Dept of Small Numbers: The Guardian’s analysis of Murdoch’s paywall traffic

Posted by Peter Kirwan on 8 December 2010 at 11:04
Tags: Media, News Corp, News International

The Guardian’s analysis of behind-the-paywall traffic at The Times and The Sunday Times, reported exclusively by Press Gazette this morning, offers something new: an assessment of how many subscribers are actually visiting the sites.

The official numbers for pure-play digital subscriptions from Wapping, published in early November, told us something about conversions. Likewise the recently-publicised survey stats from Oliver & Ohlbaum, based on a November survey of newspaper readers, which suggested that 14 per cent of Times newspaper readers had reacted to the paywall (imposed on 2 July) by subscribing in some way.

Conversion rates are important. But so is usage, which acts as a slam-dunk proxy for reader loyalty. Loyalty directly influences renewals. And renewals - rather than expensively-acquired new subscribers - are the secret sauce of any subscription business. Unfortunately, the GNM/Hitwise numbers don’t look encouraging in this respect.

In early November, News International revealed that:

100,000 joint digital/print subscribers. . . have activated their digital accounts to the websites and/or iPad app since launch.

Well, yes. But how many of these cross-media subscribers delved beyond the paywall at thetimes.co.uk and thesundaytimes.co.uk during September?

According to the GNM/Hitwise study, the number was 26,000. However you look at it, these sites don’t seem to have been a hit with devoted users of print and/or iPads. A majority of print subscribers seem to have activated their online sub. . . and not returned to the site.

Perhaps this is predictable. But how much interest have pure-play digital subscribers shown in Wapping’s paywalled sites? These are the punters who should be showing the greatest loyalty, accessing paywalled content on a regular basis.

By the end of September, when the Guardian performed its study, The Times’s paywall had been up and running for three whole months. Judging by the numbers released by News International in early November, The Times and The Sunday Times had been selling, on an averaged monthly basis, around 13,000 micropayment deals (“single copy or pay-as-you-go customers”) plus a similar number of pure-play monthly digital subscriptions across all platforms (web, iPad and Kindle).

Now let’s take these average monthly sales figures and then slice them to fit within the timeframe used by GNM’s researchers. The numbers suggest that The Times and The Sunday Times sold 26,000 pure-play subs (monthly and £1-per-day passes plus Kindles and iPad subs) in July, and the same again in August and then September.

Of course, it would have been ideal for Wapping if all of these subscribers visited the sites at least once during September. On this basis, the maximum number for pure-play behind-the-paywall visitors in September would be 79,000.

This target is toppy: it comes with a few provisos. Some of the £1-a-day punters, for example, will have purchased access twice, or more, during September. We should also subtract a small number of eccentric Kindle-heads and an unknown number of standalone iPad subscribers. (News International didn’t start bundling web access with iPad apps until the second week of October.)

So: at this point, what would you expect thetimes.co.uk and thesundaytimes.co.uk to be doing in terms of pure play (no newspaper subscription) visitors during September? Clearly, 79,000 would be way too much. So how about 60,000 paying punters a month? Or 50,000?

Er, no. According to GNM/Hitwise, during September, thetimes.co.uk and theesundaytimes.co.uk attracted 28,000 punters who had paid for pure-play access.

The numbers suggest the existence of a problem. So far as I can see, there are at least four possible explanations for it:

1) Pure-play customers are churning away from the paywall in large numbers, buying £1/month “introductory” subs and then cancelling their direct debits soon afterward.

2) Subscribers are subscribing, and churn is running at acceptable levels, but users have little reason to return to the paywalled sites. Perhaps their isolation from the rest of the web is causing even committed users to neglect them.  Whisper it who dares: Jeff Jarvis may be right about the power of the link economy. In the long-term, these apparently weak visitor numbers suggest that disappointing renewal rates lie in wait.

3) Perhaps The Times’s iPad app has taken off like a rocket, providing compensatory ballast for poor website numbers in that obfuscatory 2 November press release from Wapping. If this explains September’s poor numbers on the web site, it may also explain why Rupert Murdoch has committed so much resource to The Daily, the iPad-only US news service that News Corp  is expected to launch in Q1 of next year.

4) The data from Hitwise/Experian is incorrect. It’s beyond my pay grade to comment on this possibility. But traffic numbers are always vulnerable to challenge. . .

By contrast with these negative findings from GNM, it’s worth noting the optimism of Jonathan Miller, the much-lauded ex-boss of AOL who now runs News Corp’s digital operations. At a conference last week, Miller suggested that The Times and The Sunday Times are on an “immediate path” to compensate “within months” for the decline in ad sales that followed the imposition of paywalls.

