NBN promises risk and reward for newspapers

Some of life’s lessons are harder to learn than others.

At a young age my eldest son, Jack, developed a particular liking for yoghurt. Unsupervised, he found a tub in the fridge and – well you can probably guess the rest. Several years later, his tastebuds found Ingham spicy chicken wings irresistible. Same result, much more colourful. Now he’s at university indulging in the excesses of college living. Enough said.

Too much of a good thing can have regrettable consequences. Healthy balance is generally about managing the tension of opposing forces effectively. Diet vs. exercise, work vs. play or the primal drivers of business – risk vs. reward.

Australia’s National Broadband Network is likely to present this conundrum for the local newspaper industry. And after several lean years, the prospect of the NBN for newspaper publishers is mouth-watering.

Newspaper mastheads are now multi-platform products generating substantial audiences in print and online and attracting increasing interest in tablets and smartphones. It is widely known that seven out of the top 10 Australian news websites are owned by newspaper publishers, but not widely acknowledged that digital newspapers generated A$286million from advertising revenue in 2011, according to Price Waterhouse Coopers estimates. A closer inspection reveals that while online display revenue doubled over the last five years, digital newspapers outstripped this impressive growth by more than tripling ad revenue. Digital newspapers are driving online display revenue growth with a market share of approximately 25-30 percent.

The reward for newspapers is clear. Newspaper apps can be downloaded instantly. At 100 mb/s a half-hour video in high definition will take 88 seconds to download.  The tempting dessert is the A$3.9billion ad market that is currently the sole domain of the television industry, the home of the 30 second commercial. And why not? Newspapers certainly have the ability to generate, commission or acquire original video content. They already have the distribution platforms with growing audiences – Fairfax Media has revealed that over 200,000 apps for the SMH and The Age have already been downloaded, albeit, at this stage, free of charge.

Equally clear is the risk. The newspaper industry generates A$3.5billion ad revenue from its printed platforms. Migrating people too quickly from print to digital could jeopardise this revenue. There are however, some mitigating factors. Readers still love the printed product and research has indicated that much of the digital uptake has not been to the detriment of print. Print and digital are complementary. Readers have a very strong bond with their mastheads and will access them in whatever form available. Advertisers like printed newspapers because they know they work. And media agencies are rightly looking for well-defined rather than mass audiences to reach their targets more efficiently. The metric being developed by The Readership Works will cater to their needs via sectional, engagement and cross platform audience data.

Cyclical and structural pressures are real. The former is beyond publishers’ control, the latter a reality for all businesses. A third factor is often ignored – management effectiveness. By any measure Australian publishers have left their US and UK counterparts for dead but will continue to be challenged and examined over the next 10 years. I doubt there will be one correct business model. Different publishers and mastheads are likely to require different solutions.

The NBN will give regional publishers the opportunity to forge even tighter community connections, digitally. Some publishers may decide to reconsider unprofitable printed sales. Others will develop new distribution solutions. Does it make more sense for Seven West Media to truck printed copies of The West Australian to 40-50,000 cashed-up readers in remote parts of the state or distribute digital copies at a fraction of the cost?

In five to six years we should start seeing the impact of the NBN as publishers refine new business models. Jack will have taken his life’s lessons from the university campus to the fulltime workforce. And he’s showing a healthy appetite for the media industry.

Tony Hale is CEO of Australian industry body The Newspaper Works. This article first appeared in The Australian.

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