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Global Intelligence for the Digital Transition

Tomas Bella: Publishers must experiment and see readers as customers

The shopping area on the banks of the Danube, abundant with restaurants and cafés, gives an impressionImpression(Also called a View) A single display of online content to a user’s web-enabled…

Recently, international media reported that Piano Media, a company you co-founded, has bought the US company Press+, which is bigger than Piano. Who then bought whom?

Piano has bought the American company, which expresses the conviction of shareholders and investors that Piano has a brighter future.

What is the difference between Piano and Press+?

The Americans controlled the US market and offered the publishers of mainly local newspapers a so-called “quick” solution – they were setting up payment systems for their online versions. Piano is more about seeking individual solutions and tries to help large publishers and newspapers survive the onset of the digital era.

Printed newspapers are experiencing a dramatic decline. Is there an example of their successful transformation into an online form?

Basically, what’s happening is that apart from circulation decrease, advertising is also going down and hopes that ads – which translate into income for newspapers – will be transferred to their websites are not fulfilled. The only option then remains to increase income from newspaper sales – in their digital form. So far, New York Times (NYT) is attempting to go this way relatively successfully. Ten years ago, their newspaper sales income was 25 percent of total income because the majority came from advertising. Today, sales income is more than 50 percent, which is quite a success, yet it’s still not enough. In any case though, an important change is the fact that for newspapers, readers have become more important than advertising clients. And that is very good.

How is daily SME, where you are editor-in-chief, doing in this respect?

We are taking a similar route as NYT and since we started quite early, we also have decent results. Thanks to the Piano payment system, we have had a relatively quick increase in paying readers on the internet and if this keeps on, there is a chance that paying readers will compensate losses from advertising. However, many media companies in the world may not have enough time for this change since they started too late with it or because they do not have content someone would be willing to pay for.

What is the problem? Are readers not ready to pay for news content on the internet?

That is one part of the problem. The other part is technical. Many newspapers are not technologically ready to introduce paying for content on their website. Newspaper publishers haven’t been used to thinking about their readers the same way as, for example, Tesco retailer does. For years, Tesco has been tracking its customers’ customs and adjusts to them to make shopping easier for them. For too long, newspapers have been used to doing business with a few large advertisers – now they have to accommodate a large number of clients – their readers.

And Piano offers this knowledge to the publishers?

Yes. Publishers often don’t have a clue about how complicated the whole process is.

Do you think that even in such a small market as the Slovak one, a newspaper such as SME can survive the digital revolution?

In principle, yes. The question is though, what will the newspaper look like and how large it will be. If all the advertising suddenly disappeared, the newspaper would survive. But it would probably need to lay off half of the staff. So really, it’s a battle with time. We also need to know what should be in the newspaper so readers keep on buying it and keep it alive.

Based on the experience with Piano, can you summarize what today’s newspaper reader – not only a Slovak one – is like?

In the past, everyone kept a close eye on how many clicks a certain text on the web had and aimed at the highest readership. It wasn’t that hard – you supply an attractive headline, something about sex let’s say. But these texts were and still are for free. Thanks to Piano, we now have an opportunity to track an entirely different parameter: readership of articles that readers pay for. In this case, the headline doesn’t play such a major role and the outcome is interesting – paying readers generally read what journalists themselves would like to write. And that is quality articles.

The SME daily in its printed as well as digital form had, under your leadership, started to experiment with long articles, sometimes reaching ten pages. What has been the outcome?

It’s an experiment in which we want to find out what readers are willing to pay for. Ever since we introduced Piano, it was clear that readers are ready to pay for commentaries by well-known authors. Other than that, we still know very little about what they want. For example, we sent a reporter to the United States to follow in the footsteps of the current Slovak president Andrej Kiska, who tried to run a business there 20 years ago. For the first time, we were able to figure out – on the basis of income earned by people purchasing it online – whether it paid off.

And how did it turn out?

We made profit in the region of thousands of Euros. At the same time, it’s the first concrete answer to the question whether it actually pays off to send editors on trips abroad. This question has long been the subject of academic debates carried on until now and such trips were thrown out of the budget due to costs. Simultaneously, it shows that these days, it’s important for newspapers to have fewer high quality long articles than many short news stories, which are available everywhere.

Until now, we have basically been speaking about an online version of news. But what about paper? Will printed newspapers survive?

I think some renaissance of newsprint will come – just like with the renaissance of watches – they have basically become a matter of status. It may be similar with printed newspapers – once everyone can read them on their phone, they will – for some people – become a status symbol like Swiss watches. Before that, a fall to the bottom awaits us. And I don’t dare to estimate how deep the bottom is.

Shouldn’t we perceive the end of the era of printed dailies and perhaps newspapers in general as something that needs to be expected in capitalism and a market economy?

