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How the AFR’s “disastrous” paywall delivered the goods

7 November 2011

Former Financial Review Group CEO Michael Gill responds to our podcast, Paywalls: the good news and the gamble


Photo: Rowen Atkinson/ Flickr

Photo: Rowen Atkinson/ Flickr

WHILE Sophie Black, Eric Beecher, various folk at the Australian, Matthew Ricketson, Margaret Simons and others have at various times declared the Australian Financial Review/ business strategy to be “disastrous” (or words more colourful to that effect), I can’t recall any of them asking me about it. I do recall that after one of his more exotic colleagues beat me up on The Drum, Alan Kohler wrote to concede that the paywall strategy was “vindicated.” (Though I can’t recall that Alan or any of his colleagues has asked me about it either.)

We hear much about the “brand” and audience that is built by going online. By implication, people seem to assume that this is valuable. Generally it’s not. Which is why so many publishers have taken lately to trying paid content models. The reason traffic does not make money? At first, it was because the audience was not what advertisers would pay for. When people talk of millions of page views they’re talking about eyeballs from everywhere, a fraction of whom might want the advertiser’s Ford in Footscray. By itself, that discounted pricing. Publishers used auto refresh and other gimmicks to pump traffic, which ultimately encouraged price pressure too. Inventory was infinite. Then along came Google Adsense and dollars became cents.

When you get stuff for free, you get what you pay for. And that’s why news resources are pressured. The Australian Financial Review’s approach was different for two reasons: first, the business of the AFR had always relied heavily on pricing, including especially cover price revenue. Its niche is small in number, but valuable. The second reason was that our research consistently delivered a clear message: the product and its content were the key to the digital business.

The AFR has been profitable for all of the past fifteen years and in some of those years its profits were record numbers. In that time the Financial Times, the Wall Street Journal, the New York Times and many others have reported losses. Even during the global financial crisis, which has had huge impacts on the reading audience and advertisers, the AFR made profits – while investing heavily in its multimedia. While other newspapers have had regular redundancy rounds, the AFR had none. In fact its editorial staff expanded, with an emphasis on specialised staff.

One of the reasons the AFR is stable is that its audience has always paid a full price for the content. The newspaper is $800 a year. There were no discounts other than to university students.

The AFR measures its audience and engagement using independent analysts. Its engagement level in the target audience was much greater than for the FT in Britain or the WSJ in the United States. This was a consistent result, but the AFR measure rose during the GFC. Internal tracking research over many years indicated that price was not a major factor in the buying decision. The audience is busy (or “time poor”) – it wants relevance and reliability. That same research showed consistently that the web requirement was for more content: specialised content relevant to reader interests. It also showed that readers were wedded to the print product.

AFR advertising is heavily skewed to print because a large part of it relies on print display for brand effects. For that reason, much of the revenue cannot migrate online. AFR advertising rates have been steady or rising in print for more than a decade. This may be unique in the industry. AFR digital advertising carried a heavy premium based on its audience, which might also be a unique characteristic. AFR user traffic has been strong and growing, despite the paywall and the fact that no devices such as auto refresh were ever applied.

Contrary to some popular views, the content on always included elements that were free. A lot of new content and videos were open for sampling. But the goal was to sell subscriptions, not to promote traffic. From the time that was launched the surveys showed no sign that price was an issue. Rather it was content value: the readers wanted more, but mainly material that was specialist.

When the AFR installed a full state-of-the-art multimedia production system in 2010, the business became media neutral. From that time the AFR was able to produce to any medium at any time. Through its new efficiencies it was able to ramp up content in all the specialised areas, including video. This coincided with a sharp rise in subscriber numbers. By March 2011 subscribers had reached more than 7000 and were growing at more than 50 per cent a year – despite the impact of the GFC, which had eroded the print numbers to the mid 70,000s.

