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Yesterday News International announced that “the new digital products for The Times and The Sunday Times have achieved more than 105,000 paid-for customer sales to date." So are these figures good or not? Should other media companies be encouraged by these initial results from Rupert’s great experiment?
I’ve frequently been on record in the past, including on Channel 4 News, saying that I didn’t think Murdoch’s paywall plans were the right way forwards. So should I now be eating humble pie, given that the data and results are now public?
The Facts & Figures
A quick round up of some of the key facts and figures:
- The paywall charge is £1 for a day's access and £2 for a week's subscription to the Times’ sites. However, there is currently a 30-day £1 introductory offer. Access to the sites is also bundled with a seven-day print subscription to either title. The Times iPad app monthly subscription is £9.99 or available as part of a digital subscription. The Sunday Times will launch an iPad app shortly.
- 105,000 paid-for customer sales to date (4 months since July 2010), including corporate subscribers.
- Around 50% of these are monthly subscribers. These include subscribers to The Times iPad app and Kindle edition (Sunday Times iPad app yet to launch so not included).
- Before the paywall, according to the Times' most recent ABCe audit (Feb 2010), the Times Online site got 20,418,256 monthly unique users; this would mean 105,000 paying subscribers = 0.5% conversion rate from free to paid.
- The Times + Sunday Times weekly print circulation is around 1.5 million (according to ABC in August Sunday Times was 1,066,240 while the Times was 494,205) so 105,000 = 7% of this print readership figure.
So are these figures any good or not?
The key point at this stage is that the figures themselves are a) early and b) shrouded in uncertainty. Read Tim Glanfield’s 'Times paywall: 105,000 digital sales doesn’t tell us much at all' post for his excellent deconstruction of what the figures don’t tell us.
We don’t know yet what the subscriber split is across, say, the website vs. the iPad app. Roy Greenslade’s Guardian post suggests that iPad users might make up as many as 45,000 of the subscribers. That would make the website-only subscriber numbers very low.
We also don’t have any real insight, beyond News International's press release, about who the subscribers are (‘relatively affluent’), what the churn/renewal rates are like (‘renewal rates are encouraging’), how successful the up-sell from introductory offer is, where in the world these subscribers are (‘many… live in the UK’), the initial spike of subscribers vs. the ongoing growth rates etc.
Most importantly we have no visibility on the all-important financials. How much money has been made? The free trials and lack of clarity across subscription splits make it very hard to guess actual numbers. However, estimates range from around £50,000 in total from the last four months to a high of £400,000 a month from digital subs (see Rob Andrews’ analysis on PaidContent).
Seven months ago, long before the paywalls, in a LinkedIn post (to the Specialist Media Network group), I did some crude guesses on likely subs revenues as follows:
“The Times has 20m unique users per month with, say 60%, from abroad so around 8m uniques in the UK. FT.com has around 11.4m global unique monthly users with only just over 2m in the UK.
"So let's say the Times has 4X as many users at the moment. But let's say it converts 4X less well than the FT (generous I'd say) because it is a 'business expense'.
"The FT.com had 126,000 paying subscribers in 2009 so let's assume The Times gets that number too in Year 1.
"Let's assume only 50% of those subscribers renew for the whole year (i.e. *every week* they pay their £2 which, again, seems very generous). That would be (126,000 X £2 X £52)/2 = £6.5m
"I think £6.5m is generous. And, according to some analysis I've seen, the Times online makes around £18m a year in advertising currently. I don't know if that's true but I'd be guessing it's a lot higher than £6m. So will they lose more in ad revenue by implementing the paywall than they gain in subscribers? I'd guess so.”
So I’d say my guestimates weren’t a million miles off. The question about new subs revenues vs. loss in advertising revenues clearly still stands.
On a positive note, if the The Times’ has managed to achieve 105,000 paying subscribers in just four months whereas the FT was only at 109,000 in 2009 after many, many years doing it (The Economist growth / absolute figures also paint The Times’ growth in a positive light), then perhaps this is the start of something big?
Unfortunately, I’d guess not.
Partly this is because you can’t reliably just extrapolate the growth numbers forwards ("There are now at least 25,000 Elvis' around the world, compared to only 170 in 1977 when Elvis died. At this rate of growth, experts predict that by 2019 Elvis impersonators will make up a third of the world population." - Wikipedia).
