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Follow the money, part one: Where New Zealand's news media is finding pots of funding gold

Follow the money. It’s an axiom that journalists have believed in for years and a guiding light when it comes to holding the powerful to account. But that phrase is increasingly pertinent to those who run media businesses. As advertising money flows away from traditional channels towards large tech firms, the old business model of selling space around the news is creaking. And that has led to a range of experiments from publishers and broadcasters hoping to keep the lights on – and to keep shining those lights into dark places. Erin McKenzie dives into the local news media feed and finds plenty of experiments, but no simple answer to the funding conundrum.

By Erin McKenzie | September 11, 2018 | features

We live in an information-rich society. At the press of a button, a click of the mouse or the flick of a page comes a wealth of local and international news and current affairs. On the flip side, as we’ve seen with recent political events, we also live in a misinformation-rich society. Who is regulating the content? Who is telling the truth? And what are the agendas behind the information? This tension means the accuracy, fairness and truth of journalism is in even higher demand at the moment as some of those in power pull at the strings of what seems to be an increasingly fragile democracy.

TVNZ head of news and current affairs John Gillespie says more so than ever, anyone can assume the mantle of a journalist, but making sure the writing is truthful, correct and fair is a skill that tends to go by the wayside from individuals who are not professionals.

Some comfort, however, can be found in News Works’ Trust in Media research with Colmar Brunton. The 2017 study examined how consumer trust in media has evolved with the digital media landscape and news media came out on top. When 600 respondents were asked to indicate how much they trust the news and information from digital media channels, news media websites/apps got 84 percent followed by Google’s 81 percent. TV website/TV apps got 77 percent while Facebook was just 38 percent.

Looking at traditional media, newspaper and radio both received 87 percent and TV 86 percent. 

So why is it that Gillespie says journalism is under more stress than ever? Looking at some of the employment numbers, it’s clear: according to census data, 1,170 New Zealanders worked in print, radio and television journalism in 2013, down from 2,214 in 2006.

And while most understand the need for journalism, the problem is that no-one’s entirely sure where the money is coming from to fund it. 

Bad news

Earlier this year, Standard Media Index (SMI) released the 2017 agency ad spend in New Zealand showing positive growth totaling a record $1.04 billion was spent on major media across the country.

Unfortunately for newspapers, they did not see that growth as agency advertising spend on the channel was down 6.9 percent to $56.7 million. Newspapers and magazines (down 14.3 percent) were the only two media channels to fall.

Shortly after, the Advertising Standards Authority (ASA) released its 2017 report on New Zealand’s advertising revenue and, again, newspapers were on a downward trajectory. Revenue in 2015 was $474 million, in 2016 $417 million and in 2017 $353 million.

Where there was positive growth for newspapers was the “newspaper digital” category, which has been on the up since 2015 when it sat at $41 million, to sit at $82 million in 2017.

In both the SMI and ASA reports, digital was on the rise. And TV was holding firm, with the 6pm news still bringing in some of the biggest audiences. However, signs are emerging that digital’s shiny-new appeal could be wearing off. In 2017, P&G cut $200 million from its digital spend due to bot and brand safety concerns and reinvested in channels with bigger reach including television, audio and ecommerce. And earlier this year, Unilever threatened to pull advertising from online platforms that allowed "toxic content". 

So could the concerns over tech see local advertisers move their spend in a similar direction? When Stuart Rutherford, managing director of Zenith New Zealand was asked the question by NZ Marketing, he said he sees no evidence that advertisers are shifting budgets away from online. By contrast, he said, its share of global advertising expenditure continues to rise rapidly and is forecasted to hit 44.6 percent of global ad spend by 2020.

“The concerns we have seen from large FMCG multi-nationals and others relating to brand safety and corporate responsibility are valid and yet they simply will not stop the tech and digital juggernaut, and we certainly will not see them shifting large spend back into traditional print channels.”

Most agree that advertising is not the answer if media companies hope to fund news and current affairs content. So what is it? 

Build a wall and make them pay for it

Look around the news media industry and you’ll see walls are going up. Newspaper brands like The Washington PostFinancial TimesWall Street Journal, and The New York Times all have one. Conde Nast brands The New YorkerVanity Fair and Wired have launched ‘soft’ paywalls, in the belief that having paying readers rather than relying on advertising just makes them better. Adweek has also recently launched a paywall. And, in many cases, they’re proving to be worthwhile.