The problem is that newspapers have an additional function than just merely surviving in the market environment. On one hand, it can be said that the dramatic developments in media will clean the market of many unnecessary journalists. On the other though, the development can be so fast that no newspaper will survive. This is a certain flaw of capitalism, because in a global environment, you can compensate for the disappearance of, for example, an airline by another airline. In the case of a newspaper though, this can’t happen due to the language barrier. Should a Czech or Slovak newspaper vanish, a German one will not replace it.

Is this a real threat?

Yes. It’s already happened in the United States – in some large cities, all local newspapers have disappeared. And the results of that are beginning to be felt. Americans claim that a clear relation between the existence of newspapers in a certain city and a level of corruption exists. The function of a newspaper doesn’t just lie in that it is read by people. – They serve as an important source of information – for example about corruption cases – for television news.

During the 1990’s, Czech newspapers concentrated heavily on high readership so much that they turned yellow. Are we not paying a price for not having – in Central Europe in general – raised readers of quality content?

Increasing readership – and the number of clicks on websites – made sense economically because that was the way to increase advertising revenue. But then came Google and Facebook, where most advertising has been moving in the digital era and suddenly, higher readership of a news website doesn’t guarantee higher ad revenue.

How come Piano has not been successful in the Czech Republic, while for example in Poland, it worked?

Simply said, Czech publishers still believe that advertising revenue from websites can grow and therefore they are not urgently forced to look for a solution to making online news readers pay for content. In the case of Poland, the key was the market leader Gazeta Wyborcza’s strategic decision to go the Piano way and others then followed. There is no such leader on the Czech market.

Piano’s payment system is expanding and – with the purchase of the American competition – recently gained 630 clients. The company now has more information about reader behaviour in the world. What does the analysis of this data say?

The biggest value of Piano lies in the fact that its clients – newspaper publishers – experiment in various ways and we can analyse what works and what does not. We can then advise other clients what steps to take, which type of content to charge for and so forth.

So what is an online reader like? What has Piano concluded?

A paying reader is much more loyal – not only are the more loyal ones the first ones to pay, but when they finally do it, they actually read more. The second significant piece of knowledge learned is that very often, readers appreciate and find value in things that journalists frequently look down on and don’t consider “real work” – things like press reviews, summaries, graphs, tables, etc.

You have travelled the world because of Piano and have met hundreds of newspaper publishers. Can you somehow summarize their state of mind?

It has very often been a horrific experience in one particular thing. For example, an 80-year-old publisher from Northern Italy, whose grandfather had been a news publisher 100 years ago is suddenly asking me, a young person, to tell him how to save his newspaper. Their experience has been that it’s enough to make a good newspaper and that alone will guarantee its survival. And now something has happened and they don’t know what.

Does this mean that a whole generation of publishers wasn’t prepared for change?

Yes. For the past ten years, they’ve been attending conferences which were supposed to prepare them for the transition to the digital era. But back then, it was all about getting as many clicks on the website as possible. Today, we are finding out that it doesn’t work. I think the success of the New York Times and some other newspapers lies in grasping very early on that readership of their website will not be proportional to ad revenue and that they need go another way, the way of a paying reader.

Has that been the point of Piano?

Yes. It was important to break down the barrier of web users’ resistance which claimed that information should be for free. It has taken some time but it’s changing, especially in the case of SME. The number of paying users of Piano has exceeded 20,000. Some publishers, however, were not satisfied with their number of paying readers and left Piano. It’s becoming clear that this national model, when a number of publishers join in one payment system, has its limits.

What are they?

It works well when publishers think about how to convince as many readers as possible to pay for content and how to make it easier for them. It doesn’t work when newspapers think about whether someone else in the national payment system somehow earns more money and, if so, then how to take it away from them. And lastly, it’s about how many enlightened publishers of the first type you can find as opposed to the second type.

If we simplify the whole problem, newspapers received two major blows in the past ten years. First was the onset of internet, which is pushing printed news out. The other was the dramatic fall of ad revenues while publishers were hoping advertising would just transfer from their print to digital edition. But this has not been happening because advertising has moved to, let’s say, Facebook. Is that correct?

Yes. Some media, which will live on advertising alone, will most likely still exist in the future, but that is not the case of quality newspapers we are discussing here.

Meanwhile, The Guardian seems to be taking a different path. They are trying to increase readership of their website and still do not charge for content.

I’ve met people from the Guardian and, in general, they are not opposed to charging fees for their content. They are only waiting for the right time; until then, they want to gain as many readers as possible. And for now, they are running at a significant loss.

Is there any model at all that at least raises hopes?

