The document discusses the challenges faced by traditional news media in adapting to the digital era. It argues that most publishers did not adequately integrate their digital strategies with their overall business strategies. They set up separate digital divisions that pursued large audiences and free content without clear business models. This led to losses and a failure to recover from disruption. The Financial Times and The Guardian are discussed as case studies, with the FT finding success through integration and a subscription model while the Guardian's strategy of free content and relying on cash reserves proved unsustainable.

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POWER VERSUS EMPOWERMENT: CONSUMER VALUE
AT THE CENTRE OF NEWS MEDIA STRATEGY
Presented by Michael Gill, Counsellor with Dragoman, former CEO
and Editor in chief of the Financial Review Group and Chairman of
Australian Associated Press. Bandung, December 2016
ABSTRACT: Influential and often highly profitable media institutions
have been disrupted severely by the effect of digital media on
advertising and consumer behaviour. Many in the industry forecast
failure for the majority of traditional news sources and some assert
that there is simply no business that will employ substantial news
gathering staff. The author believes that few incumbents responded
directly to the digital imperative and very few acted with confidence
in the value of their content. The paper offers a case study in
Australian business media that sought to put content at the centre of
the business.
Twenty years on, the digital evolution that made “disruption”
fashionable is entrenched. In wealthier communities the advent of
ubiquitous broadband and powerful mobile devices has driven and is
continuing to drive fundamental changes in behaviour. Some less
wealthy communities, notably that of China and increasingly of India
and – soon – Indonesia are experiencing the benefits and pitfalls of
high capacity digital interaction.
Yet despite the fact that media was one of the earliest impacted, it
seems today that media managements remain generally in a state of
shock. This is especially true of the newspaper business, but is also
increasingly true of broadcast television and radio. One reason for
this is in the culture of those institutions.
In Australia and in many other places, newspapers and broadcast
media have been powerful for a long time. They have had a strong

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influence in social and political affairs and, generally, little
competition in their business. These factors were heightened during
the 1980s when ownership regulation of both newspapers and
broadcast media was relaxed, leaving the bulk of newspapers in the
hands of two companies and most of the television in the hands of
three. Over time, many large cities in Australia came to be served by
only one newspaper – often part of a national chain - and by
television and radio networks that are largely national in focus.
Profits were up, but the contest over content became marginal.
As the internet era emerged in the 1990s, Australia’s established
media reported strong and sometimes record profit. Yet the culture
at its heart was eroded and, in many ways, entrenched fatal flaws
that would be exposed by digital media.
Put simply, media was managed as an advertising channel. When
readers began to turn away from some newspapers, circulations
were boosted by various devices in order to induce advertising. My
point being that the paid sale of content to readers was not a
priority. The core measure of reader engagement was not really a
measure of success. As a result, there was little critical management
of the quality of content. Content is central in digital media. Yet that
was not at all the basis for news media’s response to the emergence
of digital consumers.
The critical decision for incumbent media management facing its first
digital commitments was: do we integrate? For many, this issue –
which became a debate in many cases - was simply a turf war in
which people used to management control were up against the
innovators. In some senses that was certainly true. But the heart of
this question is about the nature of change and the values on which
consumer change shifts.
The prominence of management consultants in heading new digital
silos of august publishers was certainly a factor in what followed.

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Indeed, one ex-McKinsey digital consultant is said to have applied
the infamous description of the village of Ben Tre’s demolition during
the Vietnam war as a metaphor for newspapers. (“We must destroy
the village in order to save it,” the journalist Peter Arnett reported as
the rationale of a US Major in the destruction of that Vietnamese
town.)
Most publishers chose not to integrate digital media, but to create
new operations with separate management and financial goals. In
most cases, the digital divisions were headed by people with little
experience in media. Interestingly, almost all of those people came
up with a similar answer: pursue an audience at all costs and without
immediate goals for sustainability. Content was made free. Success
was measured by the numbers of page views or unique users or time
spent on the site. Large amounts of money were spent on
experiments that produced large losses. Yet, even today and despite
evidence to the contrary, the fundamental assumptions of 1996 are
entrenched. That is, many publishers’ digital strategy relies on the
assumption that large amounts of traffic will sustain the business.
I highlight the decision over integration for a simple reason: it had a
profound effect on the industry from which most have not
recovered. It entrenched the notion that digital media is separate
and that contradictory business models are an acceptable means of
resolving uncertainty. Today, there is widespread acceptance that
integration of digital plans into the organisation in total is essential in
every business. A global executive survey published this year found
that:
“…… nearly 90% of digitally maturing
organizations — companies in which digital
technology has transformed processes,
talent engagement, and business models —
are integrating their digital strategy with

