The case for an industry charging and distribution model So online pricing is now a major agenda item for
the UK newspaper industry. Some believe in it. Some don’t. But before you rush to your own conclusions, international experience suggests that......
The digital market is much like the print market. You will only achieve efficient, effective business models by working together in a competitive partnership that realise synergies. Just as Menzies’ and Smith’s provide an efficient way of distributing newspapers, to identifiable outlets, with good reporting systems, so in online, the news industry is only going to work in the paid for space with an equivalent, industry-led partnership. Microsoft ain’t it, and nor is Google.
1. The goal. UK newspapers must be able to maximise their range of audiences, and revenue opportunities. It is vital that audiences continue to come from as wide a range of sources as possible. 2. The why? Newspaper readers whether in print or digital are too fickle. Daily online audience figures reveal that digital visitors are still a fraction of the print audience, and their time spent, and pages read, are thin and economically unviable. UK newspaper readers are particularly volatile. And the most disloyal, brand agnostic newspaper readers are the richest ones; those most valued to advertisers. Matt Brittin, head of UK content at Google pointed out “Economically it's not a big part of how we generate revenue.” Microsoft’s head of UK news, has strong credentials, but the UK newspaper industry is simply too small relative to these titans to establish a strong negotiating position. Microsoft with command of 90% of the UK PC market are uncontrolled. Newspapers with a collective 10% of the UK communications market are being strangled by regulation. As long as Google or Microsoft is in control, publishers will neither enjoy the freedom to charge what they deserve, nor be able to compete as they should. Attempts by individual newspapers to align themselves to either a single online titan, or establish an independent charging system, will be counter-productive to the publisher, diluting in terms of the interim econometrics of audience and communication revenues, and ultimately will drive the industry down in market control and value.
3. The How? The answer lies in the creation of a pan-industry solution that manages distribution, marketing, aggregation, charging, and price elasticity, while enabling competition and a free market between each publisher. In addition a publisher-driven project, could act as a “curator” attract other partners such as magazines, trade publishers, books, academia, etc, maximising both the appeal of the service, and profitability. Let’s examine each of these points: Distribution The UK press already has an effective central set of resources in the NLA and PA. It would be a relatively simply exercise, to expand their remit, to the provision of title branded content, within a central search process. The NLA also offers sophisticated indexing, which can be used to provide far more granulated search, than is available in current search engines. This would enable the currently volatile users of newspaper online services to undertake granulated searches of their specific interests, such as “David Beckham” “Global warming” “Goldman bonuses”, by source. While few individual newspapers’ general content services can demand a charge, the aggregated facility could be of considerable value, particularly if it includes other third party content. See charging below. Marketing Marketing presumes that all the current search engines continue to co-operate – this can not be guaranteed. Against the regularly propounded argument that Google are stealing publishers’ lunch, is a reverse prediction, that in five years time, Google will come back and demand a payment for the advertising revenues derived from the audiences that they have generated for publishers. So the need for a consolidated approach is further demonstrated. However evidence from many experiences in other countries is that the best way to accelerate share of the online audience is by sites “sending” traffic to each other. Therefore there will be a need for publishers to consider how best to encourage users to stay within the environment of the partners, rather than disappear off to other services. This requires some complex discussion and agreement. Aggregation Currently aggregation of the search engines means that a legitimate story in The Times, lies alongside a blog from “Igor the eco freak”. This may be a legitimate facility but any service offered by Google and Microsoft, will facilitate this, where a publisher based system, will raise the value of legitimate content, while encouraging the idea of edited citizen contributions. In addition search engines fail to offer a categorized, granulated archive search.
Development of such a service, which includes governmental, corporate and citizen contributions, could become an enormously valuable source. And with the proposed granularity the current searches are inadequate, and valueless. Charging As discussed excepting the FT and WSJ, and possibly specific sources relating to sport, sex or finance, individual newspapers will struggle individually to charge. In fact a simple, universal subscription process can be developed, based on price points for individual downloads, complete newspaper copies, or access to specific databases or archives. These can be defined and confidentially implemented by each publisher. In addition a cross charging process can easily be developed, so if one title attracts a valued reader to another title, a commission can be paid. The winning players for revenue will be those with the most compelling content, thereby encouraging the free market. Price Elasticity, and profitability It is also possible to generate a unique system for measuring in real time the acceptability of content pricing, which can then be fed back into a wider elasticity model, which not only allows publishers to set price points, but also considers the relative impact of charging for content, versus the potential advertising income from a wider audience. Such a model can be used to determine the optimum profitability for the online service. Competition and a free market Given the neurotic regulatory controls on UK publishers, and the publishers’ own wish to maintain their competitive advantage, it is important to create a process that not only maximises opportunity and security for the industry, but is seen to enable strong competition, within the market. However through the appropriate introduction of rules, a strong technological solution, and the proven oversight of bodies such as the NLA and the NPA/NS, such a system can be successfully developed, for the profit of everyone.
© Jim CHISHOLM November, 2009