That would be the New York Times and The Economist. Their online versions have significant revenues from their paying readers. But those are global media.

Do you think that small national markets can follow this model?

Yes. But there are many obstacles. Sometimes, they are very trivial. For example, unlike in the United States, where the automatic extension of subscriptions is common, this is not the case in Central Europe and it is very difficult here. It wasn’t until last year that we managed to convince one bank to facilitate an automatic extension of its subscription for Piano and deducted the fee from the client’s account.

Why is that? Is it a cultural difference?

Yes. In the US, once you pay a subscription, they extend it every year automatically. If you want to cancel it, you have to ask for a cancellation. Here, it’s the other way around. We were worried about how people in Slovakia would react if we automatically extended subscriptions to Piano. But it went well and thanks to it, the number of subscribed readers has increased. This trivial technical detail is in reality quite deciding.

Are there other barriers, which if eliminated, would help gaining subscribers?

If, for example, everyone had an Apple smart phone, the problem would basically be solved. Publishers may have many objections to Apple, however, payment through Apple is technically very easy and doesn’t present the client – in our case a reader of online news – any obstacles.

Is there an option in case I want to read just one article which interests me and pay for it online without having to subscribe to the whole newspaper?

These are called micropayments, which exist but are very rarely used in practice because they are too complicated.

Are we then just waiting for a revolution which would enable such things? That I will open some article online, pay for it in a matter of seconds and I would be allowed to read it?

That is my dream too and numerous companies in the world are trying to solve this problem. So far, without success.

When they succeed one day, is there not a danger that the world will be divided into paying elites and the rest, which will be left with information for free and thus of much lower quality?

I think the world has been divided this way for quite some time now. For example, it is already divided into readers of Blesk (a Czech tabloid) and Hospodarske noviny (Economic /Financial times). I’m not even very worried that the Internet will cease to be an egalitarian platform, even if some people will have a better connection than others. Rather, I think the world of the Internet will adapt to normal society in which no one can just walk in wherever they want and demand a right to speech.

You are probably talking about those who comment in discussions below articles, and many of which tend to have psychopathic tendencies. Why can’t they be blocked?

A few years ago, the general opinion was that hatred would disappear from discussions after anonymity was banned. As it turned out, people continue writing offensive commentaries even under their name. You can see it on Facebook. We thought that the problem was the Internet, which provides anonymity. Today, we see that the problem is not the Internet, but society.

Why can’t these discussion forums under articles be forbidden or moderated the same way it’s done in the West?

Because it’s too expensive. The BBC has a whole department which monitors and moderates discussion comments. The department has 25 people. And no one here is daring enough to get rid of discussions completely.

Isn’t that a certain difference between us and the West?

I get asked a lot about this in the West, because this phenomenon of gigantic discussions with thousands of commentaries doesn’t exist there. They believe it’s due to people being forced to keep silent during Communism and now feeling the need to express themselves. Any restrictions are received very sensitively. Yet I think the group of people which comment and read these discussions is much smaller than it appears. Nonetheless, it’s a very loud group and that is why newspapers are afraid to get rid of discussions.

Is there any other difference as far as media go between the West and our part of Europe?

The biggest difference is between markets where people subscribe to news and those where they buy them in kiosks. In Germany, Austria or in Scandinavia where subscription prevails, a sense of stability exists and newspapers are not pressured to put such an emphasis on headlines and front pages. Newspapers are much more self-confident.

The internet as a public space has also created the blogger phenomenon. Journalists, mainly western ones, saw blogs as competition and considered them enemies. SME’s website, which you were heading for a long time, on the contrary opened up its space to bloggers. It was the first daily in the world that did something like that. How has the blogger phenomenon developed over time?

It has gone through a classic development curve: big expectations subsided. Nonetheless, the blogosphere has its place and bloggers on SME’s website still have many readers. Fewer people write blogs these days but more people read them. It’s natural selection.

What other natural selection awaits newspapers?

One question for example is whether it makes any sense to have a foreign editorial team or a sports’ section in a small market such as ours. Answering the question what a newspaper can afford to drop and what needs to stay in order to keep its essence is the hardest. And the answer must be found quickly, because there is very little time.

How do you read news? On mobile, paper or computer?

As far as news goes, I mainly get stories on Facebook, where I find links to particular articles in various newspapers. I then read those.

Isn’t it a little risky?

It’s been said that you make your own Facebook. The way I do it is I open the link, save the article on my computer and then I read it in the evening on my tablet. By the way, the tablet has greatly influenced the way newspapers are read, especially longer texts. It’s strange but the fate of newspapers may depend on whether tablets will cost $20 instead of $100 and how big their screens will be.

Which news website in the world do you like the most?