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the company’s overall strategy. Managers
in these digitally maturing companies are
much more likely to believe that they are
adequately preparing for the industry
disruptions they anticipate arising from
digital trends.”
- Aligning the organization for its digital future, Gerald C. Kane, Doug Palmer,
Anh Nguyen Phillips, David Kiron, & Natasha Buckley, Deloitte University Press 25 July 2016.
Fairfax Media, the company in which I worked, employed about
10,000 people. Yet in that company I was the only manager to move
from a full time newspaper role to a senior digital role when the
digital division was created in 1996. There was no effort made to co-
ordinate or even leverage the resources and experience of the
traditional business. Over time, the gap widened, as it did in
newspapers all over the world. There were exceptions. The Wall
Street Journal aimed for integration from the outset, though its
execution proved to be challenging. Of the people I was able to
meet, only The Economist staff seemed to have a confident grip.
Their view was pragmatic, if disconcerting. “There’s no money in it,” I
was told, “so why would we jump in?” As it turned out, doing
nothing for a bit was the wise choice.
Two prominent examples are worth review. In 1997 The Financial
Times had a digital model in which all content was free. Its then CEO
told me that ft.com would make money because of a joint venture
with a financial services provider. The idea was that the rich
investors who read the FT would be funneled in ft.com to the
financial services, where ft.com would take a commission. At the
time I found this idea strange. I told the ft.com CEO that in my
experience people who read the FT (and the newspaper I worked
for) wanted independent, reliable information on which they made
choices. So the assumption that they would be herded to an
investment struck me as both unlikely and potentially objectionable.

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The FT’s decision not to integrate its digital operations highlighted
another issue. The newspaper had been very profitable because its
audience attracted advertising at high rates and its readers paid
significant amounts for the content. For quite a long time the FT was
also in the unusual position for a business publisher of having income
from (very profitable) listings: it charged money for investment
products and listed stocks to appear in its pages.
One quite odd aspect of the ft.com initiative was in its style. The
Financial Times had sold its classic building (Bracken House) near St
Pauls in 1987 and the move to a modern building at Southbank
coincided with what many felt was an aggressive change in
environment and management style. So the decision to locate ft.com
at 1 Poultry, a new building in the City located directly opposite the
Bank of England, was something of a statement.
Launched in 1994, ft.com went through a number of iterations
before an aggressive marketing launch in 1997-98. The times could
not have been better, since the emerging digital technology wave
had gathered commercial momentum. Over the next few years the
proliferation of digital startups and related share market enthusiasm
drove historically unusual revenues to business media globally. These
boom years were capped off by a fever of advertising around the
fear that global IT systems that had not been upgraded would fail as
the end of the millennium passed at the end of 1999.
Despite the boom times, The Financial Times Group was driven into
losses by ft.com and did not recover its previous level of profit until
2007, just in time to be pitched into the global financial crisis. The
FT’s recovery, which remains challenging, began with the integration
of ft.com and a gradual imposition of what are now substantial
subscription fees. The FT’s owner – Pearson plc – had long been
moving away from its diverse conglomerate style and focused on its
education business. Finally, in July 2015 the FT was sold to Japan’s
Nihon Keizai Shimbun – the Japanese business publisher owned by

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its staff that had been considering its options for global publishing
for some time. It may be ironic that the change in ownership will
coincide with the FT moving back to Bracken House in 2018,
displacing a Japanese bank.
“Rather than chasing scale and advertising,
The Financial Times has built its digital
business around an audience-driven
subscription model.” - http://digiday.com/publishers/inside-
financial-timess-digital-strategy/
In contrast with the FT, The Guardian has lost money for decades.
Until recently, its losses were balanced by income from trade press.
Like the FT, The Guardian saw the opportunity to reach a global
audience through digital channels and made that its focus, fully
integrating its digital team from its earliest efforts. It also added local
editions for US and Australian readers. And, overall, The Guardian’s
digital product has been a triumph, ranking 10th
in the world with 42
million monthly visitors. All of its digital product is free.
So long as its other commercial ventures were profitable, The
Guardians’ losses were manageable. But from 2007 the Scott Trust,
which holds all of the assets, began to sell commercial activities and
by mid-2014 the Trust held about 840 million pounds in cash. When I
visited its management in 2014, it was clear that the focus of the
business was on editorial expansion. When its sustainability was
questioned, executives expressed the view that the earnings on its
cash enabled the Trust to lose 40 million pounds a year. It was not
clear that there were plans to avoid losses or to build further
resources. In any case, there was a flaw in the strategy: it did not
envisage volatility.
In mid-2016 The Guardian group reported a loss of 69 million pounds
and another 104 million pounds’ reduction in the value of its assets.
Its cash was now 765 million pounds and operating assets aside from

