The paywall-hostile Commerce Commission should check out the New York Times' blockbuster result

KeallHauled

Chris Keall

News the ComCom can use

NBR's newsroom has its fair share of sceptics about the proposed Fairfax-NZME merger, and claims that it would save jobs an boost editorial quality (just try some of Fairfax exile Tim Hunter's coverage).

Yet there are still a few things that nark me about the Commerce Commission's decision to block the merger (now heading to the Court of Appeal).

There's the regulator's rather old world focus on print, its tendency to play down the more competitive online world, where TVNZ, RNZ, Newshub and others offer mainstream news alternatives, its stretch beyond its traditional, economic remit into political factors and, perhaps most annoyingly, an apparent bias against paywalls.

Take this section of its final decision, where the regulator essentially says that a Fairfax-NZME merger would lead to the risk of a paywall:

The merger was blocked, in part, because the commission did not believe Fairfax and NZME's assurance that they had no paywall plans.

NBR and other paid content advocates have long argued that paywalls are not a risk to the reading public.

Quite the reverse. While an ad-funded model encourages a cage fight for clicks, a paywall incentivises tougher editorial. People won't resubscribe if you serve up churnalism, or Daily Mail drek they can get free elsewhere.

Fairfax + NZME = a more expensive paywall?
Later on in its judgement, there's a paragraph that reads "The commission acknowledges that paywalls are not necessarily detrimental and, faced with a continuing decline in print revenues, the applicants may seek to rely on paywalls for some of their revenue without the merger."

But it adds, "The merged entity would be likely to impose a paywall with a higher price or that is more restrictive than would occur without the proposed merger."

Such thinking pre-supposes the combined Fairfax-NZME would have a near-monopoly on online news. That's just not true. Nielsen's MediaView survey shows Stuff and the Herald do indeed have big audiences, with more than two million unique users per month. But Newshub and TVNZ's websites have the best part of a million, and RNZ half a million and counting (and that's before the $38 million public broadcasting funding boost). This competition would put a crimp on a merged entity's paywall pricing.

So would Fairfax-NZME's need to keep traffic relatively high to main their ad revenue (the ComCom does some sums in this area but the section is heavily redacted, with many paragraphs and calculations blanked out completely). The Commission notes that while a metered paywall approach has been adopted by some news sites (for example, 20 free articles per month before you have to pay), there is a danger that a merged Fairfax-NZME would leverage their power to introduce a more restrictive paywall. Again, I would doubt it given the number of free mainstream news alternatives.

Lastly, there's the constraint that most members of the public aren't willing to pay much, if anything, for news. The harsh truth is that news was not the reason many bought a paper, back in the golden age of newsprint (give me a moment while I flash back to Jim Tucker's drill sergeant routine).

Between all those factors, I think the merged entity's ability to charge a higher price for online news, or offer fewer free stories, would be nothing, or next to nothing.

Donald Trump has derided it as "The failing New York Times."  But ironically, his co-dependent feud with the paper helped it increase digital-only subs by 51% in the fourth quarter (against the year year-ago quarter). The rise of reader revenue has played a key role in its parent company's return to operating profit. Chart: Recode.

The ComCom might get a bit more positive about paywalls if it schools up on the New York Times Company's latest quarterly result, delivered Friday.

The company drew around 60% of its online revenue from subscriptions, with a sharp increase in revenue from readers driven by a boom in online subs. The New York Times added 99,000 digital news subs in its December quarter for new high of 2.2 million (or 2.6 million including its cooking and crossword apps), as its publisher made an adjusted operating profit of $US108 million.

2017 subscription revenue topped $US1 billion for the first time and double-digit growth is predicted to continue until at least 2020.

NYT Co. chief executive Mark Thompson calls the numbers "a clear sign that our subscription-first business model is proving to be an effective way to support our broad journalistic ambitions."

The publisher's shares are up 20% for the year even allowing for last week's market correction valuing it at just under $US4 billion.

Yes, yes, it's partly about population size, and the New York Times' numbers are less impressive if you divide them by 60 to get a per-capita equivalent for New Zealand. But even then we're talking about a big chunk of change. Paywalls power middle and high-brow journalism, and in doing so they help protect democracy – an area of interest for the ComCom recently.


POSTSCRIPT: How NBR's paywall is tracking

While this article is focused on mass-consumption mainstream news, it will probably make you curious about how NBR's paywall is tracking. 

The answer is just fine, thanks. There are now more than 5000 individual member subscribers to NBR ONLINE, plus hundreds of organisations with IP (or office-wide) subs.

We're gunning for 10,000 inside two to three years.


15 · Got a question about this story? Leave it in Comments & Questions below.

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15 Comments & Questions

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Yeah, lets make the access to online mainstream news just for the wealthy and the privileged. No thanks. I disagree with this journo's opinion and I hope that the merger is unsuccessful.

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As covered above, even if Fairfax-NZME did introduce paywalls, you'd still have lots of other sources of mainstream news online, and elsewhere. We're also talking the price of a couple of cups of coffee -- not an amount only the wealthy can pay.

