[Editor’s note: Jacqui Park is head of network strategy and innovation for the IPI Global Network of Editors and Journalists. This op-ed, where she looks into the state of the Australian media market and its transformation over the past years, is adapted from her presentation at the WAN-IFRA Indian Media Leaders Summit]

The reports of Meta pulling out its support for news media forces us to ask an important question: just how important has been the funding and practical support from the tech platforms – particularly what we once called Facebook and what we still call Google?

The latest talk is the decision by Meta to end the three-year $100 million (€98 million) payments to US media for republishing material in the Facebook News Tab. It started with a bang – that widely shared “fireside chat” between Facebook head Mark Zuckerberg and the platform’s major critic, News Corp CEO Robert Thomson.

It ended in July with a whimper as reports leaked out that Meta was axing the tab (and the newsletter add-on Bulletin, which it launched to compete with Substack last year).

Australia is the poster child for government intervention to trigger support from the tech platforms to help transition media to the digital future.

Under the news media bargaining code legislated early last year, platforms designated by the relevant minister are required to negotiate agreements with news media over use of their stories on their services.

To avoid being designated, both Facebook and Google entered into voluntary agreements to pay a reported $US140 million (€137 million) to Australian publishers for material to be published in their respective news tabs or services.

It’s a lot of money that made a big difference as Australia’s media struggled through the Covid pandemic.

Australian media market circa 2020 – and how it transformed

Back in 2020, as Australia’s media skidded in the advertising collapse, some of the Australian media slammed on the business model equivalent of the brakes with cuts and closures. Regional and local media were particularly affected, with Australia’s largest company, News Corp, effectively abandoning the space, closing its suburban network across Australia’s largest four cities and all but three of its chain of regional newspapers.

Initially, these endured as digital offerings. But about a year later, these were folded into the company’s state-based mastheads.

Yet in those two years, the business model has – miraculously as it may seem – become sustainable, even profitable, in a shift from a legacy reliance on declining print-based advertising to a reader revenue model, with the core of reliable cash flow coming from subscriptions.

Although it seems to have happened quickly, it’s drawn on about a decade’s worth of digital innovation and industry reconstructing. But, crucially, the final shift to digital sustainability was made possible by the funding from Facebook and Google.

The shift to sustainability is a change that’s about more than where you make your money. It’s that big shift from a predominately business-to-business play, where news media aggregated audiences and then sold them to advertisers. In its place is the direct-to-consumer model. This changes a lot more than you think. Self-evidently, it changes who you are selling to, and so your whole sales strategy.

More importantly, it changes your journalism and your product design.

Digital advertising remains a viable model in certain circumstances. Each of the two major corporations in Australia have profitable free ad-supported digital products – news.com.au in the case of News Ltd and nine.com.au in the case of Nine. According to the Nielsen rankings these are now consistently either second and third in terms of unique users and time on site (the ABC is the leading free news site).

Their enduring mass scale anchors their journalism in a traditional general interest news format – daily politics, crime, sport, weather – more comprehensive than competitive – commodified, in economic terminology. It’s balanced with government support (and tax deductible status) for the not-for-profit AAP news service.

There’s some interesting start-up style innovation built off advertising such as New Daily, a digital news service mainly delivered through email. It relies on a mix of brand advertising (a kind of sponsorship) from its pension fund founders and programmatic advertising. In-daily has built a local voice through advertising and donations in Adelaide, Last year, a partner organisation In-Q launched in Queensland.

Other examples include daily newsletter Squiz, youth-site Junkee and Starts at 60, aimed at the over 60s audience.

But the core of sustainability is now subscriptions. The major newspapers in Australia have pivoted to the subscription model, through what we might call a metropolitan-national model.

The transformation of Australian newspapers, funded by the Big Tech

The major papers in Australia were city-based, often with the name of the city or state burned into the masthead brand, like The Sydney Morning Herald or The West Australian. This was a reflection both of Australia’s federal system and of the distance between cities.

The national exception was The Australian. In print, it had low circulation and relied on piggy-backing its printing city by city in the presses of the company’s co-owned local papers. This national focus has proved easiest to translate into a digital offering. According to News Corp’s 2021 10K filing with the Securities and Exchange Commission, this has resulted in about 242,000 paid subscribers.

