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

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.

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