The country’s first major news paywall is pulling in respectable money for publisher NZME, with 15,000 people now paying a total of around $3 million a year to read premium New Zealand Herald content online.

NZME revealed its financial performance for the first half of the year (to June 30) on Tuesday and made much of the performance of its Herald paywall as well as its OneRoof real estate site and a stronger overall advertising outlook for the rest of 2019. It also pledged to keep focusing on cutting costs, which had fallen by $4.5 million in the reporting period.

The company’s advertising revenues were down 6 percent and its earnings before interest, tax, depreciation and amortisation fell 16 percent to $19.4m for the six months.

In that kind of environment the cash from the new digital subscribers will be a ray of hope. The 15,000 number is up from 10,000 two months ago, itself a milestone when NZME had met its annual target for the first year of the paywall. The financial results presentation today says more than 5000 of the 15,000 are paying full annual subscriptions, but it is unclear how many of the rest are on introductory deals or month-by-month trials.

A year ago, NZME chief executive Michael Boggs told analysts the company had a target to reach the Australian paywall benchmark of converting 4-6 percent of readers into subscribers within three years. At the current Herald monthly unique digital audience of 1.68 million, that would be between 67,300 and 101,040 paying by the end of 2021.

On Tuesday, analyst Arie Dekker of First NZ Capital estimated the current income from 15,000 subscribers (or just under 1 percent) at $3 million-plus a year and Boggs did not demur. Boggs said the ‘churn rate’ of people becoming subscribers then withdrawing was “nowhere near” the levels the company had expected.

The free digital access for newspaper subscribers had also lowered the churn for those products and 24,000 Herald print subscribers had taken up the digital offer.

One indication the paywall might have affected income in a different way was in the company’s result for digital advertising revenue – which fell by 8 percent in this period over last year, the same rate of decline as the overall market. It was Dekker who pointed out that in past half years, NZME had outperformed the market in this segment. He asked if the paywall’s predictable effect on total numbers reading the Herald website had affected how much advertisers were spending on that site.

Boggs said there had been a drop in the unique audience but that had reversed, the level of engagement (or time spent reading articles) had increased and the digital revenue loss was “absolutely nothing that’s worrying us”.

The company’s real estate site, OneRoof, had performed well bringing in $1.3m in the first half of the year, and with the premium paywall was showing strong growth. 

But its jobs site, Yudu, seems on palliative care, with Boggs responding to a questioner who reminded him he had promised limited patience with under-performers that: “We are currently spending less and less on it and becoming more and more impatient..”

NZME is seeing an encouraging start to its businesses in the second half, with the advertising market showing “some signs of improvement”. Bookings for the third quarter of the year were up 6 percent compared to the same period a year ago.

Boggs told analysts bigger spends were evident from banks, telcos and the tourism sector – particularly cruising.

The company noted: “However we remain cautious of the potential impact of the softening economy and weaker business confidence.”

NZME spent $3.2 million on redundancies in the past six months, about 50 percent up on last year. Its chief financial officer David Mackrell said redundancies had been found in all parts of the business “where we can manage costs better and find these efficiencies”.

On one level the 16 percent drop in Ebitda and the total fall in revenue of $8.3m for the half to $181.1m look confronting for NZME. 

But Nine Entertainment, the owner of NZME’s main competitor Stuff Ltd, reported in its New Zealand operations’ result for the full year to June 30 a drop in advertising revenue of 18 percent and of Ebitda of 24 percent to $A28.3m ($NZ30m).

NZME’s share price on the NZX fell yesterday by nearly 8 percent to 48c, close to its all-time lows. The stock was listed originally at 86c but has fallen as far as 46c as the company struggles against what Boggs again today described as “well-documented market headwinds”.

He declined to comment on NZME’s possible interest in rekindling a form of the StuffMe merger, as reported here at Newsroom and also in The Australian last week, saying the company policy was not to comment on market rumours.

At the Nine results presentation last week, Nine’s chief executive Hugh Marks suggested his company was still a willing seller of Stuff, despite a sales process having fallen through in June. “It’s a process that continues. If we do not get an outcome that reflects good value we are prepared to step in and operate that business.”

Nine executives had “spent quite a bit of time” with Stuff managers and are confident “that we can improve the financial performance of that business. [But] it still remains ‘held for sale’ and we remain hopeful of achieving an outcome.”

Tim Murphy is co-editor of Newsroom. He writes about politics, Auckland, and media. Twitter: @tmurphynz

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