am simply saying that as of yet, no Newspaper that has closed has managed to hold on to their online audience as the print edition closes.
I am not some online evangalist or rabid newspaper lover. I am, at heart a publisher. And as a publisher I can only see a broken publishing model with the SMAGE. I would love to see Fairfax adjust to the new reality of newspaper publishing but fear that this is unlikely to happen in the case of Fairfax.
If a mumbrella reader can come up with an example of a newspaper that has managed to grow it’s audience share when the print edition closed I would like to hear of it. My point is that the online brand benefits enormously from the offline brands presence. It’s the newsagency marketing, it’s seeing other people reading it. It’s the logos that are everywhere. The effect that these offline activitie have on the online brand that helps it’s growth. If you were to pay for this sort of promotion for an online brand only you would probably come up with a value of (say) up to $100M a year. That income would need to be recouped online.
I cannot do anything but question the ability of a newspaper to hold this audience if the print edition dies.
It will be a tragedy if the fairfax newspapers die. But the only way out for Fairfax that I see is to be able to run the company with at least 20% less print revenue for the business. And for Fairfax I fear that would be a bridge too far.
All that brings about this clutching at straws speculation. Bottom line we live in a world where the amount of content on the net doubles every six months. Online yields will continue to fall in this all supply and no demand scenario. Which is what breeds the tabloid nature of the faifax websites in relation to their more staid and measured print editions. So people look at other revenue streams, such as charging for online content. Which we all seem to agree that at present there is no value proposition for that.
Which leads me back to my original point. In a world of rich online media Fairfax are not providing the sort of rich, online content that consumers MAY pay for.
And if it’s news? The ABC will do it better. For free.
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The only way paying online for news is going to work is if all the media companies do it at the same time.
The question is HOW?
Surely News Ltd wants to make money online as badly as Fairfax, but both are scared that the second they start charging everyone will just go to the free online paper in their market.
Then even if you get the big media outlets to be on the same page and charging similar rates at the same time, you still have all the small start ups that would compete.
I don’t think anyone has figured out a business model here that will work.
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And of course, even if the major publishers got together to do that (one subs passport that does for multiple sites?) that would look dangerously like a cartel and attract the attention of regulators.
With newspaper profits dropping rapidly, it’s no surprise publishers are looking for alternatives. However I don’t think online paid subscriptions are the way to go. I agree with the previous posts – why would people pay to get information when they can go to another online source and get exactly the same news for free.
I’m standing up for the print media on this one. In my opinion, a society without newspapers is simply wrong. Fairfax and the other major publishers should be doing all they can to revive public interest in reading newspapers – not just speculating to throw in the towel because profits have slumped.
On the other hand, perhaps it’s time that the government stepped in on this one to prevent newspapers sliding into oblivion. The French government put forward the scheme to offer free newspaper subscriptions to everyone who turns 18 years old. Maybe the Australian government should look into a similar scheme which would revive the newspaper industry and prevent publishers from packing up shop and running to the internet ?
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The Government is never going to subsidise newspapers, Gemma, and why?
Because the Government hates newspapers. Newspapers hold Governments to account more than any other news source. They have the space to do the in-depth reporting that makes Governments look bad.
Those in power are crying crocodile tears over newspapers. Once they’re gone, pollies will have much more of a free kick all round.
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