While I’m no longer responsible for the AFR or, I do think it’s in the community’s interests to get some facts into these debates. My point essentially is that people will pay for a news media product that they value. If there are enough of them, you have a viable business. Anything else is tosh.

I think people do place a quite high value on trusted, relevant sources of news about their interests. I’m not sure that many commentators have looked hard at what that means.

Finally, Andy Groves of Intel once said famously that only the paranoid survive. He also said that he who commoditises last, wins. In news media, too few are paranoid and too many have commoditised too readily.

Show Comments


Peter Clarke

10 November 2011

Adding to Margaret Simon's comments, if each AFR subscriber is paying $800 per year and there are currently 7000 of them it is a tidy $5.6 million a year. But it is a high daily rate (to match the resources of that niche readership?)compared to the rates being spruiked right now by The Australian for their (Gold!)Digital Pass or rates out there from many other media entities shooting for a broader readership. Surely, the price point remains a key element in the consumer choice equation.

One wonders if 7000 subscribers is nudging the ceiling of available dedicated subscribers who value and use what the AFR offers in this Australian market.

Also an interesting point by Tim Dunlop about how these media entities with more sophisticated metering technology at their disposal may now be more agile in calibrating their paywall porosity to meet the moves of their competitors. A battle of the paywalls!

Job cuts, strikes, ‘structural change’: the uncertain future facing quality newspapers

31 May 2012

[...] is not a mandatory requirement until July 1, 2013. The Australian Financial Review has altered the pricing of its pay wall; but it has lost more than 30,000 hard copy readers since March [...]

Margaret Simons

7 November 2011

I actually don’t think I ever used the word disastrous to describe the AFR model.

In my book 2007 book the Content Makers pg 139 ff, I said "the business model works" in relation to the AFR. Also "the main reason for its success is surely faith in its core business - providing content that is useful and relevant to its audience." On the paywall model (recently introduced when I wrote the book) I quoted others speculating that it was a disaster, but said on my own behalf"I think the example of the REview gives us reason to be optimistic."

Those remain my views, although I do think the execution of the strategy at the AFR has left a lot to be desired. I may, in my later media reporting, have used the word "disastrous" to describe the execution, though I can't remember doing so.

Andrew Birmingham

24 November 2011

Regarding the execution of the strategy, of which I have direct and personal experience, I note that the Fin Review management as late as August released circulation data confirming that since the November 2009 relaunch, subscriptions grew consistently at about 1% a week. Also that traffic and usage on the site matched the subscription growth. Even setting aside the percentage impact of starting from a small base, that still represents thousands of new subscribers paying a high subscription price by the relative standards of our industry and local market.

Most major newspapers in Australia would have struggled to match the circulation revenue growth in real terms achieved by over that period.

So remind me again, Where's the disaster? Simply saying it over and over, doesn't actually make it so.

Note also that achieved strong advertising outcomes during that period in part by avoiding the catastrophic collapse in yield that afflicted so many of its peers here and overseas. That collapse in yield came about as a direct result of publishers pursuing the kind of failed and disastrous strategies suggested loudly and repeatedly by many of the AFR's critics.

Finally, as Michael alludes to in his article, the AFR traded profitably throughout an era of maximum disruption unlike most of its peers and many of its competitors.

Tim Dunlop

10 November 2011

Great piece, despite the obvious errors about Margaret Simons' position, which I presume will be acknowledged.

Michael, I wonder what you think about the AFR's recent strategy where even more material is being brought out from behind the paywall (Laura Tingle, permanently, for example) and they are using Twitter (overusing?) to promote such material?

Over the weekend of the Qantas shutdown, in particular, the articles on the that topic were all available for free and heavily Tweeted.

This approach does actually seem to cross the line between promotion-to-generate-subscriptions and promotion-to-generate-traffic.

I can therefore imagine that some subscribers, those who have coughed up the cash, might be thinking their sub has lost some value?

I wonder if it did generate subscriptions?

