Financial media leads on the path to profitability

As many have long expected, business media are showing the way in establishing profitable paths in the digital market. This week’s financials show confidence-building trends.

Long gone are the train smash years when fabulous properties like The Financial Times saw their profitability crushed by fashionable forays into expensive, valueless web experiments. In fact it appears that the FT is leading the increasingly profitable transition to pure digital product.

It’s taking a while for the message to sink in. Commentators remain obsessed with traffic measures like ComScore (below), despite the blatantly obvious fact that these are largely unrelated to profitability.

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The FT’s parent, Pearson, no longer reports its profit plainly, though its result for calendar 2014 was said last week to be up “sharply” or to have tripled. (Its last reported full year showed a £55 million profit for FT Group.) Whatever the actual FT profit may be, the very clear trend is in two numbers.

First is price. The FT charges a minimum subscription of $US335 and up to $US480 a year. Second is digital share of reader revenue, which is well over 70 per cent of subscriptions — and “content revenues” are about two thirds of the FT’s total revenues. If the FT can make a clean exit from print — which seems likely — profit should jump, since the print business relies on scale for margin.

Going back to the ComScore view of the world, it’s interesting that the FT does not make the cut of the top 25 business media sites in the US, while The Economist does. Of the two, The Economist appears to be least aggressive in pushing the digital transition. Indeed, its 1.6 million print subscription reach is part of a growth story that was accompanied by some solid price increases. But the more stark comparison is with Dow Jones, publisher of The Wall Street Journal.

The Dow traffic ranks fourth — close to the numbers attributed to the leading freebie sites. It is highly unlikely that the WSJ would see itself as a competitor with any of them. In fact, it recently reported subscription growth appears to have been solely related to price hikes, while the Dow corporate subscription business — Factiva — has been losing subscriptions at a rate that makes the net sum negative. The parent, News Corporation, doesn’t disclose WSJ financials. The fact that its quarterly commentaries rarely mention WSJ suggests that the results are not showing anything like the trend of the FT.

On the face of what’s been said and what evidence is public, it appears that the WSJ is still chasing audience and advertising. The results look to be poor. The FT appears to be chasing subscribers who value their product, and treating advertising as a valuable bonus. It would appear that the FT is on much firmer ground and might become very profitable when the print product is no longer in demand. Certainly the trend is one in which the FT can clearly invest, whereas that’s no so clear for WSJ.

WSJ should also be wary because in the big numbers game it has unfair competition — or at least an advantaged opponent. Bloomberg, which has been creeping towards a web presence for some time, has had its latest aggregation Bloomberg Business in the market for a few weeks. While it is a bit too much of a magazine in style to be a huge bother to WSJ, its content and style tends to go head to head with the image WSJ has been pitching. The advantage of Bloomberg is that its core business is in high-value corporate subscriptions to its professional trading suite of product. Its growing digital presence is, so far, largely a consolidation of what have been branding and marketing products that appear to have a low marginal cost.

In short, it remains hard to see how many of the mass products will get to solid ground for profit. Advertising is increasingly dominated by aggregators and prices are in decline, moving increasingly toward value based on client success. Hence the unholy slide toward native advertising, which used to be known as advertorial. This is not a value-creating scenario.

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The London-based business publishers look like the media’s survivalists. The Economist and the FT have both, in different ways and in very different patterns, found themselves inextricably attached to the quality and value they offer paying subscribers. Strangely enough, since they accepted that embrace, both have evidenced increasing confidence and solid-looking financials. Hopefully the lesson might reach a few others before they sink in the swamp of clickbait, pursued by native advertisers.

About the author

Michael Gill is Principal Advisor with ChangePond Technologies and Counsellor with global business advisory firm Dragoman.

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