Game Changers: At a Time When Publishers Are Looking Almost Everything but Publishing for Growth, the Financial Times Proves Paid Content Can Be a Viable Business

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BACK IN 2002, when the digital strategy for most publishers still revolved around posting magazine stories to Web sites, the Financial Times adopted a strategy that previewed what was to come: charging online readers for content.

Today, as the reliance on advertising revenue proves untenable for many publishers, the industry is revisiting the idea of paid content. Two camps have emerged--those who think content should be paid for, and those post-Web 2.0 observers who say all content should be freely accessible and freely shared on the Internet.

For the FT, the switch has been a boon. Total global paid-for circulation is 563,026 (with digital subscriptions up 27 percent to 149,0947), while across print and online, the FT's average daily audience reaches 1.9 million. The FT Group--which includes Financial Times and FT.com, as well as M&A intelligence service mergemarket and The Economist--saw revenue jump 9 percent to about $300 million in the first half of 2010, while adjusted operating profit more than doubled to about $47 million.

Within the FT, content revenues are projected to overtake print advertising in 2011 (even as print advertising shows growth in 2010) and total advertising by 2013, with digital formats accounting for one-third of total revenue by 2012. The FT also raised its subscription rates by about 10 percent, with standard subscriptions costing about $225 while premium subscriptions go for about $330. FT.com registered users are up 77 percent to 2.6 million Still, it hasn't been a totally smooth road. The FT laid off more than 80 employees in 2009 and some observers have taken the FT to task for what they consider a clumsy consumer-facing pay wall, as well as the decision to put traffic-driving blogs behind the wall.

Here, FOLIO: talks to FT CEO John Ridding (a former journalist himself), about the remaking of a business model, and why online publishing has more in common with Internet retail than traditional media.

FOLIO: Financial Times had significant success in 2009 with digital subscriptions and digital revenue. How does 2010 compare? Does the model continue to be profitable? What have been the highlights of this shift? What areas didn't go according to plan and how did you respond?

John Ridding: We're pleased with the performance of our digital content engine and there are two pistons there. One is the FT.com's subscription machine. The other, which people know less about, is corporate content. Both of those engines were up double digits in revenue growth. One is focused on the consumer market, through products such as FT.com, while the other revolves around corporate licensing. Every news organization has been at the mercy of the advertising Cycle for decades. That makes it difficult to plan and manage a sustainable business and invest in quality journalism.

Our starting point is we need quality journalism and we need a business that can sustain quality journalism. When times get tough, there are two ways you can respond, including, as lot of publications have done, by trying to cut newsroom costs. The danger of that is you get into a death spiral by reducing the quality of what you're doing and exacerbating the sales and readership issue. We took the view that everything would come down to the quality of our journalism, therefore we had to develop a business model that would support it. That meant increasing prices. We doubled the price of our newspapers in pretty much every market and we have the confidence to charge for our journalism online.

FOLIO: How much of a role do other premium services--such as research, marketing intelligence, licensing--play for FT?

Ridding: Three or four years ago, FT was sold through aggregators such as LexisNexis. We got a cut, but we had the view that we weren't getting our fair share of the revenues. We decided on a completely new approach that requires companies wanting FT journalism to have a direct license from FT, and we set the price. …