Ten years ago, I would have answered this question easily because back then, news websites were read by opening their home pageHome pageThe page designated as the main point of entry of a Web site (or main page) or…

Comparing the homepage of SME and Czech news websites, can you see a difference right away? And what is it?

Media’s seriousness can be determined by a method of counting the number of headlines on the homepage. SME has many more than the BBC, but perhaps due to a lucky coincidence, it had the advantage of being the main player right from the beginning on the Slovak market and it could thus set the rules. Czech websites are different – for example, a Czech tabloid is much more aggressive than its Slovak counterpart and even Czech serious news websites compete for clicks with tabloids. Naturally, this influences their look and content.

Piano allows you to analyse reader behaviour in large numbers. What else have you found out about people that surprised you?

I was surprised to find out that people behave on the Internet differently than we had thought for a long time. As I mentioned already, they read long articles. According to original assumptions, they should not have done that. I was also surprised to learn that passionate opponents of paid content have become its passionate advocates. Salesmen are familiar with this phenomenon – once I own something, I don’t want to give it up. That is why the key task is convincing the reader to pay for online content at least once. At that point, the reader is willing to keep on paying and eventually becomes an advocate of this practice.

The newspaper market in Europe, and in the Czech Republic and Slovakia especially, is undergoing yet another radical change. I am talking about ownership changes. Penta, the Slovak financial group, infamous in connection with the Gorilla corruption case, has purchased several important media companies. According to latest information, its purchase of 50% of SME is about to take place. What do you think about that?

Should this happen, it will be the aftermath of the inability to transform the newspaper into a normal business. And for many newspapers, it’s already too late.

Are you saying that foreign owners are leaving because newspapers have not managed to stay profitable in our market, so they are, as a result, now being purchased by local oligarchs?

Yes. Newspapers ceased to be a normal business, in which it’s possible to foresee the future to a certain degree. SME daily has at least a small advantage due to income from Piano and a certain hope can be seen. But it doesn’t have to be enough.

What will be the journalists’ reaction if Penta enters SME?

Only a few years ago, we would be talking about how many journalists would leave the paper and how this will damage it. Today, the situation is different. Many newspapers have stopped fulfilling their socially beneficial function due to economic cuts. The question to be asked now is whether it’s better for society to have a small independent newspaper with about 30 journalists or a large newsroom, where the owner exercises its interests let’s say once a year. It’s a pressing question to which I do not have an answer.

You travel around the world, attending conferences as a Piano representative and media visionary. What do you start your presentations with?

I usually show the map of Europe and point to the spot where Slovakia is.

How did you come up with the idea for Piano in the first place?

It was really my friend Marcel Vass’ idea. He manages an internet advertising system called Etarget and realized that media would face large problems in a few years in the same way as his clients would. The idea as to how to ensure in the easiest way that readers pay for online news content was born from this realization. That is how the Piano national model, in which publishers agreed on common advancement, was created. It seems though that this national model has too many pitfalls. Nevertheless, we have gained many valuable experiences.

Having bought the US competitor, are you now the global leader in advancing online paid content?

Yes.

Is it utopia to think that one day, for a single Piano subscription, I will be able to read a number of global news and weeklies I now have to subscribe to individually?

I hope it’s not utopia. It should turn out this way one day because such should be the logic of capitalism – it would be convenient for most customers. Millions of dollars are poured these days into the development of payment technology and a huge race for the winner. It’s clear that many readers would purchase online news if it was easier. Therefore it’s a great opportunity and a way to make big money. In the end, we may be saved by technological development.

You left the position of CEO of Piano a year ago and remain only as one of the owners. Why?

It’s more a matter of business these days. And there are better people for that than me.

Why did you return to SME?

Because I see an opportunity here. The media market is a witness to such things, that – as is often said today – if you still have a job in the media, it has never been more interesting than now. All the wrong choices have basically been made and there is nothing else left to do other than freely experiment and ask such heretical questions as whether to cancel whole departments. In certain respects, it’s very liberating and frees much creative energy.

You then remain an optimist?

Basically yes. But it doesn’t mean that in some countries, it won’t end very badly.

 

After finishing journalism studies, Tomáš Bella joined the Slovak daily SME in 2000, where he edited a computer supplement and was involved in improving the SME.sk online portal. With 2 million users, Sme.sk is the leader on the Slovak online news market. In 2011, he founded Piano Media, company which helps publishers introduce payment for online news content. He returned to SME in 2013 as Deputy Editor-in-Chief. This year, Piano Media became the global leader in know-how on paid online content. He is married and lives in Bratislava.

Interview by Martin M. Simecka, published in weekly Respekt (No. 39, September 22, 2014)

© Copyright Economia, a.s. – Published with kind permission of the publisher.

Article by Tomas Bella

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