People will pay for online news – but not enough to save newspapers: Bartholomeusz

Boston Consulting Group has conducted a survey with both good and bad news for newspaper proprietors. The good news is that a surprisingly large number of consumers would be willing to pay for online news. The bad news is in the amounts they are willing to pay.

BCG found that the percentage of people willing to pay varied from just under 50% in markets like Australia, the UK and US, to 66% in Finland and 63% in Germany. Unhappily (for the proprietors) the amounts they were willing to pay averaged about $US5 a month.

In Australia and the US it was, on average $US3 a month and in the UK $US4 a month, although the most people in those countries were prepared to pay was $US9 a month. Perhaps surprisingly, Italians were prepared to pay the most, at $US7 a month, with an upper limit of $US16 a month.

Interestingly, and perhaps (for proprietors and shareholders) disturbingly, while the proportion of people who said they were prepared to pay to access online news might be surprisingly high, the proportion of those paying for online news today is quite small. In Australia it is 13%, in the US 15% and in the UK 12%. It would take effort and time to convert the willing into the paying.

As BCG concluded, while it is perhaps encouraging that consumers are actually prepared to pay anything in a world where most of the online content produced by newspaper groups has always been free, those amounts aren’t sufficient to fundamentally shift the economics of newspapers.

Even that willingness to pay something would, BCG says, disappear if disruptive free models emerged. It makes particular reference to the potential for Google – the search engine Rupert Murdoch and other proprietors most like to hate and blame for their predicament – to offer comparable free services while generating its revenue from non-subscription sources.

BCG says it would shift the revenue mix of US newspapers from the current 80:20 mix of advertising and subscriptions by only two or three percentage points towards consumer pay. It could have a somewhat greater impact on margins and offset two or three years of advertising revenue declines, but that’s no pathway to survival let alone online prosperity.

It also says that not all newspapers will be affected in the same way, differentially benefiting newspapers with unique reporting and strong subscriber bases. The average major metropolitan newspaper wasn’t, it said, well positioned to take advantage.

The survey tends to confirm what most people in the media industry already believed – that charging for newspaper content online isn’t of itself a solution to the decline of the sector.

As my colleague Alan Kohler has noted in the past, the difficulty for newspapers is that their economics were built on local or regional oligopolies, or even monopolies, which enabled them to extract rich oligopoly rents from their classified and display advertising.

The emergence of better online challenger models is inexorably and irreversibly destroying their classifieds revenue bases while the internet, where most things are free and the advertising inventory is almost infinite, is undermining both their audiences and their display yields.

If they could somehow migrate their existing audiences online overnight – stripping their models of the capital and the costs associated with printing and distributing the traditional product – there might be some eventual prospect of a profitable, albeit more modest, model emerging, particularly if consumers were prepared to pay something closer to their stated upper limits for the content.

The transition, however, would be disruptive and destructive and they would, moreover, have to reinvent their models to be more focused and more directly user-useful than much of what is produced today. News, online, is generally a commodity.

New York’s Newsday has announced plans to do just that, charging for deeper local content. Its circulation, however, is largely confined to Long Island, which makes it easier to produce content that is highly targeted and distinctive.

Murdoch has delayed, but is still committed to, plans to charge for News Corp content, while vowing to wage war on search engines and aggregators.

The BCG analysis would support the sceptics who argue that’s a band-aid, rather than a cure, for newspaper ills and one that will diminish their potential audience and leave them trapped and still-declining in their pasts.

This article first appeared on Business Spectator.