Sunday, 7 January 2018
A PAYWALL MAY BE THE SALVATION OF NEWS MEDIA
HAPPY NEW YEAR!, EVERYONE.
This is a very good article by Siti Nadzirah Samsudin is a Research Assistant at the Institute of Policy Studies, National University of Singapore, carried by The Malay Mail Online of 1 January 2018
Siti Nadzirah has touched on many points I have made over the past five years about the decline in news media (whether print, website or digital replica - i.e. e-paper) being due to the decline in print advertising revenue which commands high advertising fees as readership shifts to websites and digital replica, but where website and digital advertising revenues command very much lower fees.
"The drop in advertising revenue is not surprising, given the shift in readership from print to digital and the fact that advertising fees on digital platforms are far lower than that for print. A full-page newspaper ad here can cost over S$30,000, but the equivalent on a news website would cost only a fraction of that."
Instead, Siti Nadzirah recommends a currently rather controversial but otherwise viable alternative which could save news media - i.e. that news media charge subscriptions for its readers to be able to access articles on media publishers' website or digital replica, much like we pay the news stand price for print newspapers and print magazines. I'll come back to this in greater detail further down.
Whilst it may seem that a website or digital replica only publication is cheaper than print media, since it saves the media publisher on newsprint, materials, production and distribution costs but according to an infographic on Page 64 of Singapore Press Holdings 2016 annual report - herewith included below; newsprint costs accounted for only 7% of Singapore Press Holdings' operational expenditure in 2016, whilst materials, production and distribution costs accounted for 13% - or 20% of operational expenditure in total. On the other hand, staff costs accounted for the lion's share of 44% of operational expenditure, followed by other operational expenses at 18%.
(If you cannot see the infographic below, please enable viewing in your e-mail client)
Source - Singapore Press Holdings 2016 Annual report
Or click directly on the link below.
The bottom line here is that media operational costs are still very high, even if there are no printing and distribution costs.
For example, the now defunct Malaysian Insider - a wholly website-based publication, was reportedly costing its owner, The Edge Media Group, RM500,000 per month or RM10 million over 20 months to keep afloat, until its owner decided to call it a day and close down the publication.
Charging subscriptions (or what is called a 'paywall') to read news on media websites or digital replica on one's PC, tablet or smartphone has been rather controversial, especially when readers have been able to access the articles for free online, all this while and yes, there have been cases where publications which introduced a paywall have found it to have backfired, especially when readers just shift to publications which let them read more or less the same news for free on their website or digital replica.
Media publishers, including many major newspapers worldwide have put their print articles on their website as well since way back in the 1990s, and whilst readers had to buy the newspaper or magazine to be able to read it, however they could read the same for free on their website and since readers have become accustomed to being able to read articles for free online or in digital form, they have come to regard free access to the works of the labour of others as their entitlement in the cyber world.
Back then however, Internet penetration in most countries was low, even in the advanced countries such as the United States where Internet penetration was estimated to be around 30% in 1996. Moreover, Internet access back then was slow via those screechy 57.6 Kbps dial-up modems - yes 57.6 kilobits per second compared to 77.32 Mbps (megabits per second) average fixed Internet broadband speed in the United States as of December 2017, according to Speedtest.net. Singapore tops the list at 161.21 Mbps and the world average was 40.71 Mbps.
As for mobile Internet speeds, Norway tops the list at 61.20 Mbps, the United States at 27.22 Mbps, lightly below the world average of 21.25 Mbps.
Fixed Internet speeds in Malaysia were 22.15 Mbps as of December 2017, whilst mobile Internet speeds were 15.96 Mbps.
