The Financial Times Zings Aggregators With A 24-Hour Embargo In An Attempt To Bring Those FT News Readers Directly to FT.com. Factiva Calls It "A Disappointment," The FT Stands To Lose Considerable Revenue At Least Short-Term, But If Others Followed Suit Where Does That Leave The Aggregators?

Philip M. Stone May 22, 2006

The Financial Times is quite blunt about its goal. It wants to own a direct relationship with all its readers, via either print or FT.com. And it is willing to burn some bridges to achieve that goal, including from September 1 instituting a 24-hour embargo on its news feeds to third-party aggregators.

Nigel Pocklington, the FT’s online publishing director, said in an ftm interview, “Digital services are becoming increasingly important to us and the embargo is part of our strategy to help build a more direct relationship with our customers.”

When Pocklington talks about “customers”, he’s really talking about anyone who reads the FT, print or web version, or via a third party aggregator. In the FT’s case it has a considerable readership over which it has no direct relationship – through the aggregators such as Factiva and Lexis-Nexis who serve mostly corporate customers and charge those customers a handsome monthly fee for accessing thousands of different media and offering an easy-to-use system to find just the information sought.

Especially in the UK, which is a very large market for the aggregators, the FT is among the most accessed sources. The aggregators learned long ago that the most sought-after news in their system is business and financial information, and for that in the UK the FT has the top brand. The FT gets revenue split from the aggregators – most important sources such as the FT get anywhere from 35% to 50% of the revenue when their copy is accessed.

While no one is talking about what the FT’s move will cost it, in Factiva’s case the aggregator earns in the UK about 15% of its total annual global income meaning the FT earns from Factiva well into six figures, perhaps seven. It is very doubtful that the number of aggregator readers it entices into a direct relationship will make up for the tens of thousands of pounds it will give up by increasing its embargo.  

Simon Alterman, Factiva vice president, content, commented in an ftm interview: “We recognize that for many of our customers this is a disappointment,” but he reminds that the FT still remains a source, albeit with a longer delay for those that don’t have a direct relationship with the FT.

Alterman points out that Factiva, 50% owned by each Reuters and Dow Jones,  “Continues to offer the exclusive combination of The Wall Street Journal and Dow Jones and Reuters newswires with more than 10,000 other leading sources.” In other words, the FT’s action could well send those FT aggregator readers who won’t pay additionally for real-time FT access right into the arms of the archrival Wall Street Journal that has no time delay on Factiva.

Part of the embargo deal is that those aggregator customers that have or take out a digital license with the FT or are subscribers to FT.com will still be able to get the FT news from an aggregator without the added embargo. But to paraphrase that famous FT ad line, “No FT, No Comment” in September for those customers not taking out a FT.com subscription it will be ” No FT relationship, No FT for 24 Hours.”

It is not as serious a blow to the aggregators as it might seem at first glance, although if the FT’s move turned into a trend by other major media players anxious to get people to their web sites directly for the added page views – therefore higher advertising rates – then it could become a real problem. The FT’s own web site is subscription-based, costing £200 annually although it is much cheaper if the subscriber also has a print subscription.

“Factiva will not lose revenue from the FT delays. It recently lost its key Russian source (Interfax) and Russia is for years Factiva’s fastest growing market, and this did not result in any loss of business,” according to Nick Antonov, Factiva’s former European director.

“The FT will lose tens of thousands of dollars in royalties payments, but I cannot imagine how they are going to make this money up from gaining new subscribers for their on-line operation. Same happened with Handelsblatt in Germany – they lost royalties and did not get new on-line business when they pulled out of Factiva four years ago,” he explained.

The FT is trying to tackle two problems. Its web site grew subscriptions by only 8% last year to 84,000. In the same time period, the FT’s global circulation rose 8.3% but in its home UK market circulation dropped by 4,588 to 132,699. One of management’s biggest goals is to increase that UK readership and they suspect too many corporate readers who should be reading the paper or the web site are getting their FT experience from aggregators, and thus the added embargo from 12 hours to 24.

It basically boils down to the value FT management puts on getting its print and web site numbers up, even if long-term the revenue from those additional direct customers don’t match the revenue loss from the aggregators.

Antonov points out that while the FT is very important to UK aggregator customers it “has only a symbolic value for key customers and users in Continental Europe. The FT’s value outside the UK is mostly in its brand. People like to be able to say that they have access to the FT every day.”

He points out that “knowledge workers” want to have a one-stop shop access to all sources of information. “What the FT is doing is to exclude itself from the best collection of news available in aggregated form,” he declared.

Before the Internet and its flurry of search engines, aggregators were the only way to access so much information in one place, but now there is not much information that one can’t discover on the web if you know how to find it.  True, perhaps not as many media sources are available as Factiva’s 9,000 – 10,000 nor is it always easy to find what you are looking for on the web, but having said that information can be found for free. The question some customers might start asking is whether the Internet with its search engines is “good enough” for their needs?