“There’s a transition there that’s tough, which unfortunately means not every company can do it,” Miller said. “We’ll make it, but in all honesty because we can afford to.”

You’d need to be confident to bet against Mr Miller. On the other hand, he may be merely buying time before News International adopts the freemium model of the Wall Street Journal, or the metered model of the Financial Times. Doing so would end Wapping’s self-imposed isolation from the link economy and offer The Times and The Sunday Times a low-cost marketing platform that could better engage potential subscribers.

The numbers from GNM suggest that this might be a sensible route forward for Wapping.

Return of the prodigal: Why advertising will make or break Wapping’s paywall

Posted by Peter Kirwan on 3 November 2010 at 12:43
Tags: Media, News International

There are reasons why business ventures that make an initial fist of it get three years to prove their long-term viability. In the first year, you make mistakes. In the second year, you correct them. In the third year, you get realistic year-on-year comparatives. These tell you whether the business is a keeper or not.

This is a gross simplication, of course. But it’s worth remembering this kind of timeline given the first paywall metrics from The Times. The numbers emerged yesterday, courtesy of a statement (thanks to Paid Content for publishing it; Wapping didn’t) and an interview with James Harding, the editor of The Times, on Radio 4’s Today programme.

The numbers, compiled after 4 months of charging, go like this:

• 100,000 print subscribers have activated “free” (bundled) digital subscriptions.
  From News International’s statement: “In addition to the digital-only subscribers, there are 100,000 joint digital/print subscribers who have activated their digital accounts to the websites and/or iPad app since launch.” (NB: This equates to around 70% of print subscribers.)

• 105,000 “digital products” have been sold.
  The statement again: “Around half of these [ie half of 105,000] are monthly subscribers. These include subscribers to the digital sites as well as subscribers to The Times iPad app and Kindle edition. Many of the rest are either single copy or pay-as-you-go customers.

One intriguing question here is how many of the c.50K pure-play digital subscribers are iPad/Kindle users. News doesn’t say, and the tittle-tattle is variable. Roy Greenslade says “close to” 45,000 subscribe via iPad (although it’s not clear whether this includes freebie trials). At the Indy, Ian Burrell says “somewhere around” 30,000. Beehive City hazards a guess at 20,000.

Another question: among those users who have signed up for 105,000 “digital products”, how many casual day-pass users exist? Again, the tittle-tattle is variable. The FT suggests 35,000 day passes have been sold. The Guardian’s Dan Sabbagh says the number of day pass users (not the same thing) is “roughly… 5,000-10,000”.

A few souls have been brave enough to try to make sense of these numbers from a revenue perspective. At Beehive City, Tim Glanfield projects annualised revenues for Year1 of £4.3m plus around £300,000 annualized from short-term day passes:

Well if for example the Times iPad app at a generous estimate has 20,000 paying subscribers it would be reaping a monthly return of £200,000. If we assumed (again generously) that the there were 20,000 further monthly web subscribers paying £8 a month (£2 a week) they would bringing in another £160,000 a month … so in total from ‘monthly subscribers’ the digital products would be making £360,000 a month.

At the Guardian, Dan Sabbagh adds in some leaked info that’s not part of the News International statement, and halves the guess of £12m in Year 1 revenues he offered up just 15 hours earlier. Here, then, is Sabbagh’s latest effort at triangulation:

iPad + “small number of” Kindle subscribers: 10,000-15,000, say 12,500 paying £120/year. After Apple’s 30% commission, this may = £1,050,000

People paying online #1 (Monthly digital-only subscribers): Sabbagh assumes 37,500 of these, paying £8.66 a month = £3.9m.

People paying online #2 (“Slackers”: day payments): “Let’s assume that there are, in any one month, 5,000 slackers who pay £1 and sign off. Annualise this and you get a slacker base worth only £60,000 a year.”

Add it all up, and Sabbagh projects annualised Year 1 paywall revenue of £5.5m. By this morning, this figure had become the conventional wisdom.

Accordingly, a couple of questions now loom. Assuming industry-standard churn rates (Sky loses 11% of customers each year) can The Times and The Sunday Times continue to add £5m-worth of revenue to existing renewals for the next couple of years? And if the sites can do this, what will be the cost of acquiring those subscribers? (Notably, Adam Tinworth is very sceptical on both counts.)

The second question has been almost entirely absent from the discussion of Wapping’s numbers. It’s this: how effectively can News sell advertising against these subscribers? Greg Hadfield might be a former news editor of the Sunday Times, but he is surely correct to point out that News International now holds “an enviable amount of data” on 200K digital readers:

“For the first time the Times knows who its readers are – if those digital customers stick with the Times for 30 years, imagine how valuable they are over the lifetime of their relationship with the newspaper.”