But mainly because my fundamental issue with Murdoch’s paywall is a) what he’s trying to charge for (i.e. general news sold to consumers versus, say, the FT which is really specialist comment sold to ‘business’ consumers) and b) how he is trying to do it (i.e. locking out search engines, effectively discouraging inbound links, not following the ‘Freemium’ model I believe to be the correct one).
I also believe that once the early adopters fade away, and once all the “brand loyalists” (i.e. those prepared to pay) have stumped up then, assuming the current proposition remains in place, growth will quickly stall and The Times won’t have the vital natural search traffic (which will have been diverted to the likes of the BBC and Guardian) to bring in the ‘new blood’ required to maintain growth.
There is a great opportunity there to use free content to drive links and SEO, to drive *global* customer acquisition, to then monetise via advertising and specialist paid services (e.g. crosswords, apps, tools, data, buying clubs etc.). But Murdoch isn’t choosing this route. I doubt the necessary reliance on Google in this model particularly appeals to him…
Newspaper business models and the impact of online
Almost two years ago now I published an article on new metrics and business models for digital publishing where I questioned the ‘big numbers’ approach of most national newspapers. For a long time people have been saying, quite rightly, that ‘offline pounds become online pennies’ when it comes to advertising revenue.
This hasn’t changed. In fact it’s arguably getting worse. And I’m not convinced that all of the lovely subscriber data News International now touts - or indeed all of the wonderful targeting we can do with technology - will really lift online CPM rates to a rate anything like comparable with what print/offline has traditionally enjoyed.
It has always seemed clear to me that it is eminently possible to create profitable online publishing models, as your cost base can be very low and revenue and marketing can scale very efficiently, but only if you recognise that the size of the business, in sales/revenue terms, is never going to be as big as we’ve known historically. You can still achieve scale by having a portfolio of smaller brands/businesses servicing specific needs.
This is fundamentally an effect of the internet and the way it atomises, fragments and then regroups audiences into areas of interest that are indeed bigger in total numbers than existed before but actually ‘coagulate’ in much smaller groups. This shatters the power of masthead publishing brands across print, TV, everywhere. Very few people are truly loyal to a media brand for its own sake. It’s the specific content that is valuable. Most people probably only value one, or two, sections of a Sunday newspaper (Travel? Sports? Business? Motoring etc?) but they have to pay for it all just because that’s the way the print medium works. Not so online.
Even if you took a media property as massive as Facebook you would have to question the big numbers, impressive as they are. Those people do not exist on Facebook as a single totality; they only exist in any meaningful way within the millions of sub-groups and social clusters they belong to. Just like in the real world. And I’m not sure any of them are loyal to the notional brand that is Facebook; they are loyal to their connections and the platform. Would anyone care if Facebook changed its logo, a strapline, or even its name? They care much more about how it works and maintaining their data, connections etc.
In some ways News International seem to have embraced the above thinking. Rebekah Brooks, Chief Executive at NI, says “…each of our digital subscribers is more engaged and more valuable to us than very many unique users of the previous model.” However, I think their future growth will still falter due to their absolutist approach to the paywall, the nature of their proposition, and because of the ‘snake effect’… see following.
Snakes, heads and long tails
Power Laws, and Long Tails, are fascinating things and apply to so many areas of internet dynamics and business models, not least media/publishing.
However, because of the atomisation/coagulation effect I describe above, in fact what you see happening across media is that communities of interest are forming that are limited in size. They can be very small but they can’t be very large. Very roughly, most such communities, at their core, exist in tens of thousands, and, very occasionally in 100s of thousands. But millions? I don’t think so.
The problem is that the ‘old’ economics and promises of audience reach across print, TV etc. have always sold big numbers, typically in the millions. This is a world of very large ‘head’ audiences, very little middle, and no long tail.
What I believe is happening online is that we are now seeing the ‘snake effect’. That is, in any given area of interest, you might get a couple of sites/brands/communities that are a bit bigger than the others (the snake’s head), and you’ll get a few that are much smaller (the end of the snake’s tail), but, on the whole, you’ll see lots of these communities that are similar in size (the snake’s long body).
The platform/targeting capabilities of, say, Facebook, or ad networks/exchanges help redress this in theory and lots of money is being poured into finding the future solution which combines both reach/scale AND relevance/targeting.
However, this doesn’t help the future growth of The Times’ subscriber base. Whilst the printed newspaper was/is a ‘head’ in the world of print, I can’t see its online equivalent being anything more than a segment of snake online. You have to ask yourself, how big is the universe of potential Times’ digital subscribers? How many do they already have? Where will the new subscribers come from? What competitive free offerings are easily to hand via the web?
