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.”