The new, more agressive social media approach also comes as The Australian has gone behind a paywall and it seems (to an interested outsider/consumer) that the AFR is perhaps moving to position itself in the same space as the Oz: that is, as an upmarket national newspaper rather than just as a specialist business title. Or is that way off the mark?

Michael Gill

11 November 2011

Tim: i think you have to see the issue in the context of transition. That is: managing the commerce of what is today the source of profit while building the right model into the emerging customer need.

Peter: the $800 is the print price. When advertising is factored in the average subscriber generates somewhere near twice that. I think the sub numbers were above 8000 at last report. Many of them are print subscribers who get a discounted web price.

The key point is unique valuable content for a quite demanding audience and how you keep the value when so many others want to trade in it.

Michael R. James

2 December 2011

The arithmetic of "if each AFR subscriber is paying $800 per year and there are currently 7000 of them it is a tidy $5.6 million a year" is surely suspect.

As the author states, many of these are existing subscribers taking up the offer for combined print + online. I strongly suspect the net increased revenue to AFR is nothing like the sum calculated. (Which is not necessarily a bad thing. Locking in existing subscribers and converting them to online is worthwhile.)

Then I also suspect most of the 7000 or 8000 do not pay for the subscription themselves. Almost certainly a high proportion are corporate. One would expect that segment to be quite limited and to plateau, notwithstanding the claimed trend.

Since I do not expect any transparency in the breakdown of this type of information about subscriptions, it is difficult to discuss. The claim that AFR has done quite well during the last tumultuous years is all well and good, but is no guarantee for the future. I imagine the iPad is already having an effect in shifting previous print readers to almost exclusively online (if most subscribers also have print any shift will not be obvious). The income from print ads is probably unsustainable, even for the specialist AFR niche.

But for a non-corporate reader I can state the obvious. At the current price it is a log-order away from anything I would pay. And I am a potential customer, just not at stratospheric prices (if I recall it is twice or even more than the price of the FT online, and closer to ten times the NYT; cannot recall WSJ). I cannot view the AFR prices as they have just discontinued selling subs while introducing a completely new system.

Clearly AFR wants to retain those high-value corporates but they could devise a tiered system to garner wider readership. Perhaps that is what the new system will do. The NYT system has been very successful.

Michael Gill

2 December 2011

@Michael James: You're debating the cost of a cup of coffee a day, or its equivalent ($3).

My view and experience is that advertising based on free sites does not work (at least, it doesn't pay the bills). It has cost FT, WSJ, NYT et al a lot of money and they are now in the process of moving their online prices up.

I am told that "paywalls" are now the norm in the US, which is interesting because that's where the industry historically had least focus on selling paid print products.

The other factor to consider is that web sites need more and better content, so the costs are going up as the revenue from print ads is at risk.

In the case of the AFR, you need to understand that it's in transition. And the ad money in print is at risk.

Michael Gill

21 November 2011

Andrew Birmingham has published more on this issue:

Mike Martin

12 November 2011

I have bought the weekday paper edition of the AFR continuously for more than 30 years except for times when I was out of the country. I can't afford the online as well. However an increasing (although still modest) proportion of content comes from The Guardian (which is freely available), The Economist (to which I subscribe) and The New York Times (where in modestly exploiting the porosity of its pay wall I comfort myself with the thought that some of my $3 a day to the AFR ends up in the Times's pocket)

Michael Gill is right in that the AFR has managed (despite comical stumblings with online formats) to create a uniquely valuable news and commentary resource.

Business Spectator is steadily improving but it still has far to go and lacks investigation resources. As for The Australian, I wish they would print on three-ply paper. It would provide a more aggreeable experience. Perforations would be an added bonus.

Michael Gill

16 December 2011

Margaret's comment has been raised with me. I can only point out that she has never discussed the AFR model with me. I accept the she may have quoted others in asserting that it was disastrous. As to execution i assume that she means the technical choices that were changed after the launch and not to the multimedia platform and so on that I understand to be the most advanced and efficient available.

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