I just can’t see it getting that big. But you never know… if they get past 1m digital subscribers then I’ll post a picture of a python that’s swallowed a sheep ;)
The much bigger picture – Times’ digital subscribers just a Trojan Horse?
So I’m not a fan of Murdoch’s paywall strategy at a tactical level. However, I’m assuming that there is a more cunning masterplan at work which makes all our navel-gazing about the details of the paywall somewhat irrelevant. The Murdochs talk a lot about ‘quality journalism’ and their ‘love of newspapers’ and I’m sure these sentiments are true. However, as extremely successful business people, I feel they must know that there are much bigger games afoot than mere paywalls on a newspaper website.
What would you do if you were Murdoch? What might the cunning master plan be?
I think Seamus McCauley hits the nail on the head in his post News Corp's paywall is about News Corp, not the Times as he says:
“Considering that the Times lost £87.7m last year and BSkyB recorded profits of £855m on revenues a shade under £6bn, the obvious question for anyone holding both businesses is not 'how can we make the Times make more money?' but 'how can we make the Times make Sky more money?'.”
You may have noted “News Corp seeks European approval for takeover of Sky”.
I would go even further and suggest that the really big chess pieces on the online/media board at the moment (and if you’re News Corp you surely want to play the big games) are:
1. Search/Discovery (finding stuff)
Clearly dominated by Google and very little sign of anyone, let alone News International, muscling in on that (Facebook an outside contender perhaps).
2. Transactions/Payments (paying for stuff)
Dominated by PayPal with interesting contenders in the shape of iTunes, Amazon and Google Checkout.
3. Identity/Profiles (‘you’, your preferences, likes, data)
Facebook has very quickly taken this ground (away from the likes of MySpace among others) and, with Facebook Connect etc, looks like it may get as close to any to the ‘universal log in’ nirvana.
4. Content (including services, tools, apps etc.)
This is the most complex one with IP/rights issues clouding things further. Clearly News International is a big player in this space. But so is Google, albeit via user-generated content (think YouTube). Indeed what most irks Murdoch about Google is the way Google is a parasite feeding unfairly on the ‘quality journalism’ so close to his heart.
We have to imagine a near-future world where ALL content is available via ALL devices/media channels/screens with a variety of payment options and models (free but ad-funded, pay per view, subscription etc). This will undoubtedly happen. Surely no-one can think that Google isn’t out to ‘own’ our TV screens which will be just different windows on an IP/internet infrastructure? Surely News Corp (and let’s assume they own all of Sky) must be hugely aware at just how dangerous a threat this is to killing off a business generating £1bn in profit currently?
I doubt Google are proactively out to ‘get News Corp’ but that may well be the side effect of their long term plans. Almost five years ago now I wrote a post called 'Yell.com / Yellow Pages - are Google and local directories going to oust them?', and now, with Google Local Listings, Google Places, Google Boost, Google’s mobile service and so on I’d say Google aren’t just tapping a nail into Yell’s coffin, they’re hammering it home fast. Google TV, YouTube etc are surely just the start of a radical shift in the way what we currently call ‘TV’ works and all broadcasters should be very scared.
What can they News International do to protect against this? Well, the content piece they have tolerably well covered. But what they MUST get, quickly, is a stranglehold on data (profiles) + a billing platform (transactions) to charge their customers for access to content (in the broadest sense). Sky’s doing pretty well already with 10m households in the UK. But they need more. How many profiles or billing details does Google hold in the UK I wonder?
Surely the paywall push at The Times is really just another way to get customer data/profiles + a billing relationship? How much is a paying website-only subscriber really worth if you consider the broader picture within News Corp? Consider that a BSkyB subscriber is worth £508 a year. How quickly is Sky adding new subscribers (around 60,000 a quarter recently)? How much quicker and/or cost effectively might News International use the internet and properties like The Times to accelerate that?
All of a sudden, a few hundred thousand ‘digital subscribers’ seems to make an awful lot of financial sense.
So am I eating humble pie on my paywall criticisms following the latest figures? No. All my thoughts still stand. I still think a “Freemium” model, or variant on it (like the “metered” model of the FT) makes more sense. And I think The Times’ will need to work hard (e.g. on the proposition) to continue to convert paid subscribers at any meaningful volume.
However, I can’t believe there isn’t a bigger plan afoot which casts the achievements to date in a very different light.