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The Guardian itself valued at about 200 million pounds. Unless
something changed, The Guardian had a decade to live at best. Not
surprisingly, a big component of the loss was falling print advertising.
There was also a lesser fall in digital advertising – largely attributed
to the increasingly effective competition of aggregators like Google
and Facebook.
At this point The Guardian remains committed to free content and
rather than impose a fee it has invited readers to become financial
supporters. So far, 50,000 have responded, a small number of people
and most likely an insignificant financial result. In the mean time The
Guardian is reducing costs – largely by cutting 250 jobs from its
global head count of about 2000. Of those retrenchments about 150
are said to be coming from its editorial staff of 725 and the balance
from commercial activities. One detail that is hard to understand is
that the latest staff reduction is only half of the number added since
2012, when The Guardian last made retrenchments. So it would
appear that despite its own clear experience, The Guardian has been
investing very heavily in content that it cannot sustain. Which begs
the question: how does The Guardian decide its future? Is there any
clarity over its purpose and value? It must be said that, on current
public knowledge, the jury is out.
“the Rodney Dangerfield of commercial
journalism: It gets no respect.” -
http://www.niemanlab.org/2014/02/the-newsonomics-of-the-guardians-new-
known-strategy/
One of the great tech managers is Andy Grove, of Intel. Grove is
known for his response to the intensely innovative nature of the
semiconductor business. “Only the paranoid survive,” he said. Yet
another remark has impressed me for its relevance to media. Grove
said that in tech, “he who commoditises last, wins.”

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By breaking down media channels that had monopoly character –
broadcast licences, printing and distribution assets – digital media
shifts power. When that shift is accompanied by high capacity
consumer devices, like smartphones, the effect for incumbent
businesses is not merely disruptive. It is traumatic. Because the issue
is not simply technical; it is cultural. The empowered digital
consumer transcends the power of media companies.
In many ways the culture of news media is about power.
Traditionally, journalists have stood in the shoes of the collective
public and with that authority obtained the privilege of access.
Digital media provides access to primary sources and in many ways
the intermediary journalist is redundant. Today’s politicians,
governments, corporations and community organisations have the
means to communicate directly and citizens have the means to
obtain independent views from within their own networks. So there
is a real reason to question the power of journalism today. Yet power
is a lingering cultural characteristic of industry behaviour, when
today’s imperative is value. The value of journalism has changed for
obvious reasons. It is not clear that many journalists and editors have
responded to that change.
My experience has led to the belief that news journalism remains
valuable and in many ways may be more valuable than ever. Digital
media demands that we understand that value; that we question our
assumptions and test our initiatives. Above all that we align
resources with the value recognised by consumers. That is the
challenge in an industry that has typically been subject to very little
uncertainty over its essential value to the consumer. Today’s media
must be sure that its product is valuable to those who pay for it.
CASE STUDY: AUSTRALIAN BUSINESS MEDIA 1998-2011
From 1 July 1998 I was both publisher and editor in chief of The
Australian Financial Review (AFR). In December of that year my

