The recent departure of John Campbell from MediaWorks and the ongoing slew of staff changes at Māori Television once again brought attention to the turbulence that underpins current affairs reporting in New Zealand. But in reality this is nothing new. As shrinking print newsrooms throughout the world can attest, the news industry is struggling to plug the revenue holes caused by digital disruption.
And during a recent visit to the StopPress office in Mount Albert, Hive News founder and veteran business journalist Bernard Hickey told StopPress that the ad revenue numbers in both print and television are troubling.
"The first thing to do when you’re looking at journalism and Campbell Live is look at the ASA figures on advertising spend," Hickey says. "And what it shows you is that at around 2008 advertising revenue for newspapers started collapsing — I suspect by 2015 ad revenues for newspapers will be half what they were in 2008. And that’s a nominal figure, so if you inflation adjust it, it’s more than half."
Television has until now held strong, but Hickey sees a tipping point on the horizon.
"Television is this year having its 2008 moment," he says.
"Ad revenue for television peaked two or three years ago, and it's now starting to decline at a non-trivial rate. And obviously, the weaker of the two free-to-air players [MediaWorks] is hit hardest—and they also have some extra challenges, because they had debt. They’ve already restructured once or twice depending on how you look at it. TVNZ hasn’t had the same debt issues and is also in a stronger market position to cope with those revenue struggles."
Looking at the precedent set by the newspaper industry, Hickey doesn't believe that online advertising will ever reach the revenue levels required to finance mainstream daily news reporting.
"I’ve come to that view after having been involved in online news publishing since 2000," he says.
"Obviously, [mainstream news outlets] haven’t offset that by either online advertising revenues or subscription or counter-sale revenues. So they’ve cut their costs to stay profitable ... It’s become clear to me, particularly over the last four or five years, that prices of online advertising, what we call CPM rates for display advertising, for mainstream news—sports, crime, politics, health—have been dropping."
Speaking from his perspective as an economist, Hickey explains that he understood the advent of programmatic buying as "a beautiful way to connect enormous volumes of inventory with a limited number of advertising dollars."
"Essentially, what the programmatic networks do is create value by pooling, slicing and dicing audiences. But the value created is captured by the programmatic network and not by the publisher. It disconnects the publisher from the advertiser and that reduces market power and the ability to capture a good price."
Programmatic advertising inventory has exploded onto the market over the last year, delivering a surplus in available impressions. And while Hickey argues that this has resulted in lower prices across the board, Andy Wylie, the group general manager of advertising operations at NZME, previously told NZ Marketing that the prices will increase as demand rises.
"Since programmatic trading arrived in Australia, the only thing that has happened is that the price has increased,” Wylie said. "Think about the current housing market. When demand exceeds supply there’s a reason why vendors use auctions as their preferred trading method.”
When offered this argument, Hickey laughed it off.
"The [ online ad prices] may not have been dropping in the published advertising price lists, but they are dropping in real terms, because the CPM rates have effectively collapsed over the past decade," Hickey says. "And that’s because online advertisers have worked out that they can get a very good deal by buying their advertising through Google, in particular, but also Facebook and the other online exchanges. The game’s over. It’s been over for years."
Hickey has responded to the stark online landscape he describes by incorporating a subscriber system into Hive News when he founded the site in October 2013.
"I’ve gone the paywall and niche route. I’ve decided that the way to support my journalism is to provide something that’s exclusive, targeted and useful enough that people will be willing to pay for it."
Spending much of his time in the press gallery at parliament, Hickey writes stories aimed at people in corporate and government circles who are looking for news and information about the economy and government from in and around parliament, the beehive and various ministries. Hickey says that it was a very deliberate reason to focus on this type of content, because it offered utility to those in the corporate world.
"[Tangible Pulisher] Vincent [Heeringa] said to me this morning, there’s riches in niches, and I hadn’t thought of it like that, but I can see where he’s coming from."
Since its inception, Hive News has attracted over 500 subscribers, who pay $29 a month for 11 months of the year.
"Most of the subscribers we have are corporate subscribers. Within that 500 there might be dozens of corporate subscribers who each have dozens of regular people."
Hickey says that Hive News has proved profitable because he has kept a very lean ship, which sees him only relying on minimal sub-editing and news gathering assistance to develop the product that's delivered to users' email addresses every weekday morning.
"It’s a one-man publishing band," he says.
"It’s my news service, and the people who buy it are buying my news gathering skills and my editorial judgement. Whether that’s scalable into a proper news organisation is debateable."
So does he see paywalls as the way forward for mainstream media?
"What we do know in New Zealand is that the only substantial paywall around at the moment is the NBR paywall ... [and] It appears to be working. If you look at their employment history. They’re employing new people and trying new things. That’s positive, but again that’s about specialist publishing."
Hickey says that the problem with mainstream publishing is that the content they deliver is readily available on several sites, meaning that readers will be unlikely to deem it necessary to pay to view the pages.
"At the moment, you have a very large smorgasbord of options all offering the same content for free. You’ve got Radio New Zealand, RadioLive, Newstalk ZB, NZ Herald, Stuff, 3News, One News. It’s seven flavours of the same story within seconds.
"But what you end up with is seven different versions of dancing cats, and no one covering the court cases and the select committee meetings and the boring stuff that actually makes up the fourth estate. When you’re reduced to chasing page impressions with dancing cat videos and Sonny Bill Williams stories, why would you send anyone to a council meeting? How many coroners' reports have we missed where something really interesting happened?"
Hickey says that he understands that decisions like releasing Campbell or running softer stories on the impending Madonna concerts make commercial sense, but he is concerned that this threatens the fourth estate role that investigative journalism has until now played in holding people accountable for their actions.
"The public are going to have to ask themselves some tough questions about how they want to subsidise the public good provided by mainstream news organisations."
Hickey sees philanthropic funding, direct reader payments through a subscriber model or some form of state funding through a licence fee (as used in the United States and Canada) as possible solutions.
"The most efficient way of doing it would be through state funding or a license fee, New Zealanders don’t have a great track record of philanthropically funding anything."
And while Kiwis work out how best to support the continued efforts of those who keep the fourth estate in place, one can't help but wonder how many more important coroners' reports, council meetings and dodgy politicians will go under the radar.
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