In 2013, The Guardian launched a digital only Australian edition as a centre-left counterpoint to The Australian. In accordance with the company’s global approach, this was (and is, still) paywall free dependent on programmatic advertising. In 2017, as part of a global approach it pivoted to a reader / donor model.

As this demonstrates, for Australia digital subscriptions have been more successful at a national rather than a single city basis. Taking a product range optimised for local cities and turning it into a national offering has been one of the core innovations of Australia’s major two chains.

The solution has been to offer a national news product through a state or city-based portal. So, for example, subscribers in, say, Victoria, buy a subscription for the Herald-Sun, but through that get access to the content of all the company’s papers across the major states. The company has been able to translate this to about 550,000 paid subscriptions across all its city-based tabloids.

In both The Australian and the network of its city-based papers, News Corp imposes a strict (although dynamic) paywall. Usually, social media links will allow only a single story, while Google links usually lead to a subscriber splash page.

Similarly, Nine’s subscribers to either The Sydney Morning Herald or The Age (based in Melbourne) get access to content of both. The Nine group doesn’t release subscription figures, but its total paid subs is estimated to be about 450,000. It operates a more flexible (although still dynamic) pay-wall of up to 10 stories a month.

The transition to digital sustainability has been made possible by the government mandated “news media bargaining code”. This emerged from a two-year investigation by Australia’s competition regulator, the ACCC (Australian Competition and Consumer Council), into the impact of the digital platforms – specifically Google and Meta – on news media. Their research was backed up with strong publisher lobbying of the national government.

The result: the two big platforms are required by legislation to reach agreements with publishers for conditions – and payment – of use of their content. I don’t want to canvas the claims and counter-claims (and threats and counter-threats) but here’s where we are:

Both Google and Meta have agreed to pay the major publishers confidential amounts for use of their material in their news products – Google News and Facebook’s News tab. The competition regulator has estimated that the payments are worth about $200 million in Australian dollars (that’s about 140 million USD).

The bulk of this is going to the big two companies and it’s starting to show up in their public accounts as “content licensing” fees. As I said, figures are confidential, but reporting indicates that News Corp is getting somewhere between $50 and $100 million (figures may include payments for their US and UK operations) while Nine is getting about $50 million.

New digital only media are also receiving payments of varying amounts. Some smaller local publishers are still arguing about payments.

What’s next?

While the pandemic has hurried on subscription rises, there’s increasing evidence that numbers are starting to cap out. While the quarterly figures released by News Corp in their SEC filings show continued rises, these rises are getting smaller. My guestimate from the surveys in the annual Reuters report indicate that there’s about 1.5 million people prepared to subscribe in Australia.

Prices are at the higher end of global charges: The Australian charges about $500 a year – about the same as the London Times which you can also get bundled with the Oz; the News Corp city mastheads are about $300, similar to the LA Times offering; the Nine mastheads are about $200, or $300 for a premium subscription which includes the crosswords and an e-paper.

Once you start reaching the potential of subscribers there are two options – to either grow the audience by rethinking what it might be or get a greater share of wallet by getting more revenues from your existing audience.

News Corp is expanding its potential audience and revenue streams with new offerings. It launched a long-form sports site, Code, modelled on The Athletic and a games or puzzle site modelled on the New York Times product. Both are ad free aiming for a great reader/user experience. It also launched a news channel streaming service, Flash, but this seems to be struggling to get out of the hundred of subscribers.

Nine is attempting to shift people up the subscription chain with enhanced premium offerings, like events or one-to-few offerings. As ever, it’s a challenge to ensure you’re building desired enhancements rather than bolting on feature bloat. Some publishers – including The Guardian and Brazil’s Il Globo have found that more may be less. They’ve deliberately wound back their total content by abandoning otherwise available commodified news. The result has been a perceived higher value of the remaining content and, as a result, users spending more time on site.

Both Australia’s companies rely on friction to minimise churn – making the subscription on boarding experience delightful even while it might be more difficult to un-subscribe. The US Trade Practices Commission has recently suggested that certain friction-inducing practices (e.g. click to subscribe, phone to unsubscribe) may be unlawful. This, of course, seeks to leverage consumer inertia – and just how sustainable is that?

Coming out of the pandemic, the sustainability of Australian media appears more certain. Although pulling off the transition has relied on significant government intervention, the uncertainty about that continuing support means the future will depend on deepening the relationship with the audience and delivering the journalism they need in a product they are eager to consume – and pay for.

Source of the cover photo: https://depositphotos.com/

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