Even Reuters, the 50% owner of Factiva, has got into the copy restriction business – not embargoing its copy to Factiva but rather it has restricted selling its news copy to other Internet news sites. Reuters now holds back certain copy that it used to sell to the Yahoos of this world and instead publishes that information on the web platform exclusively on its advertising-supported Reuters.com. As Reuters wanted to control the relationship with the web reader directly via its own site, so the FT is adopting a similar strategy.

The FT’s material used to have a six-hour embargo, that was then lifted to 12 hours, and now to 24 so the big question, of course, is whether doubling the embargo is meaningful to aggregator readers. Alterman’s description of it as a “disappointment” probably sums up how customers will react, but they can still do well enough without that day’s FT. And that “disappointment” will cost the FT a lot of money. “Royalty payments depend a lot on the timeliness of content,” according to Antonov.

And it is not that the knowledge workers won’t still be able to get almost all of the same information from other sources that they took from the FT. In an explanation that will probably bring much heartburn to FT editors, Antonov says there is very little news copy in the FT that is not duplicated elsewhere. Even if the FT has an exclusive it will get picked up and sourced by the international news agencies and most of the big agencies are found in the aggregators.

“The only unique thing the FT has are the analysis pieces and comments such as the LEX column, but even this could be summarized and offered in shortened form by an alternative source,” Antonov said.

Indeed one reason given for why the FT’s UK print numbers have been in decline for a while is because competitor quality newspapers have improved their financial and business coverage to the point that some FT readers may have concluded it was not be necessary any more to buy a separate business newspaper. And those newspapers are also archived by the aggregators.

So one way or another much of the FT information is still there in a timely manner for those who need it quickly, and for research purposes it doesn’t make much difference if the news is real-time or delayed.

The FT is currently undergoing a management and editorial shakeup. Olivier Fleurot, the chief executive of the FT Group, has been bumped sideways into taking on some digital responsibilities with his position now taken by Pearson’s chief financial officer, Rona Fairhead. 

Fleurot had been in the wrong job at the wrong time and had to carry the responsibility for the FT’s poor performance in 2003-2004 when it lost £41 million – a lot of financial and technology advertising just plain disappeared which one could not put at his doorstep -- but in 2005 the newspaper earned only £2 million profit at a time when the financial business community seemed to have recovered with business booming. Why didn’t the FT share more in that success?

New editor Lionel Barber, appointed last November, has been putting his name on just about every editorial brick with hardly a week going by that there are not high-level reassignments. It might be doing some good – the FT’s April global circulation was 3.64% up over March to 462,235 copies and over the past six months circulation has crept up 4.1%. For the past 12 months it is up 8.3%, which is the best performance of any UK national newspaper. Advertising was up 13% in Q1, led by luxury goods.

But the FT it is still hurting in its home UK market where circulation has dropped by 4,588 over the past 12 months to 132,699. It has asked UK agencies for ideas to promote the UK edition that can also be used globally. 

The web site, however, attracts 4.8 million unique monthly visitors generating 41 million page views. It has been profitable since December, 2002.

Although the FT does not offer a geographic breakdown of its web subscriptions Pocklington said it is “reasonable” to suppose the majority are from the UK. So is one reason that the print edition has suffered a declining UK circulation while the web site is increasing its viewership because readers are switching from print to the Internet? He thinks not.

“There is little evidence to show a switch from (FT) print readership to the web,” he said. “The web site attracts a younger audience than does print. The average age of the web site’s readership is the late 30s. For the newspaper the average age is around 44.” He explained that while some web readers may have “director” as a title they are usually lower than board level readers, whereas the print edition has a large senior executive/board room readership.

That’s one reason why there are no current plans, he said, to transfer a lot of the statistical agate information – share prices and the like – from the print edition to the web as the European and Asian editions of the tabloid Wall Street Journals did, and which is becoming the fashion in the US media, including the New York Times and the Chicago Tribune.

Also those international Wall Street Journal editions are still giving away access to wsj.com with a print subscription. While the FT does that in continental Europe, it still charges additionally for a joint print/web subscription in the UK, although the additional web cost is heavily discounted from the £200 annual subscription for the web site alone.

What is really going to bring readership back to the newspaper, and increase subscriptions for the web site are old-fashioned daily scoops – that they have stories that no one else has. That task has gotten increasingly difficult in the UK as competitors such as the Daily Telegraph and The Times have strengthened their financial pages, but for people to buy a financial newspaper it has to be for that information that just cannot be found elsewhere. A lot of Barber’s changes are said to be to try and do exactly that.

Do that day in, day out, and then that 24-hour embargo with the aggregators may start to pay off.

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