4 Oct 2015

Media companies in the shadow of internet giants

From Mediawatch, 9:09 am on 4 October 2015

It’s been more than 20 years since newspapers started going online. But the vast bulk of revenue still comes from print, while Google and Facebook are now getting most of the money from online advertising. How news media companies should respond was discussed at the recent Newspaper Works Future Forum conference in Sydney. Digital media researcher Alex Clark was there and tells Mediawatch what print media bosses had to say.

Media leaders at the recent Newspaper Works Future Forum were forthright about the challenges they all face.

“The business models we have don’t support the cost basis of the businesses we inherited,” said Greg Hywood, chief executive of Fairfax Media, owner of many major newspapers in Australia and most of the daily and weekly papers in New Zealand.

But there was strong belief in the quality of news being created by these organisations:

“It’s not the journalism that’s broken, it’s the business model,” said Mark Baker, editor of Fairfax Media Tasmania.

Greg Hywood.

Greg Hywood, chief executive of Fairfax Media and some of the company's top newspapers. Photo: CeBIT Australia

For some leaders, the decision to offer content online for free was the 'original sin' of the newspaper industry.

Raju Narisetti is senior vice president of strategy at Rupert Murdoch's News Corp in the US, and formerly a managing editor at the Wall Street Journal.

"We thought that we’ll grow our audience and we’ll grow our revenue," he said. "The reality is that we’ve given away our product online, but we haven’t been able to grow (sufficient) revenue.”

Some media companies have tried 'paywalls' - making their readers pay subscriptions for digital access. But Mr Narisetti said “only a portion of our audience will pay. A single digit portion. If we think of paywalls as solving our existential crisis, then we’re going to fail.”

Papers still bring in the money

For many news media companies, most of the income is from their papers. News Corp's Raju Narisetti said between 60 and 70 percent of revenue for The Wall Street Journal and The New York Times still comes from the printed newspapers. He estimates it's about 80 percent for most major publishers.

Raju Narisetti.

Raju Narisetti Photo: Niccolò Caranti (CC BY-SA 4.0)

But Raju Narisetti saw that as positive.

Print really isn’t going away, and we’ve got to really own that belief. We have to evolve past this question about how long print is going to last, and ask what does it mean that print is going to be around for the foreseeable future. 

He went on to describe print readers as a “captive audience” locked into the newspaper for reasons of loyalty, habit and a sheer lack of options. 

“Especially in the US, it’s very hard to switch out of your newspaper because there’s no other choice,” he said.

Raju Narisetti also said newspaper companies should cut the cost of producing their printed papers, so that they can focus on their digital platforms.

“We have to bring our costs down as an industry. I think we have to start again asking questions about what it is that we can stop doing in print, what is it that we can reduce, what is it that we can outsource. If it impacts the quality of the product a little bit, I think that’s OK”.

Raju Narisetti also said newspaper buyers will be more forgiving than digital audiences about the quality of the product.

If you produce a ‘B-plus’ newspaper, I think you’ll be OK with your readership," he claimed. "But if you produce anything less than an ‘A-minus’ or an ‘A-plus’ web or digital product, you have a problem.

The threat of the internet giants

Underlying many speakers’ concerns, was the disruptive impact of large internet companies on the comparatively small-scale operations of news organisations.

“We can’t fight them on audience, because whatever we do we’re not going to have a billion people come to our platforms every day," said News Corp's Raju Narisetti.

There were also concerns about internet giants such as Facebook and Apple, as they begin to host news content directly within their own platforms.

“Now they’re going after content. Facebook Instant Articles, Apple News, Google - they’re really going after the things that we usually sell against,” Raju Narisetti said.

David Murphy, Editor of Mobile Marketing Magazine, shared these concerns:

Apple News should be terrifying if you’re making money from online publishing.

A man described as the world’s most powerful ­advertising executive, Sir Martin Sorrell, told the forum: “Google is not a technology company, it is a media owner, and the same thing applies to Facebook.”

Are the like of Facebook, Apple, and Google friends or foes of 'legacy' print media outfits? Some at Future Forum saw them as both.

“Google, Facebook and Apple, they’re all frenemies,” warned David Murphy.

logos of the big names in media signed up to Facebook's 'Instant Articles' service.

The big names in media signed up to Facebook's 'Instant Articles' service. Photo: screen shot

Newspaper Works chairman Michael Miller was more blunt. “They’re all targeting us," he said. "We need to stop playing defence and more the attack.”