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duties also included the management of Fairfax Media’s business
magazines. In total, these publications employed 600 people at their
peak and while the majority worked on The Australian Financial
Review, the niche magazines ranged over business and investment
and IT and operated in Australia, the UK, Singapore, Hongkong and
India.
I had been deputy editor of the AFR until 1996, when I joined a small
digital strategy group in management that developed strategies and
some products for Fairfax. In that role I conceived and delivered a
site that offered the first web-based real time Australian equity
markets information. I negotiated a commercial content aggregation
joint venture with Dow Jones and led a Fairfax investment in a US-
based investment data aggregation platform.
As was the case with many publishers, Fairfax’s digital strategy group
became a product group. For reasons of history its niche business
titles had embarked on small web site developments of their own.
But while the AFR web site content was produced in the newspaper,
the product management and strategy was with Fairfax Digital.
Fairfax Digital, like many other newspaper digital groups, chose to
pursue strategies in which the news content was offered free on line
in order to attract consumer traffic that was to be monetised in
advertising and other commerce.
Fairfax’s digital strategy presented a number of challenges for me in
managing the business. Most obviously, the AFR was a niche title
with a premium audience. Its value relied on premium pricing in both
content and advertising, value that would be eroded by offering the
content for free. Between 40 and 50% of AFR revenue came from
content pricing – the newspaper subscription was around $800 a
year. As a result there was a prolonged strategy stand off.
In the absence of an active investment strategy for digital media, I
began to develop processes and methods for managing a digital
future. My earlier experience led me to focus on strategies in which

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content value was the primary driver and on audience metrics that
tested those assumptions. I had already concluded that the strength
of print channels for advertising was to be eroded by the mass
aggregation and data analytics that the web would bring.
Like any organisation with a strong commercial history and
reputation, newspapers had entrenched cultures and an ironic
tendency to embrace their past somewhat more closely than is the
case in other workplaces. An editor of The New York Times once
observed that no workers anywhere were more poorly informed
about their own industry than journalists, which in my experience is
no understatement. In any case, and despite the realities of their
work, journalists were not inclined to question their work habits and
preferences. That was my starting point.
Regardless of what strategy was pursued it seemed to me in 1998
that it would be essential to maximise the value created from our
core resources – the time of people employed. In making choices we
would also need to know much more about consumer value, since
the quota of specific content demanded for a newspaper has a
binary relationship with relevant advertising volume. So, for
example, the advertising of commercial property in the AFR would
fluctuate from week to week, creating sometimes extreme
workloads for specialist property writers. Little advertising volume
pursued pages allocated to general business news, yet this was the
core content of the AFR and which – at times such as profit reporting
and so on – demanded large allocations of editorial space. In a digital
world with no manufacturing costs, editorial space is unlimited. The
critical resource to manage is time – the time of the writers and
editors.
Having been deputy editor of the AFR, I came to the task of
managing its transition to multimedia with knowledge. I was also
very conscious of the need, in general, to maximise the resource

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invested directly in value that was transparent to consumers. These
two factors led initially to questions about organisation and process.
The manufacture of daily newspapers may be purely a daily event
and in many cases this is how it is managed. Advertising is sold,
editors are supplied with pages populated with advertising and at a
certain point the edited page image is transmitted to printers and
the papers shipped to consumers. In an extreme case, staff come to
work and complete that whole process from scratch. The news, in
every sense, is what arrives in the day. In many ways this is how the
AFR operated in 1998.
Management of the news process at the AFR in 1998 was marked by
inherited practice, much of it derived from the larger production
metropolitan newspapers that were prime brands of the Fairfax
group. Editors convened for broad discussion of the day’s events
before lunch and reconvened in the evening to decide at around
6pm what priorities were allocated to which page. The final
newspaper was due to complete at around 8pm. Unlike the big
metropolitan papers, the AFR was national and its production
required an early printing start at five locations around the country.
I told a meeting of editorial leaders that in my experience the
management and processes in place at the AFR in 1998 produced
three “worst case” outcomes. By jamming the final decisions and
print deadline close together and the end of the day we produced
effects that maximised stress and pressure on staff. These factors
also limited flexibility and correction of error. Finally, the batching of
content at the end of the day in a narrow window also maximised
the cost of handling the work and increased the cost of
manufacturing and delivery delays from the print plant. We had to
change.
We began the process of change with a mapping of the work. This
showed, among other things, that there was a very heavy reliance on

