Digital disruption of traditional ‘rivers of gold’

Published on
July 5, 2012

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The potential advertising revenues from digital media represent untapped ‘rivers of gold’ for Australian media organisations but the challenge is getting those rivers flowing.

Last month, both News Limited and Fairfax announced major organisational restructures as they attempt to come to grips with this digital revolution.

The challenge ahead of Australia’s newspaper giants is probably best summed up by New York Times research quoted in The Australian. Before New York Times erected its paywall, hard copy readers of the newspaper generated around $800 each in advertising revenue. Compare this to digital readers who only generated $3.85. For News Limited, every dollar generated by a print reader, equates to only 18c per digital reader.

If newspapers are to continue as we know them, digital users will have to start paying their way. Fairfax figures show more than three quarters of their readership access their newspapers online. While the Australian Financial Review currently charges for access, the popular Sydney Morning Herald and The Age sites are free to a digital readership in excess of five million.

At the moment the rivers of gold aren’t even trickling. Sure it’s a great thing to be the most popular news site in Australia, but newspapers are a business and the question confronting the industry at the moment is how to monetise their huge readerships.

This struggle with monetisation has contributed to a collapse in advertising revenue; the consequences of which are being felt by Fairfax staff, 1900 of whom will lose their jobs in the coming months. Print readers will also see the Sydney Morning Herald and The Age shift from broadsheets to tabloids.

So what are the approaches to monetisation:

1. The metered approach
Under a metered approach, readers can access an overview for free, but they are charged for a deeper level of content. This approach, currently being considered by Fairfax, targets highly engaged readers who are theoretically willing to pay for deeper content.

2. Subscription
News Limited has already gone down the subscription path with The Australian and The Herald Sun with other News mastheads expected to follow. For a weekly access fee of just under $4, The Australian readers can access the full digital edition. Melbourne’s Herald-Sun subscription model harnesses the paper’s popularity among AFL fans, with much of its extensive AFL coverage located behind a paywall.

3. Micro-charging
The micro-charging approach requires users to set up an account. They are then charged a fee of a few cents for every story they read. The early attraction of this approach diminished as media outlets quickly realised it favoured extensive coverage of One Direction at the expense of coverage of the growth of democracy in the Middle East.

So does all this sound the death knell of newsprint?

News Limited doesn’t think do. They sell 11 million newspapers a week in Australia and Rupert Murdoch believes in the strength of newspapers. He did, after all, get his start with ink and paper. The media baron says they still set the daily agenda for all media and they are a crucial part of multi-platform publication, provided readers pay.

Settling on the best method of making users pay is the challenge. Is it subscription, the metered approach or micro-charging?

Time will tell.