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While newspapers were not free in the golden age of print publishing, they were not expensive and certainly not restricted to an elite audience. I’d argue the opposite case. It’s the free advertising supported online ‘news’ sites pandering to lowest common denominator that pose the biggest risk to keeping ordinary citizens informed.

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The rule of thumb during my years in the newspaper and publishing industry, was somewhere around 66% of all publishing costs were met by advertising revenue and, the balance by newspaper/magazine sales. I have no idea what it is nowadays, but would imagine it is no where near anything approaching these income ratios

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Absolutely right...with media you get what you pay for and if you aren't paying and someone else is you get what they want you to read ie frequently fake news and advertorial.

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a couple of comments...

1. such thinking does not "pre-suppose" that the merged entity would have "a near monopoly online", but it does recognise that its market power would be materially greater than either of the separate entities.

2. if the NYT can get such great commercial results in a much more competitive environment, why can't one or both of the applicants do that here, without merging?

yours, a happy NBR paywall subscriber

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Hi John, I agree that Fairfax and NZME together would have more market power to introduce a more expensive or more restrictive paywall than either alone -- but because of their need to keep traffic relatively high for ads, comprehensive free alternatives (RNZ's website, and those of TVNZ and Newsroom, plus various startups), and the fact most people just don't want to pay, I still don't think it's that much market power.

I brought up the NYT more to show that a paywall -- so looked-down-on by the ComCom -- can be a good thing commercially, and for democracy. I wish they would use paywalls-are-bad as their starting point for assessment of any deal.

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I’m happy to pay for quality journalism. I have a digital subscription to the NYT and I subscribe in the winter to The Press. It doesn’t get read. After all, I do need something to start my fire with at home.

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"We're gunning for 10,000 inside two to three years"
Mmm... not too sure about that: Elasticity of Demand etc. Halve your subs and youse get that number before then.

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And we could get to 10,000 even faster again if we cut the price by 90% -- but NBR's not going for the biggest audience; we're going for people who will pay a fair price for business news they can use. That proposition is not for everyone.  But it costs a lot of money to run a professional newsroom, so we hope we can produce enough quality content to attract at least 10K. 30K has a good ring to it, too.

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I'm not sure the Commission's concerns are as unfounded as some people think. The whole deal with paywalls as a 21st century version of the older subscription/advertising model isn't that tricky. There is a lot of economic literature on the subject of two-sided markets such as news media (specialised or not), and it is reasonably complex and not necessarily part of the international policy setting and merger control/regulation competition law mainstream. Jean-Charles Rochet and Jean Tirole (him of the Nobel prize for economics) are authors of one such paper. In short, the economic principles are that when you price paywalls, and evaluate the competitive pricing for paywalls, you must consider the elasticity of demand and the marginal cost on both sides of the market respectively. In some ways this is the economic gloss on Chris' response to Cockatiel Monsoon above coupled with the value of (?quality) news to consumers, consumer tolerance for advertising, and the value of access to consumers of news. Two -sided markets are just a little harder to conceptualise and the news business is not just about selling product. What is the right price for the paywall, and how does market power reconcile with the two-sided market analysis. This is all worthy of a bigger thought piece it seems to me irrespective of Stuff-Me.

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Best to get your news from many sources to prevent capture by the MSM. Blogs have been great to unshackle the previous MSM monopoly.

My late Dad taught me verify verify then verify again. Dont trust any one news source for your information.

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How bad is it for the publishers when you buy their masthead for a few bucks and still feel ripped off, paywall or not both have already alienated half of their readers by acting as a ventriloquist's dummy for the left.

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Chris,

I agree with your argument. And for what it's worth I've think you've done a fine job helping lead this change for NBR.

I am a long time subscriber to the old school newspaper being delivered to my door. I fail to see why there is no logical bridge between people paying to read the newspaper and paying to access quality journalism and why it is not an acceptable thing.

However I do object to mixed modes of operation. I don't like how NBR casts a story with no (consistently) clear expectation set on whether it is paid or not. I also don't like paid stories which are essentially built from stories that started in the open. Harvesting one model to build another up doesn't seem right.

So if I was to suggest one thing, if you are to argue this point strongly then you at least need to become more principled and disciplined in the practice of what you preach.

I wish you success with the goal of more paid subscribers. My expectation is that the cost of entry will reduce and go towards improving affordable access, which ultimately will increase overall influence. After all isn't that what the 4th estate always wants?

Regards

James

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Good article Chris! I pay for NBR , NYT and WSJ. I read but don’t pay for Stuff and The Guardian (I should and will donate to The Guardian). I value the opinion pieces in all the above rags (Stuff excepting) - that’s what I mainly pay for. One advantage of a paywall is that ignorant trolls tend not to post comments - for eg the comments posted on this article are, by and large, constructive debate. Look at the comments on Stuff - do I have to live in this country with those people? Cheers Paul

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