But Google’s US-based director of strategic partnerships, Jason Washing, believed that the company should not be seen as an adversary.

“We’re committed to working with all partners across the ecosystem, and making the ecosystem bigger. I think we’re all in the business of wanting to have the pie grow.”

Furthermore, he sought to allay fears by emphasising the importance of news within Google:

“News is something inside Google that is very near and dear to us as a culture. Everything that we strive to do is about enabling consumers and readers to access the highest quality content that’s available.”

Teaming up 

To help counter the threat of internet giants, Sir Martin Sorell said news organisations should be “looking at media ownership in the fullest possible way,” by acquiring print, television and radio properties.”

Collaboration was also a hot topic of discussion amongst industry executives, who believed that the time had come to put their mutual interests ahead of their commercial rivalries.

“Traditional legacy media see competitors as the rival newspaper. That just isn’t the case anymore,” said Mark Baker from Fairfax Media in Tasmania.

His boss, Fairfax chief executive Greg Hywood, echoed that: “I think that the industry is taking up the point about working together, but we’ve actually got to get together and sort it out".

Newspaper Works chairman Michael Miller agreed: "We need to be easier to deal with as an industry. We should be saying that we will work together.”

Ciaran Davis, chief executive of APN (parent company of NZME) used fighting talk.

“Outside the boardroom we fight and we scrap and we punch each other up," said Ciaran Davis. "What I’ve really found about the Australian radio industry is that when the boardroom doors are closed, the agendas are set aside. I think that is critical. We’ve got to start working together across the industry.”

Watch this space: media mergers in action

Consolidation is already underway across the Australasian news industry.

In New Zealand, APN became the sole owner of The Radio Network group in early 2014. It has since combined all of its local print, radio and online properties to become NZME and is merging its newsrooms. The same investment deal also saw APN acquire the Australian Radio Network. While APN has not merged its Australian print and radio assets, it could happen there too.

APN also recently accepted a major investment from News Corp, resulting in a 15 per cent ownership stake. Already there are signs of greater collaboration between the two companies. They share leaders in executive roles and are bundling online subscriptions to their content.

There is also wider collaboration in New Zealand media. Last year, Fairfax New Zealand and APN began sharing printing plants. Fairfax New Zealand's managing director Simon Tong recently revealed that Fairfax, NZME and TVNZ are discussing collaborative strategies to push back against the power of Apple, Facebook and Google. Simon Tong even quipped that during his time in the banking industry cartel was a good word.

TVNZ’s chief executive Kevin Kenrick told Fairfax: "The main game is how we compete against the 'globals'. The natural conclusion is to say: what partnering opportunities are there that would enable us to enhance our scale and therefore our ability to compete?”

While having the big players in New Zealand media working together may enhance the sustainability of their businesses, important questions arise.

How can the benefits of collaboration be embraced, without undermining the diversity and independence of individual media voices? And are there ways for small and large media to be sustainable, without more corporate consolidation?

Finding new funds for journalism

Media researcher Alex Clark is working on News Renewed, an initiative based on mutual needs of the news media. 

Picture of Alex Clark

Alex Clark Photo: supplied

Having established that some people are willing to pay a subscription for a bundle of news media, he started work on a service called PressPass for which one account could unlock content from a range of premium websites. But major news media companies here have now backed away from putting up paywalls in the foreseeable future. 

“My focus has shifted to improving the way free news websites are funded in New Zealand,” Alex Clark told Mediawatch. “It appears there is a strong subset of New Zealanders who care about journalism and are prepared to fund it”. 

He’s now developing a common platform called PressPatron for outlets big and small to raise money from readers to fund journalism. 

“It makes it easier for readers to support their favourite news sites and journalists through a single account across many websites. Reader can choose to make monthly donations to a specific site or put donations in a virtual ‘tip jar’ which is divided amongst the sites they visit”. 

Alex Clark is a media researcher who attended the Future Forum in Sydney recently. He is the founder of the News Renewed project, which is exploring ways to improve the sustainability of online journalism. He is also developing a funding platform called PressPatron to support both independent and mainstream media organisations. You can share your thoughts with him directly: fundingnews.co.nz/contact  

A mock-up of Alex Clark's Press Patron platfrom allowing users to donate to several news sites at once.

A mock-up of Alex Clark's Press Patron platfrom allowing users to donate to several news sites at once. Photo: supplied