Six months ago I was the quintessential pay wall skeptic. I’d been reading a lot on publishing models. We’ve all been reading a lot on digital behaviour and online purchasing decisions. But I, and most of my friends, colleagues, acquaintances, hadn’t been paying for many digital media.

In my experience, emotions tend to override logic when it comes to discussing mastheads. Discussion turns it into a zero-sum game between revenue streams – an environment products seldom operate in (especially media products). The debate begins to assume that:

a) Unless 100% of revenue can be drawn through digital subscriptions, the masthead fails commercially,
b) digital subscriptions reduce audience numbers to a valueless level to online advertisers, therefore
c) hybrid content models involving walled and free content cannot function.

The single revenue-stream imperative is odd and seems unique to digital debate on publishing models.

I’ve also been reading a lot of ‘back of the napkin’ math from people like Federic Filloux: people with experience managing the costs of sizeable newsrooms. Broadly, these simple models find that if a masthead can convert 5% to 10% of its audience to a paid subscription it can run a newsroom at an operating profit. Which started to convince me that a long-term strategy could achieve this. And, long term, more than operating profit. And I’m not the only one. (Even if, as publishers and editors, we’re a bit biased.)

Importantly, these ‘back of the napkin’ arguments rarely run to a zero advertising imperative. They assume that the revenue model will remain a hybrid between subscription and advertising. (This is scarier for many American magazine publishers, who in a great ‘eyeballs’ chase discounted their print subscriptions below cost, leaving them in a difficult position to now charge for digital subscriptions.) A hybrid content model is exactly what News Limited is rolling out  with its Herald Sun pay wall.

On Monday night (5/3/12) a cadre of Melbourne’s digerati and I were invited into the HWT building for a preview of the HeraldSun.com.au redesign and a conversation around the paper’s pay wall plans – launching on the Labour Day public holiday (12/3/12 in Melbourne). Everything was on record, with the only request being that no photos of the redesign were taken or shared.

The tweet stream saw a fair amount of emotion entering it around editorial quality and policy of the paper. I’d be happy to chat on that too, but we were there to talk pay walls and design, and it was surprisingly candid.

The design topline:

• It’s incredibly image heavy,
• the site spaces content out significantly in order to increase its touch screen friendliness. (Having seen this on a projector at approximately 1024×768, I am a little skeptical of the desktop experience), and
• the homepage has 12 possible design configurations in order to respond to a variety of news events.

There’s no new ad units being introduced at launch (disappointingly none of the new IAB ad formats), no launch partner and no, there will be no automatic pre-roll video, a la Fairfax. But it is the commercials around audience I’ve got faith in. The paper is targeting three groups primarily, and in an intelligent way.

Group one: current readers
Those with a print subscription will receive a complimentary 12-month trial. It will be interesting to watch the long-term engagement arc of these readers over the 12-months. I foresee a fairly violent hockey stick early on, followed by rapid decline and plateau of  impressions as uniques declines, but a loyal core builds.

Group two: migrators
This group are the late majority – the less digitally-savvy who are coming online, looking for content, but also seeking familiarity in the brands they engage with.

Group three: Supercoach players
All 400,000 of them. This is a very engaged audience with massive potential for the masthead. They will be enticed to pay with new features including real-time scoring, but importantly not pushed to competitor product DreamTeam by being forced to pay to play.

Users will be able to view up to five(!) articles for free each day, but only if they locate them via Google! This move is a little baffling to me as it punishes user loyalty and opens an interesting loophole, as James Tuckerman points out on AnthillOnline. Not to mention Rupert’s feelings about Google. I’d anticipate this to rapidly be reduced, moved towards The New York Times monthly-rather-than-daily model and opened up to those actually typing dubya dubya dubya dot herald sun dot com dot au into their browsers.

Beyond product though, the Herald Sun has a pretty reasonable price-pitch and its bundling is interesting:

• Two-month free trial for all users,
• a 12-month free trial for all existing print 6-7 day subscribers,
• $2.95 per week: full digital access to the Herald Sun, website, tablet app and mobile site,
• $4.95 per week: full digital access plus newspaper delivery on Saturday and Sunday,
• $5.95 per week: full digital access plus newspaper delivery Friday to Monday, or
• $8.95 per week: full digital access plus newspaper delivery every day.

Payment options currently don’t run to PayPal, but stretched at the end of the evening, I was told to expect that option with six months.

The most savvy move here as I see it – beyond the trials and the Supercoach enticements – is the lack of division between digital products. Recognition of use and ownership by the Herald Sun will likely drive visitor numbers and engagement by their paying audience, something The New York Times-style division of products does not enjoy.

If we take the theoretical ‘back of the napkin’ figures I raised above, at 5% conversion to paying subscribers among their digital audience (4,672,185 according to News Space), on the cheapest product, it looks like the following:

4, 672,185 (monthly unique visitors) /4 = 1 168 046.25 (weekly unique visitors) / 100 x 5 = 58402.3125 (giving us the figure of 5% paying subscribers) x $2.95 (cheapest weekly subscription) x 52 = $8 958 914 digital subscription revenue annually.

Not company-wide-business-model-shifting, but also a conservative and short-term figure. And something that’s all the more viable as a five-year plan for a media company with the scale of News Ltd. Imagine this, bundled with national titles. And Foxtel.