I think I don’t want to talk too much about the news that SPH is trying to spin off its property assets into a new REIT.
We all know that this is in the works. Free up more cash, charge management fees, then use cash flow from newspaper publishing to create more.
Essentially, I am still rather pissed by a national news publication read by so many people for being very bias towards a certain political party.
I will much rather leave my readers with some articles to brainstorm about the viability of SPH’s newspaper business.
Paywall versus Free
Felix Salmon at Reuters wrote a very good 2 part article on Content Economics.
For those interested in how content monetization works, how to charge, the pros and cons will be interested in this article. It is especially interesting if you are a blogger producing content like myself.
Central to the theme of the post was the concept of value versus price. Putting up a paywall might not mean that the user get the full value.
We have seen that in financial newsletters who charges us a pricy subscription but may not substantiate to your overall returns.
Putting up a paywall will also mean that users can never experience the value of the content.
Amazing offline resources like the Oxford English Dictionary and the Encylopedia Britannica are facing existential threats not only because their paywalls are too high for people to feel that they’re worth subscribing to, but also because their audiences are not being replaced at nearly the rate at which they’re dying off.
The real reason why Fortune put up a paywall, of course, has nothing to do with how valuable Andy Serwer thinks the magazine’s content is. Instead, the paywall is just another way for the Time Inc brass to try to make money and keep the magazine’s rate base high, the idea being that people will be less likely to cancel their magazine subscriptions if they know that they won’t be able to read that content online for free.
Which brings up a fundamental rule of online subscriptions: there is zero correlation between value and price. There are lots of incredibly expensive stock-tipping newsletters which have a negative value: you’d be much better off if you didn’t subscribe to any of them at all. And of course there’s an almost infinite amount of wonderfully valuable content available online for free, starting with Wikipedia and moving on through the sites of organizations like Reuters, Bloomberg, the Guardian, and the BBC.
At the end of the day, it would seem that all roads leads to a world where if you are unable to build a relationship with your readers and make yourself valuable to them, this could go sour pretty fast.
The second article talks about how SPH transform their business model in this digital age.
I have always been wondering why won’t they separate and show when digital format of their papers will become profitable.
I overlooked the fact the importance of effective pricing and product transformation.
This included the global Boston Consulting Group’s recent assessment that "in most countries, print media companies continue to have commanding brands and strong consumer relationships".
The Poynter Institute, which teaches journalism, also noted in an article last month that several studies had predicted "an extended economic shelf life for print, even as audiences swing digital and the search for viable digital news products continues".
A third report by the International News Media Association had also painted the future of the news industry as a "print plus digital, hybrid industry".
This is exactly the direction that the SPH division’s newspapers have taken, said Mr Daniel.
"For SPH, the bottom line is we have built a successful business model for our print and digital products, both online and mobile. We can and will grow from here," he added.
Mr Daniel noted that The Straits Times is now "a multimedia product: print, online, mobile, video as well as social media, with our staff working together across platforms".
He added: "Later this year, The New Paper will turn 25 and will relaunch as a bold, new multimedia product. It will pioneer yet another new business model: a print plus digital price for newsstand sales."
Touching on charging for content, Mr Daniel said that SPH was among the first media companies in the world to introduce digital paywalls, a practice now increasingly common at newspaper websites in the United States.
He revealed that by the end of the financial year last August, The Straits Times had reached almost 30,000 digital subscriptions, bringing its total average daily circulation for both print and digital editions to a high of 374,000.
The number of digital subscriptions has more than doubled since then, he added.
Last month, The Straits Times’ website straitstimes.com and AsiaOne also hit record page views of 85 million and 66 million respectively.
The reason that SPH can enact a paywall is due to the people that most value having up to date news and good local journalism (I don’t agree about this) reads their paper publication.
By bundling their digital alternative and not having an overly high cost, it lets the users choose which format they prefer.
Should digital becomes the format of choice in the future, habit and those that have enjoyed the value, would continue to pay for it.
But this model will only continue to work if they can provide higher value compare to a cheaper alternative i.e. free.
As Buffett notes, to produce local content you need efforts. For the universal global news, Google will be your best friend.
This is probably the reason, SPH takes a very aggressive stance to protect their intellectual property rights, thus suing Yahoo last year.
Would the new media be able to create a blue ocean? I highly doubt that. Although new media is more efficient and larger volume, being a less monopolistic market and lower barrier to entry makes me think that growth will still be anemic and that it is prolonging the obvious.
What do you guys think? Have your opinions changed regarding SPH?
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