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“hand-off” actions. That is, many tasks relied on a prior task’s
completion and the “hand off” of the task to the next person. One of
the problems of the “hand-off” is uncertainty. For example, when all
the elements of a print page are complete but one and that one is
delayed because a hand-off failed to occur, then the whole page is
delayed. Of course, a paper’s production requires that each page be
complete and, given the physical limitation on page-making print
technology, pages must be delivered in a reliable flow if the tight
production and delivery schedules are to be met. Hand-offs were
expensive and highlighted the need for much better processes.
Many of the staff became actively engaged in change. Some were
keen to improve their own lives, since the stresses of the established
methods were considerable. Some could see other benefits, such as
the opportunity to have better management of their stories. Some
were simply interested in the idea of improvement. For those
reasons we had a high level of staff ownership in a process that
brought about considerable change - much of it in the disciplines
required of editors to manage their own and other people’s time.
By the end 1999 the AFR editorial process was much refined.
Planning for future events was a weekly task, designed to highlight
known major news events coming up and to ensure that work was
done in advance to prepare specialist coverage. Major editorial
projects with long lead times were planned and managed, the two
elements coming together with the effect of ensuring that on any
given day the AFR had strong, fresh and preferably unique content –
rather than a dependency on whatever showed up on the day.
Editors were required to make firm decisions on content plans
before lunch each day. This allowed the flow of complete pages early
through the day and left much greater flexibility late in the day to
accommodate important changes or late events.
Stress levels came down: staff were able to go home without fear of
their work being undone in a late night rush. Production flows

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became much steadier, so quality improved and losses on late print
times disappeared. The final improvement came when we could shift
some of the editorial resource from the now smoother production
work to an expansion of writing staff. Quality improved, staff were
happier and we could invest more in valuable content.
While the editorial staff explored improvement and value, we shifted
focus to look into the value in advertising. Like most newspapers,
AFR advertising was priced according to its display and proximity to
the front page. Yet it was evident that quite a few advertisers were
specifically interested in niche segments, like property. So began a
process that saw a restructure of the newspaper to highlight
segments and generally to improve the utility of segmentation for
readers. Very quickly we learned that advertisers saw considerable
value in specialist segmentation with the result that competition
drove up prices to prime levels in what had otherwise been
discounted advertising space.
By reducing the complexity and improving work flows we were able
to increase the resources for creating content and improve quality at
the same time. And by improving the display of specialised content
we made advertising value more transparent, increasing revenue.
Overall the focus on value delivered substantial improvements in
profit and gave us clearer insights into the building blocks for a
digital future.
In the period from 1998 to 2005 there was considerable innovation
in product, much of which focused on specialisation and processes to
improve the unique values relevant to readers. Research was refined
to test our assumptions on a regular basis and to track both current
reader acceptance and the signs of migration to digital sources. The
broad research trends reflected high and rising metrics for audience
reach and a surprising attachment to the print product.

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In 2006, after a protracted internal debate, management of both
digital and print products of the Financial Review Group was
consolidated. The principal outcome of that board decision was an
immediate effort to establish a commercial basis for digital product.
The greatest initial hurdle was acquisition of digital skills, as the
specialists in Fairfax Digital had no experience of integrated or paid
product and were in any case occupied on other work.
As we researched user requirements for business and investment
information, two priorities became apparent. Users had quite clear
ideas of what was required and were also clear in the view that
digital product would not immediately supplant print. The
expectation for the daily business media – The Australian Financial
Review – was that a digital product would offer greater depth across
all of its sectoral and other segments. This presented a number of
commercial and logistical challenges. But first there was the problem
of technical design.
Users of afr.com were most likely driven by occupational and
investor purposes. Both required a range of original content specific
to Australian needs and each expected integration of other content
and relevant data, such as market prices and announcements. A
number of original features, notably some related to investment
analysis, were incorporated into the design, which was segmented
heavily into interests such as company news, mining news, property
and so on – as well as packages on public policy and political news,
economics and analysis. Perhaps the most difficult issue was pricing.
There were two basic drivers of the pricing. One was the cost of
extra content to meet the demand for much greater depth depth
and segmentation. The other was the absence of an advertising
model for such a content-heavy digital product. In the end, we priced
the total package at the estimated ARPU (average revenue per user)
of the print product – but also offered segmented packages at low
prices for those whose interest was specific to, for example,
property.

