Launch of The Saturday Paper
28 February 2014
Just a few years ago in 2008, French President Nicholas Sarkozy held crisis talks known as the Les Etats généraux de la presse écrite, where he declared: “Democracy cannot function with a press permanently on the edge of an economic precipice”.
When the U.S. congressional commerce committee held a hearing into the Future of Journalism in 2009, its chairman John Kerry paraphrased Joseph Pulitzer's line that “our Republic and its press will rise or fall together” and added, “well certainly the quality of the dialogue in the Republic will”.
And this anxiety is not misplaced, for surely the work journalists do is as essential to our democracy as the work of legislators, judges and ministers.
And it is also true that for many years the most important foundations of that journalism have been the great metropolitan newspapers — with their lock on classified advertising, those rivers of gold as Rupert Murdoch once described them, nobody else had the resources to employ so many reporters or so much space so comprehensively to cover the events of the day.
As we all know those foundations are shaking. The Internet has smashed the business model of those papers by providing a more cost effective platform for advertising. The hyper platform of the Internet of course challenges all media platforms — print, radio, free to air and subscription television included.
But as the launch of the Saturday Paper shows rumours of the death of newspapers, even printed ones, appear to be exaggerated.
Of course Joseph Pulitzer's warning about the Republic and the press rising and falling together was not entirely altruistic.
He was not only a Congressman for a short time, but also one of America's most famous, and now revered, newspaper proprietors not least because of the journalism school he founded at Columbia and the pulitzer prizes that it established.
And, who knows, perhaps Morry Schwartz will do the same as Pulitzer and run for parliament — they have so much in common, both radicals, both idealists, both born in Hungary, both Jewish and above all with ink in their veins.
To mangle another line from Apocalypse Now this week — they love the smell of newsprint in the morning.
In Gay Talese's famous book on the New York Times, the Kingdom and the Power, he gives a sense of the immense costs of publishing a daily newspaper: The company in 1966 had 5,300 employees and devoured an estimated five million trees a year.
In Talese's world newspapers were very nearly a natural monopoly. The strategy for newspapers was simple — lower the face value of the newspaper, go for circulation and rely on the high entry costs of the business to keep out competitors.
Many American newspapers earned as much as 80 per cent of their revenue from advertising.
Newsrooms could be aloof from the grubbiness of commerce, enjoying the proceeds of the classified rivers of gold with the aloof independence of a Duke receiving the rents of his tenant farmers.
As Talese wrote of the Times newsroom: “If they do not completely ignore such other large departments within the building as Production, Promotion and Advertising, they acknowledge them with a certain condescension. This is particularly true with regard to the Advertising department which, after all, deals directly and constantly with that most contaminating of commodities, money”.
These days, few newsrooms have the luxury of ignoring where their funding comes from. In large part, the industry is yet to settle on a single model, or even strategy, that guarantees viability.
I have often said that in the digital age, perhaps the scarcest commodity of all is people's attention spans.
As Mark Thomson, the CEO of the New York Times company, said in a speech last year, every media company faces the same challenge.
Imagine their total market by graphing every reader who accesses their products every month on an x-axis. On the y-axis would be the amount of time they spend reading the news. The total area below that slope represents what can potentially be ‘monetised’ by media companies.
We are in such a state of flux that it's no longer smart for these companies to have a single approach for all consumers. Those high up on the slope are willing to pay a large amount of money to get a physical copy of the newspaper.
In 2012, I tweeted an article in the online site, Monday Note, which argued newspapers should drastically increase the cover price of their physical papers, to capture as much value from high end readers as possible. The Saturday Paper's cover price and focus on quality journalism will bear out whether that argument was right (though I suspect it will be).
Further down the slope are readers who likely have little loyalty to a masthead and will likely only read an article when pushed to it by an alert on their iPad or via social media.
This is a tough demographic to get to. Most newspapers are using porous paywalls to slowly train them to start paying for content. But typically, these are the readers for whom newspapers have to make tough decisions about — typically swapping print dollars for digital dimes.
Chris Mitchell this week noted that although The Australian has 65,000 paying digital subscribers, print still accounts for more than 90 per cent of revenue. Across the Australian industry, digital revenue still only accounts for 9 per cent of all income — advertising still accounts for 61 per cent of income and physical circulation accounts for 29 per cent of income.
It is too early to assume that digital revenue will step into the breach to the ongoing fall in print advertising revenues.
Apart from strategies for generating revenue, there are other models still testing whether media organisations even need to be profitable.
Famously, the Guardian is run by a trust, relieving it of immediate profit and loss pressures (though it cannot run at a loss forever).
In the U.S., philanthropists such as Jeff Bezos are increasingly investing in media companies for the same reasons they might have invested in universities — to contribute to the civic life of their communities and to create a legacy for themselves.
While media companies jostle and vie in the new environment, the role of Governments is pretty simple: to help, not hinder, new business models emerge and make it easier for companies to innovate.
Across my portfolio, the current media, telecommunications and radiocommunications regulatory framework is still fundamentally based in a mid-1990s world of relatively stable technologies and business models.
We now, of course, live in a world that has seen the explosion of the internet, the ubiquity of the mobile device, the invention of social media, the rollout of a fast broadband network, the end of analogue television and the rise of cloud computing.