Of course, these subscribers are only valuable in this sense if you can sell lots of high-priced advertising against them.

So if £12m-£15m in subscription revenues are a possibility during Year 3, the decisive factor in determining the future of Wapping’s paywalls might not be subscriptions at all.

It may turn out to be how successfully News International can emulate FT.com by selling at CPMs that blow free-to-air news sites out of the water.

You can run from the need to sell online display advertising, as several News International executives, including Les Hinton, have done. But Wapping’s paywall numbers suggest that none of us can ultimately hide from the need to fix what’s wrong with it.

Retailers & national newspapers: Too big to fail?

Posted by Peter Kirwan on 11 August 2010 at 12:43
Tags: Associated Newspapers, Daily Mail & General Trust, Media, News International, Trinity Mirror

Is the advertising recovery we’re witnessing as unbalanced as anything that occurred in the City of London during the run-up to 2008?

That’s what I’m starting to wonder. Take DMGT’s Q2 numbers, which disclose that retailers once again outperformed the broad advertising market, increasing their expenditure Associated Newspapers by 19% YOY. Overall, ad revenues at Associated climbed by 15% during Q2.

At Associated, retail is almost certainly the largest vertical sector in terms of ad revenues — bigger than cars, telecoms and IT or financial services. Anecdotal evidence suggests that retailers have become similarly important at Trinity Mirror’s nationals and The Sun.

The slide at the top of this post, taken from a recent presentation by Guy Zitter, the MD of Mail Newspapers, shows that retailers bought roughly £80m-worth of display advertising from The Mail and Mail On Sunday last year. This year, the retailers’ contribution could rise to £100m. This represents a big proportion — perhaps one-third — of the display ad revenue generated by Zitter’s newspapers.

Drill down a little deeper, and you find that almost half of Mail Newspapers’ retail advertising — nearly £40m-worth of it last year — came from supermarkets. Remarkably, the supermarket have more than trebled their expenditure at DMGT during the past five years.

A few obvious questions, then. What is propelling this huge expansion in retail advertising? Food price inflation? The simple fact of intense commercial rivalry? Or is press advertising itself a bargain that retailers crave to consume? (Perhaps it’s not the latter: Zitter’s presentation also proudly points out that the Mail and Mail On Sunday have been increasing revenue per page at a rapidly increasing rate — well beyond the rate of inflation — for at least the past decade.)

Moreover, the supermarkets have behaved like no other sector during the recession. Unlike everyone else, they continued to spend more and more on press advertising. (Other retailers, by contrast, slackened off a bit, but certainly didn’t hit the breaks in panic mode.) Among the nationals, the supermarkets’ behaviour put a floor under the worst effects of recession, blunting its impact.

In the end, the really important question for publishers is how much longer the big retail chains will be able to increase their expenditure at this rate.

No-one knows. And therein lies the problem. If the supermarkets’ priorities change in the context of a double dip recession, or for any other reason, things could very rapidly start to look ugly for the national press.

Look further ahead, and a bigger challenge looms. Most retail advertising is tactical, price-based, stuff designed to pull shoppers through the doors. When it comes to this kind of advertising, the web hasn’t dealt a death blow to newspapers. Quite the opposite, in fact.

But mobile advertising could be a very different proposition. Geolocation-based offers that appear on shoppers’ handsets as they wander down the High Street, or in advance of a planned shopping trip, won’t spell the end of newsprint. But they will hit newspapers where it hurts.

Rupert’s Spaghetti Junction: News Corp now boasts four ways to sell paid digital content

Posted by Peter Kirwan on 15 June 2010 at 12:52
Tags: BSkyB, News Corp

If you needed an indication of where News Corporation is going, yesterday brought it: a £7bn+ bid for 60% of BSkyB, coupled with two smaller deals designed to make newspapers palatable to the company’s shareholders.

A spoonful of sugar makes the medicine go down; or as the Americans would say: offense and defense. It’s all very reminiscent of James Murdoch’s speech in Barcelona last year — the one in which he argued that TV is a “big opportunity” and newspapers will play a smaller role in the company’s future.

Rumours about News Corp and BSkyB have been swirling around for a long time. Buying Skiff and taking a minority holding in Journalism Online are far more obscure deals, but just as intriguing in their way.

Five or six weeks ago, after listening to Murdoch talking about “final discussions with a number of publishers”, I suggested that he might still be planning a consortium-based approach to paywall publishing.

