In a generally depressing decade for newspapers, the Financial Times, a global business publication based in London, has provided something of a bright spot. In emphasizing digital distribution early on and setting up a metered paywall, which allowed readers to access a limited number of posts each month before they had to purchase a (pricey) subscription, the F.T. pioneered a business model that was widely adopted elsewhere, including at this magazine. Today, the F.T. has almost three quarters of a million paying readers, more than at any point in its hundred-and-twenty-seven-year history. Roughly two thirds of those readers are digital subscribers, who pay high prices: as much as four hundred and eighty dollars a year.
This year, two big things have happened at the F.T. In March, it abandoned its metered paywall and switched to a new business model based on offering readers cheap trial subscriptions. And, in July, Pearson PLC, the corporate owner of the F.T., sold it to Nikkei, a Japanese media company, for $1.3 billion. Since the sale, the paper hasn’t said much about its plans for the future. Recently, however, I interviewed John Ridding, the F.T.’s chief executive, in New York, and I began by asking him about the purchase by Nikkei, which he helped to negotiate.
When the news was first reported, both the buyer and the price raised eyebrows. Although Nikkei is a dominant presence in Japan, where it sells more than 2.5 million newspapers a day, the company hadn’t previously expressed much interest in expanding beyond Asia. Moreover, in outbidding Axel Springer, a German media company, Nikkei paid almost forty times the thirty-seven million dollars in operating earnings that the F.T. generated in 2014. In a post at Nieman Journalism Lab, the news analyst Ken Doctor noted that the price, relative to earnings, is “about 10 times what an average U.S. daily, large or small, would sell for today.” Why was Nikkei so eager to get its hands on the F.T.?
“Number one is they are fundamentally supportive and excited by the strategy,” Ridding said. “Like us, they believe in the value of quality journalism, both as a mission and also as a business. They also think the language of business is English, and if you are going to be a global player you need a strong English-language position, or voice, or publication. So it made perfect sense from their strategic global perspective.” There were other factors, too, he said. Nikkei wanted to prepare for the transition to digital, which has been slow in its home market. In addition, he said, “Japan’s got its mojo back a bit. They’ve been on defense on the business and economic front for some time. There is a sense of optimism and dynamism in Japanese business, which has probably been in reserve for a while. I don’t want to overstate it, but I think this is also part of that broader lifting of horizons.”
Of course, Japanese companies have bought prestigious western businesses before, and the deals haven’t always been successful. I reminded Ridding of the short-lived Japanese purchase of Rockefeller Center in the late nineteen-eighties and asked him, gently, if this wasn’t another “trophy property” purchase. “It is definitely not a trophy,” he insisted. “It is not that they are going to put us in some cupboard in London…. I think if you were to summarize the vision that we both share, it would be about growth. We both think there is a very good growth opportunity for the F.T. That requires a long-term perspective. It requires investment. They have committed to that. And for a news organization like the F.T. right now, that’s music to one’s ears, frankly.”
He went on: “We spent a long time, a lot of hard work, changing stuff—reorganizing, rebuilding, carrying out some experiments. We are in a position now where the business model we’ve developed is potentially really exciting. What is lacking is some fuel in the tank and the ability to spread our wings a bit.”
To be sure, Japanese companies such as Toyota and Sony are renowned for their willingness to invest, and for their long-term focus. But Japanese newspapers, including the ones owned by Nikkei, are also known for taking a less aggressive stance toward news than many of their Western counterparts. I asked Ridding if the F.T.’s editorial independence would be preserved. “Editorial independence is absolutely fundamental to the way we operate,” he replied. “It’s fundamental to our values, and to the value of the F.T.” In preparing for the sale, Ridding said, he and his colleagues drew up a list of criteria for a potential buyer, the first three or four of which centered around values, culture, and editorial independence. “All of the preliminary and early discussions with Nikkei were about that. It was, ‘This has to be completely understood,’ ” he said. “We had some pretty deep conversations about what it meant in practice, and how would they feel about this and this. And frankly, their understanding of it, and how we operate, was profound.”
Ridding, a former F.T. journalist himself, pointed out that Nikkei is largely owned and run by ex-journalists. Still, Japanese reporters, and those who work for Nikkei in particular, have a reputation for going easy on the country’s corporations. Ridding said that he didn’t think that was fair. “When you talk to them as journalists about news, they love news,” he said. “But I think the most important thing is they understand our values and editorial independence. I’m not going to tell them how to run Nikkei, and they are not going to tell us how to do editorial independence at the F.T. They are very clear about that.”
The conversation turned to broader issues related to digitization and the search for a workable business model. Why did the F.T. decide to abandon its metered paywall, which others had copied? Ridding began by reviewing some history. After it was introduced, in 2007, the metered paywall “worked extremely well,” he said, noting that it had driven the F.T. past the milestone where digital subscribers overtook print. Over time, however, he and some of his colleagues came to believe “there was something of a contradiction in the metered model.” Ridding explained: “The real challenge for news media and for journalism in the digital age is it’s fragmenting all the time, and people don’t come to one place. In the old days, people would have a newspaper, maybe two. And then, the usual transition, they would go to the home page. But that’s all blown up and fragmented. People are finding F.T. stories and other stories on all sorts of platforms, and different channels. Our approach was to think: ‘How do you recreate that habit, that engagement, of the old print world in the digital world?’ And by definition, if you have a metered model, which limits people to eight articles a month—or ten, or three—your model is actually getting in the way of habit. People aren’t going to form a habit if you are rationing what they read.”