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The 2006 launch of afr.com was a failure. The principal lesson of that
failure is now widely understood as a first principle in digital product
management: make it easy. Primarily, the error was to try to build a
complex aggregation of functions and packages in a market that
wanted a single package in a simple web site. An incidental lesson:
technology is not the driver. In this case the technical solution – an
application using Flash technology – was correct. But it was the
wrong solution for the market, as was the attempt to offer clients a
variety of package price points. Version two of afr.com required a
single price and a simple, familiar combination of design and
function.
One reason for the complexity of the 2006 afr.com product was my
own attempt to hedge. Confident that content value was central and
advertising unreliable in digital markets, I’d fixed on a content driven
price that was higher than the print subscription by a large margin.
Faced with the obvious concerns about that price in a market then
dominated by free newspaper web sites, I’d allowed the AFR’s niche
segmentation to intrude a soft option. Packaging segments in the
way pay-tv subscriptions were bundled offered the appearance of
price and value choice. But it was not what customers wanted. The
lesson: make sure there’s great value in the content package.
The launch of afr.com revealed another fundamental issue. Our
incremental arrangements for producing newspapers, magazines and
web sites imposed a considerable cost. We had six technology
platforms on which work was produced for various products. Each
platform was independent of the others. All integrations of content
were manual. Our digital plan demanded much more content, but
the existing IT complexity made that very expensive. We had to find
a way to minimise the cost of handling content so we could maximise
the investment in original content itself. Established suppliers of
media IT were too heavily invested in print systems to offer an
alternative and new players were focused purely on digital product.

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Happily, some very capable Italians saw the opportunity to help
incumbent media make the multimedia transition.
Through colleagues in Europe I discovered that Eidos Media, a
Milanese firm, had created a platform named Methode that enabled
a focus on the content, rather than the channel. For me, this meant
that we could invest in specialised people who could then create
anything we chose – in any medium – while working at their desk
and without the need for another person to rework content from
one IT platform to another.
It took some time to assess the Methode system and to be satisfied
that it could integrate everything – newspaper, magazine and web
content – in a single work flow. (It could, but we would be the first to
do all of those in one system.) More time was required to establish
and obtain approval for the investment required. Then there was the
arduous process of designing a modern work flow and installing it in
a new IT system plus links to all of our existing databases and
customer recognition systems. After a huge effort over a long period,
our workplace was transformed to a truly multimedia – “media
neutral” – environment. The platform delivered two critical
capabilities: human intervention in the work flow was reduced to
quality management and editing; and the flexibility to add on
segments or new components to the web site was effectively as
simple as it had always been with print.
Late in 2009, afr.com was relaunched in parallel with the new
content making capacity enabled by Methode. Once bedded in,
Methode enabled us to avoid double (or triple) handling caused by
our old IT systems. Daily output from the same newsroom staff
numbers almost doubled. Simpler design and pricing of afr.com were
essential improvements, but extra content was critical to what
quickly became a positive reception. From November 2009 afr.com
attracted subscribers in big numbers and by March 2011 the monthly
growth had been steady for over year at an annual rate of 50%.

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The essence of this strategy was to focus on the value of the news
business. In print, half or more of that value was in advertising. But
the digital market offered little certainty for that kind of balance.
FRG’s digital opportunity was in creating a unique high value content
product that could support a high value approach to journalism.
A decision taken back in 2006 proved to be fundamental to the later
success of afr.com. Fairfax had been syndicating content to a
commercial aggregator, factiva, which distributed content to
businesses. Many of those clients in Australia were in the core of the
AFR market, so the factiva syndication was almost as serious a
commoditisation of content value as making content free online. I
terminated the syndication agreement.
In March 2011 FRG was experiencing the second year of its
multimedia operation and the second year of effects from the most
disruptive global economic crisis in 90 years. It is not possible today
to know whether the strategy would be successful as there have
been fundamental changes and I’ve no direct knowledge of their
results. But as of March 2011 the signs were good. print product and
digital product were profitable. There was a steady, strong growth in
digital subscriptions that implied by extension a sound basis for
transition to a digital future. Print subscriptions were weaker, but
adequate, and at that stage advertising in print remained sufficient
to justify the manufacturing costs. Advertising in afr.com was
surprisingly strong and by 2011 exceeded all direct competitors, all
of which offered content for free.
“the kind of bottom-line payoff that most
other smart digital-transitioning publishers
can still only dream about” -
http://www.niemanlab.org/2015/02/newsonomics-the-financial-times-triples-its-profits-and-
swaps-champagne-flutes-for-martini-glasses/

