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Home portfolios Strategy and Accounting – Paywall Strategy of News Corp

Strategy and Accounting – Paywall Strategy of News Corp

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  • Business & Management
  • Marketing

Description

            News Corp is the amongst the top three media conglomerate in the world that has major interests beyond newspapers including film, cable, satellites, etc. The company has achieved greater success as reported in News Corp for the year 2006 with increase in revenue and net income. However, the newspapers segment has reported negative growth during the period while the circulations of magazines have increased compared to the year 2005 (News Corp, 2006)[1]. Overall the revenue of News Corp was increasing but profits in newspaper segment were decreasing since 2006 and introduction of paywall strategy in 2010 didn’t provide any solace to the business. The study critically reviews the effect of paywall strategy on News Corp and recommends certain viable suggestions.

Paywall Strategy

1)         Newspaper industry earns majority of its revenue through advertising from other companies who pay depending upon the number of circulations. The advent of internet gave rise to electronic news where advertisers pay depending upon the page views.  The paywall strategy implemented by News Corp by putting WSJ, The Times and The Sunday Times behind the strategy has resulted in downfall in the number of monthly page views. The paywall strategy worked well with Wall Street Journal, the same didn’t happen with Times UK as the subscription package of £1 per day for the news which was available for free on other online newspaper was not of much importance. Whereas Wall Street Journal provided editorial content, analysis and expert articles on topics which attracted certain target groups for subscription (Drury, 2010)[2]. According to comScore, the readership of Times UK website declined from 4 million unique visitors to 2.4 million, a 62% drop in the readership whereas page views came down by 90% from 41 million views in May 2010 to 4 million in September 2010 (Schonfeld, 2010)[3]. The audience of Times newspaper has dropped from millions of unique visitors to merely 200,000 paying subscribers which shows that paywall strategy of Rupert Murdoch is a failure providing cold feet to the advertisers to think of advertising on Times online (Moore, 2010)[4]. As published by Times that their number of subscribers is more than 105,000 apart from 100,000 from regular reader who have subscribed to the daily newspaper, the important part is that subscription is spread over four months which means there were 26,250 subscribers each month (Geere, 2010)[5], could be considered as page views compared to 41 million page views before the strategy was applied, which could be a greater threat to the popularity of the newspaper, circulation wise and revenue wise, providing an opportunity to its competitors.

a)         The drop in the page views will be a big blow to the company as advertisers wouldn’t want to invest their money on a place where they could not get more visitors. Moreover, the Times may have to increase its CPM and CPC to generate more revenues. In order to take a close look at what the Times has lost in lieu of paywall strategy, it is necessary to take into consideration the advertising option before the paywall strategy was implemented (Schonfeld, 2010).

(41,000,000 page views x £0.10 CPM (per 1000 views) = £4,100,000 per month)

            It is assumed that advertisers were paying 0.10p for 1000 views and with 41 million page views, the Times could have easily made £4.1 million per month which has now reduced to merely 4 million page views giving back only £400,000 which could be termed as huge loss in terms of revenue.

            However as reported by Times UK, 105,000 subscriptions within four months could have generated £3,150,000 which is great as compared to the lowest number of readers. If the subscribers had paid £2 per week, then 52500 subscribers could generate about £415,000 per month apart from advertising which are still operating on the website.

            However not taking the advertising revenue into consideration, the total of income generated from subscription is £3,150,000 + £415,000 + £400,000 = £3,965,000 which is almost near to what the news paper was making while giving the content away for free. If the rate of subscribers goes on as it has gone for the past four months, then the company could be making really great profits as compared to the free edition. However, the consistency in paying for subscription from period to period depending on the content of the newspaper as the similar news may be available online for free elsewhere.

b)         Though the numbers of subscribers have been tentatively released by the Times, the packages in which they have subscribed and the success ratio has not been revealed leading to negative as well as positive assumptions. The strategy of News Corp is being closely monitored by other media analysts and advertisers while other newspapers are also moving towards paid service as online advertising falls short of publishers’ hopes of replacing dwindling print ad revenue (Pfainer, 2010)[6]. Despite the loss in number of readership due to paywall strategy, the management at News Corp seemed pretty pleased with the outcome of the strategy which was evident in the statement of James Harding, Times editor regarding the loss in readership as “okay” while News Corp Executive, Rebekah Brooks was pleased with the results stating that each digital subscribers were more valuable to them than many unique users accessing free content (Ingram, 2010)[7]. Similarly, James Murdoch, Chairman and Chief Executive of News Corp expressed satisfaction about the progress that the company has achieved in a very short period i.e. 105,000 subscribers (Luft, 2010)[8]. It is further important to mention that charging online has been successful for Financial Times where subscriptions to its websites and I-pad application rose to 50% in the first 9 months of year (Clark 2010). Thus, the statements of satisfaction and opinion about the digital subscribers from the leading executives at News Corp makes it clear that this strategy is here to continue and plan to bundle the subscription package with British Sky Broadcasting, which has 10 million customers, to further improve the performance of newspaper through the paywall strategy. News Corp presently owns 39 percent stake in the BSkyB and plans to take over the management. The management at News Corp is not in hurry to change the paywall strategy and its plan to include the BSkyB in the subscription package makes it clear that the company will continue with the paywall strategy unlike New York Times and Economist who abandoned the strategy following drop in the number of readership (Pfanner, 2010). However it is better for other companies to watch and monitor the progress of News and to make movements after analyzing the quarter results while many other leading news papers are formulating strategy to take their content behind paywall as in the case of Telegraph (Clark, 2010)[9].