“So we decided to blow that up,” Ridding said with a chuckle. The replacement was cheap trial subscriptions. If you go to the F.T.’s Web site today and try to read a story, you will be prompted to take out a month-long subscription for a dollar. (In the U.K., the fee is a pound; in much of Europe, it is a euro.) “It’s not like we invented it,” Ridding said. “It’s been in other businesses and other industries. One of things we looked at was Ancestry.com, which did something similar. The idea is that for a nominal amount you can read as much as you like, and that creates a habit.” So far, Ridding said, the new strategy appears to be working. “The acquisition rate of subscribers is up about eighty per cent year on the year,” he said. “The statistic that I think is really exciting for us is that since we launched this new approach, we’ve had more than a thousand new subscribers every week, with the exception of six weeks. Last year, there were only six weeks when we had more than a thousand.”
Other publications that have gone to a metered paywall will no doubt be watching closely to see what happens with the F.T.’s experiment. Ridding said that it has also helped to “change the mindset” of the organization. “If you basically have a month, or a limited period of time, to build that relationship, it gives you a real reader focus and a customer focus,” he said. “It used to be, ‘We write what we feel like writing.’ And certainly when I was a writer, that’s how I operated.” (This comment brought forth another chuckle.) Evidently, things have changed. Engaging with readers is now a mantra at the F.T. Earlier this year, the paper even created an audience-engagement team in its newsroom, whose members spend a lot of time creating and distributing content on social media. Non-subscribers who click on an F.T. story from Facebook or another social-media platform can read it for free before being prompted to buy a cheap trial subscription.* “My view is that the people who understand editorial best are journalists,” Ridding said. “And they are very active in putting stories out, building that relationship with readers and potential readers…. They get engaged. They become more likely to subscribe.”
The new business model also helps the F.T. to exploit data analytics, Ridding said. “We are now able to measure, optimize, and track all of these readers and changes with real insight that we could never do before. It sounds dry, but it’s not. It’s really understanding readers, what matters to them. We are never going to edit by numbers, but we are going to inform all of our decisions around data.” Asked for some examples, he cited a redesign of the F.T.’s Web site; online-advertising programs targeted at narrow groups (such as readers who travel frequently between New York and London); and the development of “Fast F.T.,” a news-and-commentary service that was launched in 2013 and that can be accessed from desktops, tablets, and smartphones. “It’s live and rolling, and it’s pretty fast,” Riding said.
None of these things is exactly revolutionary, it must be said. Other publications, such as the Wall Street Journal and the Washington Post, offer cheap trial subscriptions. Virtually all newspapers obsess over data, promote themselves on social media, and serve up news and commentary in smaller chunks. Despite these efforts, many of them are still struggling to make a profit. Ridding conceded that building a sound economic basis for serious journalism remains a work-in-progress. “I don’t think there is a one-size-fits-all, silver-bullet-type approach,” he said. But what has changed, he insisted, is that more people inside and outside of the newspaper industry now recognize the advantages of digital distribution and the power of online-publishing brands. “Precisely because of digital disruption, precisely because there is so much information and news and information out there, the value of a trusted guide, the value of a trusted brand” has gone up, he said.
Of course, to attract a paying readership, you have to differentiate yourself from the competition and provide something readers value. The F.T.’s edge, Ridding said, is its global perspective. Although it is clearly a niche product, that niche—affluent, globally minded business readers—is growing, and not just in the developing world. Ridding cited the United States as a market with “good opportunity for growth.” With the backing of its new owner, the paper is planning further investments in customer acquisition and retention, in Web-site functionality, and in areas like video and audio. (No, Ridding didn’t mention hiring more journalists: the F.T. currently employs more than six hundred of them.)
With my time almost up, I asked Ridding if he believed that the existential threat to serious journalism had now passed. “Well, I never believed in the existential threat to journalism,” he said. “I believed in some major challenges to the business model that supported journalism. But we were very confident—it was almost an instinctive belief within the F.T.—that quality journalism has a value, and that there is a business model … if you have the confidence to charge for it. Remember, when we did start charging online, we were regarded as sort of freakish, particularly in the U.S., particularly on the West Coast of the U.S. But we fundamentally believed that if it’s quality journalism, people will pay for it. That’s been vindicated.”
Of course, the F.T. is just one publication, and a pretty unique one at that. Drawing general lessons from its experience is dangerous. As evinced by the ongoing job cuts at the Daily News, many metropolitan newspapers, which used to charge very little, are still struggling mightily. “The newspaper industry shot itself in the foot by going for massive reach, low-quality circulation,” Ridding readily conceded. “It did a lot of damage to itself.” But he also said insisted that things are changing in journalism and that the business climate is improving. “There is a belief in journalism,” he said. “It was only a week or two after our deal that NBC Universal and BuzzFeed did quite a big deal. There’s a lot of capital going into not just start-ups but the industry in general…. I think there is a sense again that, actually, great journalism can be a great business if you get the business model right.”
*This post was amended with details of the Financial Times’s subscription model.