Alliances remain possible, but yesterday’s news suggests a go-it-alone approach. In any coalition of the willing, News Corporation will be first among equals. That’s because News Corporation now owns a significant slug of the relevant technology. Indeed, Murdoch now has at least four different approaches to paid content from which to choose:

1) Skiff

Bankrolled by Hearst but now owned by News Corp, Skiff is a hugely ambitious effort to build a shared end-to-end software platform for digital publishers.

You name it, Skiff has a solution for it. This company has spent four years (and $35m of Hearst’s cash) developing industrial-strength software for publishing paid content in digital formats. Its specialities include digital content production, wireless delivery, advertising platforms and revenue collection (which is where it might be able to help with paywalls).

Those who have witnessed Skiff’s demos speak positively. When I interviewed him last year, Gil Fuchsberg, the company’s chief executive, argued that the company stood to benefit as the world’s “enormous base of print media consumption” shifts toward digital outlets.

2) Next Issue Media

A low-profile coalition of US newspaper and magazine publishers including Conde Nast, Hearst, Meredith, News Corp and Time. Occasionally described as “Hulu for magazines” (on the iPad).

Next Issue Media was formed late last year to ensure that the technology industry doesn’t dominate the transition to tablet-style devices. The consortium’s job is to select the technology that publishers will use to publish content, sell advertising and generate reader revenues on tablet-style devices and smartphones. Paywall technology is part of its remit: the consortium plans to open a “shopfront” selling apps and subscriptions that will rival iTunes.

Has News Corp become frustrated by the slow pace of development at Next Issue Media? It’s possible. Last week, Paid Content disclosed that the consortium is still looking for a boss six months after its launch. As Rafat Ali put it: “Now, who needs a third-party company, and for what?”

3) The Wall Street Journal’s digital commerce platform

Running the world’s largest subscription-based news site implies a legacy of clever software. But the Journal hasn’t been directly involved in what Rupert Murdoch recently described as his effort to rope rival publishers into “an innovative subscription model that will deliver digital content to consumers”.

Les Hinton, chief executive of Dow Jones, recently suggested that News Corp’s digital guru Jonathan Miller — who orchestrated the deals with Skiff and Journalism Online — is firmly running his own operation. “That’s a News Corp project which Robert [Thomson] and I aren’t directly involved in,” Hinton told Paid Content. “We look after our little operation with the Journal.”

Little? Hinton’s modesty is unnecessary. What the Wall Street Journal doesn’t know about paywalls, it can find out very quickly. Whether or not its technology suits other News Corporation publications, its expertise should prove valuable.

4) Journalism Online

Founded by the US magazine entrepreneur Steve Brill and former Wall Street Journal publisher Gordon Crovitz, Journalism Online is a subscriptions platform designed to be used by a vast number of paywalled publications. Customers sign up for “a single protected account” with one username and password.

Journalism Online says it will help publishers — 1,500 have signed letters of intent — to offer micropayments, time-based “micro-subscriptions”, bulk subscriptions and combined print/online subscriptions.

Here’s how the company describes its own efforts: “16 targeted strategies — such as metering, segmented content, and topic-based packages for readers — that will convert publishers’ engaged readers into paid subscribers without turning away casual visitors.”

What will News Corporation do with all of these different approaches? The executive who has been given the job of rationalising this Spaghetti Junction of software and relationships is Jon Housman, one of Jonathan Miller’s apparatchiks at News Corp’s Digital Media Group.

Housman already has fingers in a couple of relevant pies. On News Corp’s behalf, he sits on the board of Next Issue Media. In addition, Housman has strong ties with the Wall Street Journal. (He became managing director of the Wall Street Journal Europe in 2005, before Murdoch acquired it).

No doubt News Corporation will let a thousand flowers bloom (for a while at least). As Rupert The Dealmaker knows, it’s important to have options.

Yet News Corp is now deeply involved in the software business, where acquiring — and trying to merge – competing platforms usually turns out to be a nightmare. Early decisions about what to keep and what to axe can help, but even this doesn’t guarantee success. Getting all of these assets to work in concert won’t be easy.

Best case scenario: editors to start hiring by Christmas

Posted by Peter Kirwan on 2 June 2010 at 10:02
Tags: Associated Newspapers, Daily Mail & General Trust, ITV, News International

If anything stops the cuts, and prompts new hiring, it’s going to be advertising (not slowly declining circulation revenues). Or as Peter Williams, the finance director at DMGT, put it last week: “Advertising is probably the thing which is going to move the numbers at the margin.”

