Dr Kim Williams tries to ease the pain for News Ltd

The next time I get cancer I want it to be Kim Williams who tells me I only have a few months to live. I’m sure he’ll make it sound so much more palatable, and perhaps even a privilege, that it’s happening to me.

Dr Kim’s video to staff yesterday, announcing radical surgery at News Ltd to keep the patient alive, displayed a brilliant bedside manner, especially when it came to telling staff that some of them would “regrettably” have to go.

Pausing for a moment to register the gravity of it all, and glancing slightly off camera before fixing the patient firmly in the eye, he promised: “I will make sure we communicate openly with those affected and that at all times people are treated with honesty and dignity.”

I liked his next pledge too: “News knows no other life than in the media; it’s what we do and what we believe in. That’s why we’re confident about all forms of media.”

It was a refreshing bout of optimism compared to the steely gloom from Greg Hywood on Monday over at Fairfax HQ.

The good doc wasn’t quite so calm when he fronted up later to the ABC’s PM programme and got into a spat with presenter Mark Colvin, who kept on asking how many jobs would go. But he was still sounding confident about the future, telling Colvin that newspapers would still be flourishing in 2020.

We’re not sure that’s right, because events in the media industry have a habit of moving faster than anyone has predicted, Rupert Murdoch included, but we’re not sure that’s wrong either.

But whether Dr Kim’s optimism is justified or not, it’s clear News Ltd’s papers are in a better position than their Fairfax rivals, because The Daily Telegraph in Sydney and Herald Sun in Melbourne are mass-market tabloids with high circulations that have never relied on classified advertising. Consequently, they’re not suffering so badly from its mass migration to the internet. News’ papers in Brisbane and Adelaide — The Courier-Mail and The Advertiser — are in much more strife, however, because they did have those rivers of gold, and they face a much more difficult future.

But all papers — even News’ tabloids — are going to be under increasing pressure in the future, and that can only mean one thing: less revenue from print sales and ads, and fewer jobs for journalists, who will find themselves working harder to feed the beast. Nor will it be the Daily Beast of Evelyn Waugh fame; it will be the Hourly Horror or the 24/7 Terror.

Currently, News Ltd sells 11 million papers a week, according to Williams, or roughly 550 million copies a year. Assuming for ease of calculation that these make News $1 a copy, that’s a revenue stream from print sales of $550 million a year. If that falls by half in the next five years, which is surely on the cards, they’ll be looking at $275 million less to spend on staff, including journalists, which would probably work out at around 2750 people, including employment costs.

So the question is whether the changes and cuts at News and Fairfax will go far enough. The answer is we don’t yet know.

The measures announced at News are pretty remarkable, in that they involve a massive change in the way they run the business. But my guess is that the future of these mastheads (and their journalists) will only be secured if paywalls can be made to work. Six months ago, when The Power Index interviewed Greg Hywood about the future of Fairfax, he was confident the group would find ways of monetising its growing audience (up from 5.5 million to 7.2 million in the last five years) without charging readers for content. This week, he abandoned that position.

The good news about that, for News and Fairfax at least, is that neither of the big newspaper groups (who have roughly two-thirds and one-third of the print market respectively) will be giving their stories away online for free. That must make it more likely that consumers will cough up some money. Will it be enough?

The latest buzz is that paywalls on The New York Times and The Times in London are working much better than expected and exceeding revenue targets. The NY Times recently boasted of signing up some 500,000 paying customers. The Australian quotes a figure of 40,000 subscribers for its digital product, and not all of them paying.

The other interesting area, at least for News, is whether its papers can get a revenue boost from the purchase of James Packer’s 25% of Foxtel, should the $1.97 billion bid go ahead. The biggest successes for News Ltd online are coming from sport, with products like the Herald Sun’s Supercoach, which has more than 400,000 players, and from entertainment news, which is big on iPad and mobile.

But having a bigger share of Foxtel may also enable Murdoch’s media interests to do more bundling of services and products and more cross-selling of ads. That was one of the attractions of taking control of BSkyB in the UK and one of the reasons why BSkyB’s TV and newspaper competitors opposed the bid.

Another interesting question on Foxtel is whether it will emulate BSkyB and make a motza from bundling broadband, pay TV and telephony. That’s the “convergence” dream everyone was raving about in 2000 during the dot-com boom, when the Packers and Murdochs were so excited about investing in One.Tel and in selling Channel Nine to Telstra.

Maybe that will come true at last. But coming back to those pesky papers, which Rupert loves so much, one can’t help feeling that, despite Dr Kim’s soothing words, the future’s a little bleak, especially if you work in the industry. It will be one with fewer journalists, working harder and faster, with less time to dig, more holes to fill, and less demand for anything except sport and celebrity.

In my next life I might try calling the footy instead.

This article first appeared on The Power Index.

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