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OBSERVATIONS
1. News media is no longer a mass market advertising business. In
a digital environment, aggregators like Google and Facebook
have both the audience and the data at extremely low cost to
own the market and decide its pricing. Similarly, the utility of
transaction advertising for things like cars and homes is much
higher in a digital product and so classifieds are largely
disconnected from news media brands. Virtually all forms of
advertising are now priced and allocated on measures derived
from digital constructs, an effect which accelerated the rise of
buyer expertise in advertising agencies at the expense of
subjective values.
An interesting characteristic of the afr.com experience was that
the audience and premium value was able to migrate. Most of
the subscription growth in afr.com was in the preference of
subscribers to buy a bundle of print and digital: a clear
reflection of the then entrenched audience research. The
audience liked the print product but wanted a digital product
which much greater content depth.
Another insight into that experience: niche advertising followed
the readers, at premium prices. The strong advertising on
afr.com was driven by premium pricing, much of it highly
targeted. While the ad volume was low, the revenue was such
that it exceeded that of the highest traffic (free) investor site in
the market.
2. Despite the evidence, news media typically have pursued mass
market advertising as the sole foundation of their digital
product. While some such as the NYT have sought to build a
business on content pricing, most newspaper companies have
chosen to chase traffic and advertising in what so far are failed
or failing models, dependent on shrinking print income to
sustain shrinking resources.

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“The Economist has taken the view that
advertising is nice, and we’ll certainly
take money where we can get it, but
we’re pretty much expecting it to go
away.” – Tom Standage (http://www.niemanlab.org/2015/04/the-
economists-tom-standage-on-digital-strategy-and-the-limits-of-a-model-
based-on-advertising/)
3. Editorial strategies may be the death of news media. Free
content, distributions to aggregators and a host of other
strategies have been used by news media in the pursuit of
audience numbers. In doing so, editors often are no longer
required to exercise judgment and allocate resources according
to the values of a defined audience. In many cases success is
measured in simple metrics that largely come down to
undifferentiated traffic on the site. The result: content choices
are driven by traffic numbers. The effect: news brands that
were built on engagement of a demographic and often a
community are increasingly disappearing into a fog of popular
global traffic.
4. You get what you measure. In my experience editorial
managements and media management generally is used to soft
measures. This I think is simply a function of their past and
former market power. Circulation, for example, was for
decades the Viagra of editors. Despite the fact that it was often
fake – in the sense that it was no measure of the customer’s
ardour for the product. I heard of one case where a newspaper
was flying copies of its newspaper to remote parts of Canada in
order to fulfil discounted students subscriptions. And I know of
one newspaper executive who, faced with declining reader
interest simply lowered the audience demographic target to
cover what were fairly desperate efforts to inflate circulation
numbers. Avoidance of reality is well entrenched in business
practice and goes a long way to explaining what are otherwise
curious decisions. In today’s environment the most striking

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example is the way that newspapers measure competitiveness.
As noted above, traffic is today’s currency. Yet when news
media rank competitors they persist in comparing only their
immediate peers. This despite the fact that these aggregate
audiences are tiny relative to Google, Facebook and so on,
which take a disproportion of the related advertising dollars.
“In the first quarter of 2016, 85 cents of
every new dollar spent in online
advertising will go to Google or
Facebook” -
http://www.nytimes.com/2016/04/18/business/media-websites-battle-
falteringad-revenue-and-traffic.html?_r=2
Both Google and Facebook wisely avoid direct comparisons by
witholding the relevant data. News media show very little
evidence of imposing the discipline of audience engagement
measures that would drive editorial decisions in the direction
of consumer value. A longstanding weakness of consumer
discipline in newspapers has been compounded by the soft
option of digital traffic measures. This digital choice has
accelerated an already established trend for news media’s
engagement with audiences to weaken.
In some cases the pursuit of traffic has diminished editorial
quality to the point where audiences see no value. In others,
the lack of focus on content value has led to drastic and
haphazard cuts in staffing, to the point where much content is
simply opinion.
5. Price is what you make it. One remarkable characteristic of
news media management in the digital era is the decisions on
pricing. Even today there are prominent news media
commentators who assert that the role of newspapers is
essential in our lives. Yet the same people say that they have
no commercial value. Usually, this leads to a somewhat
uncertain lobby for philanthropy or public subsidy. Aside from

