Is a profit worth the price of the Times’s paywall?

http://www.theguardian.com/media/2014/dec/07/is-profit-worth-price-times-paywall

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Newspaper economics used to be dead simple. You charged a cover price and you billed advertisers. If you sold enough copies and ads, you had a business, a two-revenue-stream solution. But that business model is missing supposed dead today, last sighted drifting somewhere in cyberspace. Bid farewell to simplicity.

Except, last week, for one joltingly unlikely thing. The Times and Sunday Times together reported an operating profit of £1.7m – the first profit in that quarter over 13 long years. The print circulation of the Times actually edged 1% up year-on-year. Digital subscriptions went up as well, by 8%. Something that almost everyone said couldn’t happen confounded prophecy.

The most important dissenter, of course, was Mr Rupert Murdoch; which is perhaps why praise for this performance seems somewhat muted. Rupert, you may remember, was a leftover relic with acid and printers’ ink in his veins. He decreed – five years back, when the Times and the Sunday Times were billed as losing nearly £70m a year between them – that all his journalism must command a fair price. It couldn’t be given away free, dependent on ads for survival. It would be guarded by steep, non-porous paywalls. Stump up if you want to peer inside.

That meant no clicking trails across an open net, no entry points via burgeoning social media, no mammoth totals of unique visitors round the world, no pulsating communities of comment and influence. It meant – almost everyone said – obscurity, disappointment, a barren future. And who knows? Everyone may be right in the end. But not just yet.

Now, of course, simplicity doesn’t survive very long in a world of shifting complexity. There are many factors in play behind this Times success. Add a move into new, cheaper office space to the mix. Make some staff cuts. Join a neat supermarket deal that shifts extra copies from checkout areas. Appoint two new editors to freshen appeal. Find more external printing contracts to use spare press capacity. Load in the bait of Premier League goal moments to build digital subs. Divide the existing empire into two and bring the necessity of making, not losing, money to bear on newspaper holdings. And, possibly, look again at old auditing guidelines that seemed to make Times Newspapers Ltd a beleaguered island washed on every side by waves of red ink (with normal tax mitigation advantages attached).

Was the £70m loss ever real? Is the £1.7m profit real? Transparency, as so often with newspaper accounts, is elusive. You can’t quite tell how many subscriptions were abandoned as well as confirmed. You may find separate enterprises rolled mystically together. There’s no absolute certainty. But there is, nevertheless, a broad, underlying truth that matters – symbolically, and practically. The Sunday Times, staggering back from recession and the digital blight that wiped away most of its classified job advertising, is profitable again. The Times – tucked behind its paywall – is much closer to viability. Perhaps, one day, as on so many days before, it will be sold to a new owner. The staff are pretty twitchy. But there’s no obvious Rupert reason to unload it fast. Five toiling years have built new foundations. It won’t be a fire sale.

What are the important figures to register here? One is a breakdown of total revenue that shows sales accounting for 51%, with only 44% coming from ads. That’s hugely different from bygone times when quality papers might aim to make 80% from ads and a mere 20% from cover price. But it still seems to mean a profit on the bottom line, one bulwarked by circulation and not by an ad take that appears to slide lower and lower every passing digitised year. And then there’s the cash that big subscription schemes can offer – at least in very broad-brush terms.

Some 170,000 readers across both titles have chosen the digital-only route at £6 a week. That’s around £53m a year top weight. Or try a blend of digital and print subscriptions – some 390,000 of those. Perhaps £121m belongs there. Big, regular money if you can get the walls and the pitch right. And there are still ad sales and bog standard over-the-counter circulation stuff to swell revenue beyond these newer digital streams. It’s not difficult to see how that £70m black hole might have been covered.

Paywalls have other advantages as well. Because every copy, online or off, has a price, figures for total paid circulation have a neat, engaged feel: 545,000, up 3% year-on-year. And because paywalls keep the constant clicking of 24-hour updating away, so that the news and comment within the walls don’t need to change constantly, staffing levels can be kept lower, too. The walled approach is more akin to that of a conventional newspaper, plus digital bells and whistles. It isn’t a running news service competing with Reuters, Bloomberg and the rest. It is something much more familiar, something staider: a day’s news and thoughts sealed in time for those who want them that way.

Of course you can’t declare the economic argument between free and paywall policies over any time soon. The walled Sun’s current subscription level – around £18m to £20m – isn’t particularly impressive. The free Mail Online, with its 193 million unique browsers worldwide, took £62m in ads last year – but wants to push this up to £80m and then £100m by 2016. If it does that, there’s seriously transforming ad money to be made down the free road. And the Guardian, boasting similar digital revenue figures for the moment, will have great expectations as well.

The Times, behind its wall, has less global salience and less traffic. It may find expanding abroad very difficult. It has cut itself off from mainstream development – forced to obey the word of Rupert, not the apparent word of the market. Do we, though, know where that mainstream will take us next? Do we know whether Facebook, with all its referrals, is a permanent news tool or yet another fleeting internet phenomenon? Can we be sure that advertising – booming on digital, but not in a way that helps newspaper finances – can take some of the strain? Do more page views equal more revenue, or just more frenzied activity?

The jolting thing about that thin, frail Times profit is that it is here and now, not years down the track. The fascinating thing is that it is possible. The significant thing is that salvation can come in such different ways: and that hundreds of thousands of readers will pay up every week to show what they still like – and, clearly, putting one subscription with another, want.