2.         GMG (Guardian Media Group) is one of the UKs leading media organization with Guardian News & Media being its operations publishing Guardian and Observer. Guardian is regularly voted as the best newspaper website in the world delivering liberal journalism to a global audience while Observer is the Britain’s oldest Sunday newspaper and unlike other newspapers generates revenue from advertising and sponsored contents (www.gmgplc.co.uk)[10] The Company reported pretax loss of £171 million mainly due to fall in advertising (GMG Annual Report, 2010)[11]. Even though the media analysts are skeptical about the success of paywall strategy implemented by News Corp, other news agencies are formulating strategy to implement their own model of paywall to maximize their revenue. Since it is evident from the annual report that the company has incurred loss which is mainly due to advertising falls, it is inevitable for GMG to follow the suit which is evident in the board management’s proposal to charge for specialized content. Generating revenue in highly complicated web network is biggest challenge as most of the major online news provider are behind paywall offering their content for paid subscription like ESPN Insider, Nature and Science, Ars Technica, MacJournals.com and New York Times’ TimesSelect.

a)         Recommendations to overcome paywall challenges

  • As most of the news is found online for free, it is essential to attract more number of visitors to the site by providing the breaking and general news online which are also available on TV channels and news feed site.
  • Editorial content may be put behind the paywall while providing an abstract of the article enticing the reader to read full article by subscribing to the newspaper.
  • It may be advisable to increase the advertising cost according to the page, i.e. main page, editorial page, etc. and it is further mentioned that the area on free editions should be charged more as compared to paid editions because free editions will attract more visitors as compared to paid editions.

b)         The above recommendations will be helpful in not reducing the number of readers thus maintaining the page views and ad revenues intact while on the other hand it would also incur increased revenues from paid edition through subscription plus advertisement. The strategy will work in favor of GMG considering the fact that it is not losing any of its readers and at the same time getting subscribers to its editorial content.  Basing on the above recommendations, providing editorial expert opinions on news content and analysis through subscription putting them behind paywall is the optimal strategy while leaving the newspaper free of charge to regular visitors.

References

  1. Clark, N (2010) Telegraph will charge readers for its websites’, The Independent Media, http://www.independent.co.uk/news/media/online/telegraph-will-charge-readers-for-its-website-2148020.html
  2. Drury, A (2010) “News Corps builds the wrong paywall”, Revenues and traffic will fall early and swiftly, and News Corp is likely to have to rethink its dogmatic approach, MIS ASIA, http://mis-asia.com/opinion__and__blogs/bloggers/news-corp-builds-the-wrong-pay-wall
  3. Geere D (2010) The times discloses paywall statistics., Wired.co.uk, http://www.wired.co.uk/news/archive/2010-11/02/the-times-discloses-paywall-statistics
  4. GMG Annual Report 2010, http://www.gmgplc.co.uk
  5. GMG, Guardian Media Group, http://www.gmgplc.co.uk/our-journalism/
  6. Ingram M (2010) Its Official : News Corps, Paywalls are a Bust, GIGAOM, http://gigaom.com/2010/11/02/news-corp-paywall/
  7. Luft, O (2010) Times Claims over 50,000 monthly digital subscribers, Press Gazette, http://www.pressgazette.co.uk/story.asp?sectioncode=1&storycode=46223&c=1
  8. Moore CT (2010) News Corp, Being Buried under Crumbling Paywall, Reve News, Nov 4, 2010, http://www.revenews.com/ctmoore/news-corp-being-buried-under-crumbling-paywall/
  9. News Corp (2006) Earnings Release for the Quarter Ended March 31,2006, News Corporation, http://www.newscorp.com/

10.  Pffainer, E (2010) More Than 100,000 Pay for British News Site, The New York Times, http://www.nytimes.com/2010/11/03/business/media/03newscorp.html?_r=1

11.  Schonfeld, E (2010)  The Times UK Lost 4 million Readers to its Paywall Experiment, TechCrunch http://techcrunch.com/2010/11/02/times-paywall-4-million-readers/

 

 

 

 


[1] News Corp (2006) Earnings Release for the Quarter Ended March 31,2006, News Corporation, http://www.newscorp.com/

[2] Drury, A (2010) “News Corps builds the wrong paywall”, Revenues and traffic will fall early and swiftly, and News Corp is likely to have to rethink its dogmatic approach, MIS ASIA, http://mis-asia.com/opinion__and__blogs/bloggers/news-corp-builds-the-wrong-pay-wall

[3] Schonfeld, E (2010)  The Times UK Lost 4 million Readers to its Paywall Experiment, TechCrunch http://techcrunch.com/2010/11/02/times-paywall-4-million-readers/

[4] Moore CT (2010) News Corp, Being Buried under Crumbling Paywall, Reve News, Nov 4, 2010, http://www.revenews.com/ctmoore/news-corp-being-buried-under-crumbling-paywall/

[5] Geere D (2010) The times discloses paywall statistics., Wired.co.uk, http://www.wired.co.uk/news/archive/2010-11/02/the-times-discloses-paywall-statistics

[6] Pffainer, E (2010) More Than 100,000 Pay for British News Site, The New York Times, http://www.nytimes.com/2010/11/03/business/media/03newscorp.html?_r=1

[7] Ingram M (2010) Its Official : News Corps, Paywalls are a Bust, GIGAOM, http://gigaom.com/2010/11/02/news-corp-paywall/

[8] Luft, O (2010) Times Claims over 50,000 monthly digital subscribers, Press Gazette, http://www.pressgazette.co.uk/story.asp?sectioncode=1&storycode=46223&c=1

[9] Clark, N (2010) Telegraph will charge readers for its websites’, The Independent Media, http://www.independent.co.uk/news/media/online/telegraph-will-charge-readers-for-its-website-2148020.html

[10] GMG, Guardian Media Group, http://www.gmgplc.co.uk/our-journalism/

[11] GMG Annual Report 2010, http://www.gmgplc.co.uk