Also when one could only access the Internet on a PC or an personal digital assistant (PDA) back in the 1990s, today one can also access the Internet of smartphones and tablets and as prices of notebook PCs have dropped to very affordable levels, such as under RM1,000 for an entry level notebook today, compared to several thousands of ringgit for a notebook back in mid 1990s and equally so, very affordable smartphones and tablets costing below RM500 for entry level models, compared to thousands of ringgit in the early smartphone days, Internet penetration has exploded not only worldwide but also in Malaysia, where according to the Malaysian Communications and Multimedia Commission's Internet Users Survey 2017, 76.9% of people surveyed in 2016 said that they are Internet users.
So as the majority of people can now access media articles on their PCs, tablets and smartphones and mostly still for free, this however has put media publishers under increasing financial pressure to survive and these pressures may increasingly force them to resort to charging readers subscription to read their articles, or otherwise close shop, unless they have a rich sugar daddy or sugar daddies who are prepared to keep them in business despite losses, especially to serve political objectives.
Despite the general antipathy towards have to pay to read media articles on website or digital media, Reuters Institute Digital News Report 2017 found that 20% of Malaysians are pay for online access to news media, including subscriptions, donationss, or one-off purchases, compared to 16% of Singaporeans, 21% of Hong Kongers, 12% of South Koreans and a mere 6% in the U.K.
Malaysiakini is one Malaysia-based alternative media publication which has been charging subscription to read its articles for close to 20 year now and unlike the now defunct Malaysian Insider, Nut Graph and others which have closed shop, Malaysiakini has managed to more than break even and remain afloat from subscription, syndication and other revenue streams.
At first sight, it may seem that the subscription model works for Malaysiankini since there are enough Malaysians willing to pay to read the alternative news, mostly political, which they publish online, especially when any print publication in Malaysia risks losing its publishing license for publishing such news, since until now, online publications in Malaysia do not need a publishing license.
However, this argument does not seem very credible, considering that there are many other competing online publications such as Free Malaysia Today, The Malaysian Insight and several others which publish alternative political viewpoints online for free, though many of them are kept in business by mostly un-named sugar daddies.
As for the newspapers and magazines, they may eventually find themselves forced by circumstances to charge subscriptions to read their content online or in digital form, and whether enough readers will be willing to subscribe is left to be seen.
The entitlement mentality of expecting to be able to access articles and content for free online is still very strong and such a move may prove to be very controversial amongst the vast majority of Netizens, who are either unaware or don't care that most journalists, musicians, video and other content creators and production staff need to be paid for their work in order to survive financially.
After all, we are willing to pay a reasonable price for goods and services in the physical world, yet most of us would balk at having to pay to access content in the virtual or digital world.
For example, peer-to-peer file sharing services such as the long defunct Napster had allowed people to obtain music for free online and Netizens had justified this due to the "high price" of music CDs charged by the giant music publishing corporations, and some see this as the online equivalent of "Robin Hood" stealing from the rich to give to the poor but forget that by them doing so, deprive the musicians who created the music of the royalty income rightfully due to them.
Most of such Netizens would not themselves be willing to work for free, yet expect others to work for free to provide content free for them. Scroungers!
Siti Nadzirah's article published by The Malay Mail Online and referred to here follows below.
JANUARY 1 — The recent upheavals in the news industry in Singapore have sparked a conversation on the future of news organisations. How do media companies like the Singapore Press Holdings (SPH), which announced that it would terminate 230 staff members by year-end, remain competitive on a rapidly changing media landscape? What can small online publications like The Middle Ground, which ceases operation in 2018, do to get a slice of the pie?
The truth is that their future remains bleak without financial support from readers, given the trend in declining advertising revenue. And digital advertising revenue is monopolised by Google and Facebook. According to Fortune, they are expected to earn “half of all revenue worldwide” this year. Importantly, financial support from readers can also help to limit the influence of advertisers on media organisations and their reporting.
Research by World Association of Newspapers and News Publishers (WAN-IFRA) found an increasing trend in audience revenue globally. In 2012, newspapers earned US$80 billion (S$107 billion) in audience revenue and US$87 billion in advertisement revenue. In 2016, these figures were US$86 billion and US$68 billion respectively.