So what do DMGT’s half-year results, published in the middle of last week, tell us about advertising markets?

How is Associated Newspapers doing by comparison with ITV (ad revenues up 8% YOY in Q1)? How is it faring against The Sun (which led a YOY ad revenue rise of 10% at Wapping during Q1)?

Answer: a rising tide lifts all boats. Between October and December, underlying ad revenues at Associated fell by 7% YOY. Between January and March, they rose by 11%.

That’s very similar to what we’ve seen at Wapping and ITV. In parts, Associated may even have done better. Metro, in particular, seems to have done brisk business during Q1.

The slides accompanying last week’s presentation to analysts suggest that display revenues at the Mail, Mail On Sunday and Metro rose by 15% YOY in January and by the same amount in March.

Peter Williams, finance director at DMGT, told analysts that April was “a bit sort of choppy” but May has been “perfectly OK again”. Like others, he blames the General Election for a slight slowdown in ad spend.

Later, he elaborated, talking about YOY increases in ad revenues:

On a month by month basis, [advertising at Associated Newspapers in] March was actually well into double digits, April is actually quite low, single digits, but I think you’ve got to put those two together, that’s our view, and then May is actually looking, will be back into double digits.

So: growth is coming along nicely at ITV, Associated Newspapers and News International. Speaking in person talking to analysts on Wednesday morning, DMGT’s executives sounded chirpier than the dour earnings release they issued beforehand.

Their joy wasn’t unconfined, however. Williams, for example, warned that Associated “will not get a big bounce in June from the World Cup in the way that ITV does” because this “just doesn’t happen in newspapers”.

He added that the number of ad pages being run by Associated Newspapers “remains some way below 2008”.

And you needn’t expect that Associated will start hiring in a big way any time soon. In the words of DMGT chief executive Martin Morgan, Associated and Northcliffe have “quite a way to go before we need additional resources” to handle the upsurge in ad sales and pagination.

As profits start to surge inward over a much-reduced cost base, there’s a strict hierarchy of needs at quoted companies.

First, bankers get what they are owed (if they weren’t already). After the bankers, it’s the shareholders’ turn to benefit from resumed, or enhanced, dividends. Next come investment bankers touting hot takeover prospects. (As Martin Morgan of DMGT noted last week, media M&A markets seem to be returning to life.)

Last in line come the wage slaves. Even if recovery remains on track, many newsrooms will spend the next six months dealing with a rising tide of pagination on the basis of depleted resources. With any luck, some editors will be hiring again — albeit very cautiously — by Christmas.

Mail Online prepares for digital revenue lift-off

Posted by Peter Kirwan on 27 May 2010 at 15:00
Tags: Daily Mail & General Trust, Media, News International

Mail Online remained the UK’s most visited newspaper site during April, pulling in 40m unique users. Here’s the league table, measured by daily average browsers during the month:

Mail Online: 2.37m (Up 74.5% YOY)

Guardian.co.uk: 1.84m (Up 22.4% YOY)

Telegraph.co.uk: 1.58m (Up 28.5% YOY)

Independent.co.uk: 0.46m (Down 2.1% YOY)

Mirror Group Digital: 0.44m (Up 11.4% YOY)

It has become fashionable to thumb your nose at numbers like these, which don’t reflect things like engagement.

But just look at the contrast between the eyeballs attracted by Mail Online and its ability to monetize them.

Digital revenues from the Mail Online rose by a creditable 20% to £5.4m during the six month period to March. This suggests a run-rate of nearly £13m for the coming year, if growth continues at a similar pace.

Yet this is way behind the £40m of digital revenues budgeted by Guardian News & Media for the current year. You’d have to guess that telegraph.co.uk is playing in a similar ballpark.

Of course, the comparison isn’t entirely fair. By flogging jobs, property, travel and motors, Associated Northcliffe Digital makes nearly £100m a year in additional revenues.

But if we simply focus on newspaper companion sites, it remains clear that Mail Online is experiencing huge audience growth that it has yet to monetize. Its rivals went through this nervy process a couple of years ago.

Looking ahead, the key question is whether Mail Online has got the tools and sales teams in place to sell the hell out of its inventory between now and Christmas.

The site needs to exploit its own audience growth and encourage advertisers to defect from the newly-paywalled Times and the Sunday Times.

Paul Hayes, News International’s top salesman, joked this week that he will be “in the shit” if Wapping’s paywalls don’t work. This is because he wrote the business plan.

At the Mail Online, publisher Martin Clarke might find himself in a similar position if digital growth disappoints during the next six months.

I doubt it will: Clarke sounds bullish. Commercially, this could be a real breakthrough moment for consumer digital revenues at Associated Newspapers.