In heavily regulated markets, tight regulation usually helps incumbents — they have armies of lawyers to help navigate complex rules and lobby Governments where smaller companies lack the resources. The pressures on the regulatory arrangements and the negative impact of out-dated regulation on the sector will only increase.
A few months ago, I kicked off a review of regulation in the industry and have been inundated with responses from a very concerned industry.
This week Fairfax CEO Greg Hywood called for a scrapping of the ‘two out of three’ rule, which states that proprietors should not be able to own newspapers, radio stations and television stations in a single market, in an era when newspapers can broadcast over the Internet anyway without having to get access to public spectrum.
All these proposals are being looked at but it is clear that any changes will have to carefully balance two competing concerns — the need for diversity in our media industry and to ensure that we have enough economically viable media businesses to make that diversity possible.
But that balancing act can't be divorced from what's actually going on in the industry. One of the great ironies of Labor's media reforms was that they were proposed to counteract media consolidation in an era when the main trend has been towards diversity.
For instance, Julia Gillard argued that: “We have got two newspaper companies which deliver their services online understandably in the modern age. They take 86 per cent of the Australian market.
If we looked at the top two newspaper companies in the US, they only take 14 per cent of the market … So there is a degree of concentration.”
You can only make such comments if you focus on a subset of news production, which covers the physical printing of newspapers.
But on the consumption side, the story is very different. Over the decade to 2013, the proportion of Australians over the age of 14 reading print-only newspapers fell from around 61 per cent to 41 per cent for all News Corporation titles, and from 25 per cent to 8 per cent for all Fairfax publications.
But that doesn't mean we've all suddenly lost interest in the news per se. The Newspaper Works EMMA (Enhanced Media Metrics Australia) figures show newspaper readership is actually up overall due to a 7 percent boost in digital readership during 2013.
The appetite for journalism is unabated — journalists have more readers than ever, their digital presence amplified by social media. What is less obvious is how to get paid for it.
Similarly, Roy Morgan Research reports an almost universal rise in readership for the daily newspapers in the last quarter of 2013, with overall masthead readership of each of the NSW metro dailies — that is, print and digital combined — up by around 3 per cent. 
This move to digital platforms has radically reset the economics of the media industry.
Digital-only sites spend next to nothing to serve new customers — unlike the printed version of The Saturday Paper, a website can just as easily be delivered to a reader in Alice Springs as it could to Sydney or Melbourne.
Once a company can manage the fixed costs of establishing and running a site, the real variable is the revenue line. It's no small cause for optimism that one of the newest local online offerings, The Guardian, has reportedly exceeded its revenue forecasts by 300 per cent.
The bias in the digital age is towards competition. News.com.au and the smh.com.au still retain top places among Australian news sites, but competitors are rising fast. The Daily Mail now has more unique online readers than the Courier Mail. The BBC is the 10th most popular site in Australia while the Guardian and Buzzfeed now have more than 1 million unique readers each month.
In the near future, media companies will be employing more data analysts around the world figuring out how to keep people on their sites for a click longer.
But the truth is that to capture the imagination of a reader — to inform, to explain, to amuse and amaze — is still by and large an art more than it is a science.
And it is in this art, that the reasons to have an optimistic outlook for newspapers is founded. Sharing stories is the most human of habits and the long form of journalism is one of the most pure, most enduring examples of that.
So on that note, I wish the editors and journalists of The Saturday Paper the best of luck in their endeavours.ENDS
 Monday Note, (2008), available online here: http://www.mondaynote.com/2008/10/05/making-e100-per-inhabitant-per-year/
 Guardian, (2008), available online here: http://www.theguardian.com/world/2008/oct/02/france.nicolassarkozy
 Talese, G., (1966), The Kingdom and the Power: Behind the Scenes at the ‘New York Times’, p.88
 Nieman Journalism Lab, (2011), available online here: http://www.niemanlab.org/2011/03/call-it-the-frank-rich-discount-the-sunday-new-york-times-moves-from-premium-product-to-loss-leader-and-the-best-deal-for-digital-access/
 Thompson, M., (2013), “Address at the Reuters Institute”, available online here: http://graphics8.nytimes.com/nytco/pdf/MT_Reuters_Memorial_Lecture_Paying_the_Piper_090613.pdf
 Monday Note, (2012), available online here: http://www.mondaynote.com/2012/09/02/why-newspapers-must-raise-their-price/
 The Australian, (2014), available online here: http://www.theaustralian.com.au/video/id-c0Mm5yazod4rX8zODXciM8t_QVKoFEuJ
 State of the Newspaper Industry in Australia, (2013), available online here: http://www.canberra.edu.au/faculties/arts-design/attachments/pdf/State-of-the-Newspaper-Industry-in-Australia-2013.pdf
 AFR, (2014), available online here: http://www.smh.com.au/business/media-and-marketing/scrap-crossmedia-ownership-rules-fairfax-20140224-33chq.html
 Gillard, J., (2013), available online here: http://pmtranscripts.dpmc.gov.au/browse.php?did=19151
 Based on Roy Morgan Research data.
 Crikey, (2014), available online here: http://media.crikey.com.au/dm/newsletter/dailymail_361ab10f4eb118339a92acb8bca657e7.html#article_28705
 Nielsen ratings, reported in Mumbrella, (2014), available online here: http://mumbrella.com.au/news-com-au-regains-top-spot-read-website-mail-online-now-eighth-position-206878