The New York Times now has over 2.2 million paying readers according to Recode and the business has grown 30 percent each year since it started in 2011. Finally, consumers seem happy to pay for access to good content and, at a time when Donald Trump has attempted to destabilise democracy through constant attacks on the media, many have seen the need to support the journalistic institutions that hold power to account. 

Closer to home, NZME announced plans to have digital subscriptions in place by the end of the year. The announcement came at a similar time as the release of its 2017 financial results, which basically showed what they’ve been showing for years: in 2017, its print advertising revenue was down nine percent, reaching $121 million, down from $132.7 million in 2016. Its circulation revenue was also down three percent, reaching $83.3 million from 2016’s $86.1 million.

Meanwhile, its digital performance showed healthy growth, outperforming the market with digital revenue growth of 18 percent. But it’s still relatively small. And, given it, and all other media companies making expensive-to-produce news content, is competing for eyeballs with other digital behemoths (as well as smaller, very popular and non-journalistic domestic sites like MetService and Trade Me) it’s getting harder to sustain this still largely ad-funded business model.

That reader revenue is sure to rise with digital subscriptions. And, to get there, NZME managing editor Shayne Currie says it will focus on improving premium journalism and nurturing audiences online.

“We have a project team looking really closely at what we can o er in terms of premium journalism, what people are prepared to pay for, and how we present that generally.”

He adds, NZME doesn’t refer to it as a “paywall” anymore because it sees it as having negative connotations. Instead, it’s called a “digital subscription tool” or a “pay gate”. Many other publications call it a membership, often offering tiered options and various benefits.

“I think in the case of our newspapers we have seen people are prepared to pay for journalism and we believe it’s high time that with the right journalism and premium content people will be prepared to pay for that in a digital sense,” says Currie. 

Selling the sausage. Not the sizzle.

But what is premium content? Currie admits it’s quite subjective but says “it’s the strong work that reporters are doing each day, with the big in-depth investigations that you won’t find anywhere else”.

One news organisation with a paywall already in place is Newsroom. Founded by Tim Murphy and Mark Jennings in early 2017, the site appears in two forms, one a free newsfeed and another called Newsroom Pro. The latter publishes news, commentary and information for paying subscribers, which includes corporations, government agencies, local councils, NGOs, and individuals. However, Murphy says both Newsroom and Newsroom Pro report on the things that matter to New Zealanders. 

Looking at how the paid subscription model is performing, Murphy says they’re “more than happy with where it’s at” and, while he wouldn’t discuss specifics, he says they’re on track and believes reader revenue will continue to grow.

Right now, he says 35 percent of its income comes from subscribers and that will be above 50 percent by the end of year three. In four- to five-years, he sees subscribers being its biggest form of income.

But while the paywall appears to be on a positive trajectory for Newsroom, questions have been raised about the effectiveness of a paid subscriber model. According to Rob Howard, author of Hiatus, paywalls conflict with the internet age, because they charge readers when there is limitless free content.

He says for media companies to charge readers money, they have to ensure the offering is something worth paying for.

“The reality is that 80 percent of current- events news is interchangeable, regardless of your source. If you’re looking for today’s top stories, you can pick from a limitless list of vendors and walk away with a very similar body of knowledge,” wrote Howard in a piece published on Quartz, Atlantic Media’s very successful – and free – business publication. 

Another point of conflict he points out is with the primary role of journalism, which is to educate and inform the public about important issues. How can publishers decide what is free and what is paid for in a way that doesn’t undermine their other content? When nzherald.co.nz was redesigned it featured a section called premium and in-depth, which many felt was an admission that all the other content on the site didn’t fit into that category. 

“When the papers say, ‘this is so important that we’re making it free,’ they’re simultaneously saying that all the other stuff they publish doesn’t really matter, so they’ll charge you for it. It’s hard to imagine a business philosophy that’s more upside- down,” said Howard. 

To continue reading the story, see the next piece here.

This story was originally published in the 2018 Media issue of NZ Marketing. To subscribe, click here.

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