Stop the presses #2: A long way to the all-digital future

Posted by Peter Kirwan on 26 May 2010 at 14:45
Tags: Associated Newspapers, Daily Mail & General Trust, Guardian Media Group, News International, Telegraph Media Group, Trinity Mirror

To say the least, the notion of “switching off the presses” is simplistic. There will be complicating factors we can only vaguely imagine. Here are a few that might emerge:

1) Print could generate profits after digital revenue streams mature

Fickle investors who buy shares in the likes of DMGT, News Corp and Trinity Mirror on the public markets will see no reason to halt print production if it remains significantly profitable.

As others go digital-only, quoted groups may hang around, mopping up the last print-based profits. As competition declines, these could prove hard to resist.

The risk, of course, is that these businesses begin to resemble Big Media’s very own rustbelt. The last men and women standing will need to be dedicated to cost-cutting. They will continue to feel the old urge to protect print at the expense of digital.

2) A two-speed national news market?

Focusing 100% on the digital future as soon as possible has its attractions. Pushing all of your resources and talent in one direction could produce impressive results. A big gulf could open up between digital-only and print/digital publishers.

Privately-held operations like Guardian and the Telegraph Media Group may find themselves free to dive headlong into a digital-only future.

3) Are conservative readers more resistant to change than liberal readers?

Some readers will never be ready for the end of print. But does the Daily Mail (for example) attract more late adopters to its ranks than the Guardian?

Logic suggests that liberals are just as likely to resist the passing of the old medium as conservatives. But the Mail’s editorial campaigning against most (all?) things digital suggests that it believes anti-digital sentiment runs deep among its readers.

Demographic trends might encourage some publishers to hold on to print for longer than others. The Sun still sells around 2m copies a day. . .

4) Print as a break-even platform dedicated to marketing the brand

Some publishers may choose to maintain dwindling print editions as a marketing tool, to promote their brands and drive readers to digital sites. For this reason, too, the death of print may be a lingering affair.

5) The ultimate mopping up operation: print editions go free

The experience of the Evening Standard suggests that free distribution could become the ultimate means of extending the lifespan of the nationals’ print editions.

The infrastructure required to distribute in huge numbers will be daunting. So will the costs. But you’d have to bet that someone will try. The Independent could become a test bed for bigger future efforts.

6) What happens to the huge build-out of print capacity?

Good question. In the run up to 2008, News International spent £650m on huge new printing facilities in Broxbourne. John Witherow of the Sunday Times suggests that these presses “were supposed to last 30 or 40 years” (ie: until 2048).

News International spent big. But lots of its rivals invested in new print plants at around the same time.

It’s too early to argue convincingly that these investments represent an industry-wide miscalculation of strategic proportions.

But what does lots of spare capacity suggest? All other things being equal, it suggests that the cost of printing newspapers, on an outsourced basis, at places like Broxbourne, can only decline. This may represent good news for local newspapers who contract out their printing to vast print plants owned by others.

Alternatively, all of that spare capacity might be dedicated to printing huge runs of a few free national newspapers.

There will be plenty of twists and turns on the road to an all-digital future. Yes, a few broadsheets might switch off the presses by 2015 or 2020 or even 2025. But their exit from the market will open up opportunity for others. Taken as a whole, the transition from print to digital still looks like a lengthy affair.

Up, down & sideways: Boom time at The Sun, stability at Trinity Mirror and cuts at The Times

Posted by Peter Kirwan on 13 May 2010 at 17:36
Tags: Johnston Press, News Corp, Times Media, Trinity Mirror

So Sly Bailey’s regionals experienced an 8% decline in ad revenues between January and early May. This mirrors the 7.1% decline at Johnston Press over the same time period.

There was no forecast of a return to growth among the regionals in this morning’s trading statement from Trinity Mirror. Management expects “month-on-month volatility” to continue across the company.

Turn to the company’s nationals, however, and things get interesting. The language here was muted, almost downbeat. Ad revenues are “flat” and “relatively stable”: up 1% in January-February, but down 1% in March-April. Circulation revenue fell by 6% across the period.

This feels like a marked contrast with News Corporation, which unveiled its quarterly results last week.

News Corp reported a 10% YOY increase in ad revenues at Wapping during Q1. During the conference call, James Quinn, the Telegraph’s US business editor, got a word in edgeways with Murdoch about this.

Q: “Any sign that the 10% increase will be sustained?”

A: “At the moment, every sign. We’ve had many weeks when the London Sun has had all-time records in revenues. I’ve got to say I’m surprised. But it’s very welcome.