The drop in advertising revenue is not surprising, given the shift in readership from print to digital and the fact that advertising fees on digital platforms are far lower than that for print. A full-page newspaper ad here can cost over S$30,000 (around RM90,000), but the equivalent on a news website would cost only a fraction of that.
It is the drop in advertising revenue, especially from print media, that is hurting newspaper companies.
For example, while SPH has seen some growth in its digital circulations for various newspaper titles such as The Straits Times and Lianhe Zaobao, its annual revenue from its media business has dropped in consecutive years.
No one can quite say whether we may one day see digital advertising rates rise to be as high as those in print. But clearly, few media executives will bet on that.
The crux of the issue lies in giving readers a reason to provide financial support. This is a challenging but essential task.
One way that publications could appeal for readers to pay for content is to be upfront about their mission and challenges.
The Guardian is forthcoming in its financial needs. It includes an appeal for readers to either become a supporter for US$6.99 a month or to make a one-off contribution at the end of every news article.
In 2016, it has more than doubled the number of readers who regularly provide financial support — more than 800,000 readers from 140 countries are either subscribers or members, or give monthly or one-off contributions.
Reasons for readers to support The Guardian include the quality of its publication, its perspective on the news and self-declared cause of making “the world a better, fairer place… [and keeping] the powerful honest”.
According to its CEO David Pemsel, its supporters may also do so because of its unique ownership model. The Guardian is an independent company protected by the Scott Trust — any financial gains would “directly support journalism and not shareholders’ pockets”.
Building a relationship with its readers is also a core tenet for Dennik N in Slovakia — an online paper that publishes a print edition every weekday. Its journalists are encouraged to respond to comments left on their articles. Subscribers have access to a private Facebook group managed by the publication where they can “complain, comment or pitch their own stories”.
News organisations could lean on big data and artificial intelligence (AI). Knowing how, when and where content is being shared and by whom could provide organisations with key insights on readership patterns and trends. AI could provide readers with new experiences to consume content.
Singapore’s news organisations are also embarking on their own strategies. TODAY ceased its print publication to focus on its digital and mobile platforms, recognising that “readers increasingly want their news on the go”. The Straits Times is going for a greater pool of overseas readers, as currently 30 per cent of its online readers come from countries such as Australia and the US.
Why pay for news?
While there is no denying the attractiveness of free content, paid media and free content can exist alongside one another, as they serve different functions.
Why would readers pay for their news? According to a 2017 survey in the US by Media Insight Project, readers subscribe to a publication (print and/or digital) because it excels at covering topics that they care about. Others do so because their friends and family are already subscribers. Non-payers, on the other hand, are just not interested enough in the news and “think that there is plenty of free content available”.
Figures from the Reuters Institute Digital News Report 2017 on digital news consumption show that 16 per cent of Singaporeans pay for online access (this includes ongoing subscription, donations, or one-off purchases).
While this is higher than in the UK (6 per cent) and South Korea (12 per cent), it is lower than countries like Malaysia (20 per cent) and Hong Kong (21 per cent). This has implication for the sustainability of media in Singapore.
If journalism in Singapore fails because of a lack of financial support from readers, it is Singaporeans who ultimately end up the poorer for it.
Access to news and information is crucial to the development of an informed citizenry. News provides us with facts and different perspectives, critical for an increasingly diverse polity and complex world. Studies by researchers have shown that informed citizens are “better citizens”. They are more likely to participate in politics and more knowledgeable on political issues.
News organisations have the mammoth task of providing credible and up-to-date information, run a profitable business, and nurture and grow its base of loyal readers.
The rest is up to the readers. — TODAY
*Siti Nadzirah Samsudin is a Research Assistant at the Institute of Policy Studies, National University of Singapore.
** This is the personal opinion of the writer and does not necessarily represent the views of Malay Mail Online