21. 21
generally tentative subscription pricing of a few news media,
the clear examples of conscious pricing are in cases where this
was already a vital element of the income. In the case of The
Australian Financial Review, each print subscriber was worth
about twice the very high subscription price. I’d imagine that
The Economist’s content pricing is a somewhat higher share,
while the advertising share of both the FT and The Wall Street
Journal might be somewhat higher than the AFR. In my case,
and I believe the evidence of the other publishers I mention
here supports this view, I believe that a firm focus on content
pricing and content value provides a stable bridge from the era
of print manufacturing to digital expansion. For example, The
Economist initially did little online. It’s first response to the
digital era was to extend its global print reach and increase
cover prices, which it did very successfully. It unloaded some
subsidiary products to focus on the core. And it built a
profitable stream of revenue from its content-related
conferences and business information consulting. The problem
for very many newspapers is the absence of certainty about
value. As a result, traditional value hierarchies are imposed,
many of which are entirely introspective in nature. A favourite
example is the presumption that columnists are the most
valuable share of editorial space. The evidence is that they are
not. In fact typical audience research shows over many years
very little reader recognition of bylines. And when some, like
the NYT, seek to test the subscription potential of their “most
valuable” staff, the result has been swift reversal. A
combination of poor discipline and the pursuit of
undifferentiated audiences has led many news media to
undermine their value. Increasingly we see rising shares of
celebrity journalism disguised as commentary in a digital
environment where commentary is largely worthless. And as
print income wanes, the resources for content of value are
distracted by traffic imperatives or simply missing. Products

22. 22
and brands are degraded at a time when the real need is
distinction in worth and relevance.
6. Value is key. The Economist is open in its view that any
advertising it gets is a bonus. Its business is content.
Increasingly that is also true of The Financial Times and perhaps
of both The New York Times and The Wall Street Journal. There
may be many other cases, notably in markets where advertising
has not been a big income source, such as India. But the most
common presumption is that newspaper value has shrunk by
90% (the newspaper dollar becomes a digital dime). There’s no
question that big slabs of money, notably in classifieds,
disappeared when manufacturing and distribution lost their
status as competitive moats for newspaper revenues. It is not
clear that audiences have abandoned the imperative to be
informed. Obviously, content value is different in a digital
environment – if only for the obvious reason that some parts of
newspapers existed to attract advertisers. Up to now, not many
general interest news media have experimented with models
built on content value. This will demand a new focus, but the
evidence is that paid content is fast becoming a driver of the
relevant digital markets. There is every reason to believe that
future news product will be fully adapted to contemporary
multimedia (it is amazing to me that even the NYT does not use
video prominently), carefully crafted for value in its audience
base and profitably priced.
“Engaging with readers is now a mantra
at the F.T. Earlier this year, the paper
even created an audience-engagement
team in its newsroom” -
http://www.newyorker.com/news/john-cassidy/the-financial-times-and-the-
future-of-journalism
7. Finally, red herrings. Many confident statements about digital
media are simply wrong. My favourite: “data must be free”.

23. 23
Data is not and has never been free, though it’s not always
been clear who was paying. The pseudo-ideology of the web
has confused the fact that many organisations have an interest
in propagating information with the self-interest of getting
something for nothing. Unfortunately, this view has become a
comfort for those who might otherwise be forced to sustain the
value of what they produce by charging for it. It gets worse,
because once that idea is embedded it leads to the next stage
of retreat: we’ve lost control, they say.
“76% of Americans say they usually turn to
the same sources for news” - Pew Research Centre
(http://www.journalism.org/files/2016/07/PJ_2016.07.07_Modern-News-
Consumer_FINAL.pdf)
The idea that aggregators like Google have control of news
distribution is only relevant if publishers believe they can make
money that way. The evidence is the opposite. In fact they are
diluting their own brand and enriching that of the aggregator
for no commercial purpose. Yet media persist in giving
otherwise largely empty vessels the valuable content (aside
from pictures of exotic animals) that makes social media work.
It is noteworthy that publishers like The Economist, who’ve
maintained a consistently pragmatic view, do not today give
priority to aggregators. By way of example, the afr.com product
was not open to aggregator links and was not syndicated in any
way at all. As noted above, its fully priced subscriptions grew at
50% per annum from launch through to a strategy change in
late 2011. In my experience, well founded belief in content
value, delivered well and tested against the reality of user pays
is a practical option. The Economist’s 2016 results included a
32% rise in content profits and in which print ads earned only
47 million of its total income of $331m pounds. Profit was a
very healthy 60 million pounds – on a trend toward digital

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transition that will increase profitability as manufacturing costs
diminish.
ENDS
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