A: Are there specific titles? Is it all display?

A: It’s all display, yes.

Q: Just the Sun or is it across all four papers?

A: The Sun has been the leader, but across the four papers, we’re up.

The contrast in tone with Trinity Mirror is stark. And yes, something interesting does seem to be going on at The Sun. In early April, Media Week described ad sales for the Easter period as follows:

Among trading highlights for the week are a 50% year-on-year increase in spend from the big four supermarket retailers as they focus on Easter dining as well as their expansion into new categories such as electrical and gaming.

Among the biggest spenders for The Sun, in a sector reported to be up 50% up year on year, are B&Q, DFS, Argos, Wickes and Furniture Village.

Perhaps a fleeting 50% increase on top of last year’s collapse isn’t much to write home about. But Murdoch did seen genuinely surprised — his word, not mine — about The Sun’s ability to break “all-time records” in terms of revenues in such a weak market.

Note, too, those final few words, in which Murdoch suggests that trading is up YOY “across” The Sun, News Of The World, The Times and the Sunday Times.

At the Telegraph, James Quinn interpreted this to mean that each of these newspapers is doing better than it was last year.

It would be churlish to suggest otherwise. But if The Sun really is soaring away into the upper atmosphere, what’s happening at The Times and The Sunday Times?

You have to wonder. In Scotland, the Sunday Times has axed its marketing team. By one account, 16 out of 20 journalists could be let go. There’s a suggestion that the Scottish edition will now be produced “from England, with regionalised pages”.

Today, we got the main act: a 10% cut in editorial budgets that could cost 80 jobs at the Times and the Sunday Times in London.

When it comes to cuts like these, one quarter’s trading performance is neither here nor there.

Like HM Government, Times Newspapers Ltd is trying to cut its structural deficit. In the year to June 2009, pre-tax losses came in at £87.7m, up from £50.2m the previous year.

Perhaps management is taking action before News Corp’s shareholders rise up to demand it. In any event, the logic seems remorseless. Two years ago, Wapping offloaded 100 out of 450 sales staff after merging its tabloid and broadsheet advertising teams. Here’s how Harding describes thinking at the moment:

our losses are unsustainable. We cannot ensure the long-term future of this paper and our futures in journalism if we cannot make a viable business out of The Times.

Up, down and sideways. The good news at The Sun and ITV (ad revenues up by 8% during Q1) is balanced out by the bad news elsewhere.

The IPA’s recent Bellwether Report suggested that media budgets rose during Q1. The last time this happened was Q307, two and a half years ago.

But note that only 21% of marketing bosses increased their total spend during the quarter. As yet, the recovery is patchy and weak. It’s not hard to imagine a pull-back.

Wapping’s paywall: Not the only game in town

Posted by Peter Kirwan on 5 May 2010 at 17:24
Tags: News International

In the final week of May, or perhaps the first week of June, we’ll get our first glimpse of Wapping’s paywall. Both The Times and the Sunday Times have started a month-long countdown to launch.

But there’s more in the pipeline. Yesterday, during a Q&A with analysts and journalists, Rupert Murdoch mentioned a different (but simultaneous?) launch that may turn out to be more important.

For better or worse, this sounds like the culmination of all of those efforts to build a coalition of the willing among publishers. Here’s what Murdoch said:

Today we’re in final discussions with a number of publishers, device makers and tech companies and we will soon deliver an innovative subscription model that will deliver digital content to consumers, wherever and whenever they want it.

Later in the session, Murdoch took part in a curious exchange with Kenneth Li of the FT, who asked for further information:

Murdoch: We’ll be giving a press conference in three to four weeks which we hope will have some important announcements. I’m sorry not to be more explicit…

Li: So this would be an app for entertainment as well?

Murdoch: Oh, you bet. Everyone’s been negotiating with Apple about TV shows, films. We do VOD, everything on there.

Li: This would be a direct rival to iTunes?

Murdoch: [Background voice: "Yes"]. No, well I guess so. It’s an extension of it.

It’s not entirely clear what’s being discussed here. Despite Murdoch’s mention of a “model” and Li’s mention of “apps”, News Corp seems to be promising a cross-industry platform for publishing and selling digital paid content.

Note the reference to “everything on there” (ie: video from broadcasters and text from newspapers and magazines). Murdoch also refers to “delivering digital content to consumers, wherever and whenever they want it”. (This makes me think about smartphones and iPads. . . as well as the desktop web.)

The discussion of iTunes is bizarre. At first, an unidentified voice (possibly belonging to News Corp COO Chase Carey), suggests that yes, media owners will compete with Apple’s online store.

Cutting in quickly, Murdoch disagrees at first, before apparently reversing his position (”Well, I guess so.”) Finally, Murdoch adds that we should anticipate an “extension” of iTunes.

Regardless, the tone is expansive. By contrast, in yesterday’s conference call with analysts and journalists, Murdoch failed to mention the Wapping paywall.

It’s tempting to think that Next Issue Media, the low-profile US-based consortium of publishers founded last year to deal coordinate a response to the iPad, will be part of the launch to which Murdoch refers.

News Corporation is a founder member of this consortium, alongside Time, Conde Nast and Hearst. John Squires, the former Time executive in charge of Next Issue Media, has been a busy boy since the consortium got up and running last December. I suspect that he has played a major role in the the negotiations Murdoch mentioned yesterday.

On Squires’ blog, there’s talk of a “web-based storefront”. (Rather like iTunes, you’d have to guess. And if that’s the case, why not sell subscriptions to the Times and the Sunday Times through it, too?).

Squires also has plans for what he describes as a “universal content e-wallet”. (Anyone for seamless interoperability between handheld devices produced by rival hardware vendors?)

In addition, the consortium has spent a lot of time working on the nuts and bolts of getting content on to new devices. As for advertising on iPad-like devices, Squires is promising an “innovative digital advertising platform featuring pioneering measurement tools”.

We also know — courtesy of a blog post dated 5th April — that Squires’ consortium is planning a consumer-facing launch “quite soon”. (Anyone for the last week of May or the first week of June?)

Squires, it seems, has “gone through literally hundreds of options” looking for a “name and logo to capture the essence and vigor of our venture — one that will truly excite both consumers and potential business partners alike”.

In recent history, there haven’t been too many moments when the media industry has stolen a march on the technology industry. The launch to which Rupert Murdoch referred yesterday may turn out to be one of these rare moments.

Squires is known to have had discussions with Apple (and presumably Google, too). But we don’t yet know how many media owners he has been able to attract into his tent. Nor do we know what role, if any, outfits like Skiff and Press+ (a.k.a. Steve Brill’s Journalism Online) will play in next month’s announcement.

But the tech industry is split (as it usually is, for a short while, before a runaway market leader emerges in a new market). The intense competition that exists between Apple, Amazon and Google offers the possibility that for once, content owners might be able to deal from a position of strength.

In a few weeks’ time, we’ll learn whether some of the world’s biggest media owners have got their act together. Make no mistake: this is bigger than a paywall.

At Trinity Mirror’s nationals, the worst recession in living memory feels like a blip

Posted by Peter Kirwan on 4 March 2010 at 13:08
Tags: Associated Newspapers, News International, Trinity Mirror

Some news organisations have had a half-decent recession. Trinity Mirror’s nationals rank among them.

This morning, Trinity Mirror released its final results for the year to December 2009. Ad revenues at the Daily Mirror and its stablemates fell by 8% during 2009. That’s far less than the chunky double-digit percentage declines that afflicted many broadsheets.

But at tabloids like the Mirror, circulation is more important than advertising. At Trinity Mirror’s nationals, for example, circulation comprises almost two-thirds of overall revenues. During 2009, these revenues held steady at the Mirror and its stablemates, declining by a mere 0.5%.

Add it all up, and Trinity Mirror’s nationals have emerged relatively unscathed from the worst recession in living memory. Overall, revenues declined by just 3.2% YOY to £460m. On the bottom line, operating margins were barely disturbed. In 2009, these declined to 18.2% from 18.7% during the previous year.

It’s hard to call this a recession: it feels more like a blip.

Sly Bailey and her management team will feel good about this performance. The comparison with the Mail and the Mail On Sunday is suggestive.

At Associated Newspapers, home to the Mail and the Mail On Sunday, like-for-like ad revenues fell by 15% during the year to October 2009, and then by a further 11% during Q409. Although it’s hard to make a direct comparison, circulation revenues seem to have fallen more rapidly at Associated, too.

As always, however, there’s a sting in the tail. Readers have stopped buying newspapers during this recession in big numbers.

Between July and December alone, the number of national newspapers sold by Trinity Mirror declined by up to 10%.

Trinity Mirror mitigated these big declines by hiking cover prices. During 2009, the Daily Mirror rose from 40p to 45p, and the Daily Record from 60p to 65p.

But if readers’ willingness to buy newspapers continues to decline at the current rate, an awkward question presents itself.

In a world where the Daily Mail costs 50p and the Sun costs anywhere between 20p and 35p, what’s the most that Sly Bailey can charge for a copy of the Daily Mirror?