He amassed 5,000 subscribers for one of New Zealand’s first paid newsletters
Before Substack even existed, Bernard Hickey was perfecting the art of charging newsletter readers for money.
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In a recent article, I noted that the year 2020 “saw the creation of a market for independent internet writing, one that allows journalists and essayists to make a full-time living without the aid of traditional media companies.” Though many factors played into this, including the Covid-19 recession, it’s probably not a coincidence that most of the successful indie writers monetize their work through Substack. The newsletter platform made charging for paywalled content incredibly easy, allowing its writers to focus most of their efforts on amassing their “1,000 true fans.”
But what if you were trying to launch a paid newsletter prior to the invention of Substack? That’s the dilemma Bernard Hickey faced in 2012. He’d built a large fan base while covering finance and business news for New Zealand’s largest newspapers, and that year he wanted to see if he could erect a scalable business that charged readers for premium content.
To do so, he sunk tens of thousands of dollars into building a tech stack that enabled readers to subscribe to his content. He then had to convince his followers to pay for his newsletter — not an easy thing to accomplish in an online environment where most content was available for free. Despite these hurdles, Hickey managed to generate over 5,000 subscribers, some of whom were paying upward of $29 a month to read his reporting and analysis.
I recently interviewed Hickey about how he grew that business, where he found his customer base, and why he ultimately decided to shut down the newsletter and pivot to something new.
So you were a financial journalist for traditional media for over a decade before you struck off to launch a media startup. What made you decide you wanted to carve a more entrepreneurial path?
I was in the executive team for New Zealand's largest newspaper group, Fairfax Media NZ, from 2006 to 2008 and could see I was going to spend the rest of my career sacking journalists and managing decline. I wanted to create and grow and hire, and saw opportunities in stand-alone digital native news organisations. So I jumped out to help start up a financial news site called interest.co.nz.
And what was the business model for that site?
It was a free site funded by display and some bespoke links from mortgage rate and savings rate comparison pages.
Were you writing for the site, or had you taken on purely a business manager role?
I was both writing and supporting ad sales. My partner did most of the ad selling. I ran editorial and hired journos. After five years we had six journos and five or six tech/sales/support staff.
Did you feel like the site was more successful at what it was trying to do than the more traditional newspapers you had worked for?
Yes. We were able to grow our coverage of economic and financial issues in a sustainable way for the first five years, 2008-2012, because our advertisers were the 'cream of the crop' marketing to the richest 25% of NZers who renegotiate around $200 billion of fixed rate mortgages and $100 billion of term deposit savings accounts every year. Every renegotiation is an opportunity to grow or lose market share, and often those 1 million people would compare the rates on offer on interest.co.nz.
You eventually left to launch your own paid newsletter, far before this became a common trend for journalists. What spurred that move?
I could see by 2012 that Google and Facebook were cleaning up the display market. Our niche of banks was moving the big chunks of ad money into Google and Facebook. The space we had in marketing and ad exec lunch calendars started to evaporate. We couldn't compete with the exchanges and the enormous engineering power when it came to ad performance analysis or sheer volume. We tried sponsorship, but eventually the digital ad budgets became too large that marketing managers were not allowed to do their own deals. All had to go through agencies and be analysed up the wazoo. I could see then the only way to do serious news sustainably was to build my own (there was no Substack then) paid email newsletter, which pulled together mail, customer database, payments, and a paywall. Sounds easy now. Not so simple or cheap in 2012.
Yeah, as you say, there was no Substack back then. You had to pay someone to build you the tech stack, right?
That's right. It cost me about NZ$50k over four months and made the payback that much longer. I built up a subscriber base of about 5k within five years, but it wasn't profitable enough or fast growing enough to be viable. Also, unlikely overseas between 2012 and 2017, our two largest newspaper groups stayed completely open and free.
How much were you charging, and what was the mix of free and paid content you were putting out?
I put everything behind the paywall and charged individuals NZ$29 a month, and corporations between NZ$5-20/user, depending on volume.
Wow, 5,000 subscribers at $29 per month. That's over $1 million in annual revenue. Most writers would consider that a huge success. Why didn't you feel like that was a successful model?
That would be the case if everyone paid $29/month. My average net yield after hosting/transaction/depreciation was more like $7/month per user, as most were on corporate accounts that required enormous lead times. I had hoped to build up enough revenues to be able to employ more people and be able to take holidays, etc. But that wasn't possible, especially when I realised there was so much login fraud going on and I reached a plateau. The constant refrain was: 'why should I pay when I can get something passable somewhere else for free. News is meant to be free,' I was told. The last two big players (NZ Herald and Stuff) spent 10 years in a Mexican standoff hoping the other one would jump behind the paywall first. A classic prisoner's dilemma. NZ Herald went partially behind a paywall last year, and Stuff is still free.
A lot of my subscribers will be surprised to hear you got 5,000 paying subscribers without offering any free content to lure them in. But I'm guessing the reason is that you were already a pretty well known journalist in New Zealand, right?
Yes. I have a relatively high profile for an economic journalist, and was able to write some exclusive content. Interviews with ministers. Scoops on economic policy. High engagement with subscribers. But not enough to make it worthwhile or scalable.
So you eventually wound down the paid newsletter. What did you work on next?
I joined up with the former editor of the NZ Herald, Tim Murphy, and the former editor of TV3, Mark Jennings, to launch a serious news site dedicated to long-form journalism funded by sponsorship. No ad networks or display. It was called newsroom.co.nz.
When you say "funded by sponsorship," what do you mean by that?
We had a roster of sponsors (one car, one energy, one airline, one bank, one telco, and one university) who paid a relatively high annual fee to have their branding on site, with some sponsored content.
I also ran a paywalled part of the site called Newsroom Pro, which offered subscriptions at $29/month to corporations and individuals. A portion of the content was kept behind the paywall for a day and then 'released' into the wild.
Did you feel like this was a more successful model? Was it able to profitably fund longform journalism?
The combination funded around 10-15 full time journos and brought in an audience of around 500k a month. But we had the same tragedy of the commons problem. Why pay for something when you don't need to, and the biggest news provider is staying free. Much easier to offer paywalled content in other countries where the big news orgs have gone behind paywalls too.
Eventually you came full circle and left that site to launch on Substack. What triggered that decision?
Covid was tough for a mostly sponsorship funded site, and we had the same problem with corporate subscribers sharing logins and saying 'why pay when it's free over there.’ I decided it wasn't sustainable for me. I was working long hours for little money and couldn't see a way forward while big corporate subscribers didn't see the value in paid-for news from independent sources at scale, and while Stuff was still open and free. So now I'm just looking at building up a small 'fan base' of subscribers and keeping my production costs low. I suspect (still) the real revenue will come from speaking engagements and consulting. It's also more fun.
Other than not having to pay a boatload of money to build a subscription/newsletter platform, how does your strategy now differ from the last time you did this?
I'm better at understanding the economics and content of subscriptions, and the difference is the ability to spend more time on the content, rather than on the machine. Also, at least one of the 'big two' has gone behind a paywall, and I'm regularly told by the other they are close to it. Although I'm often disappointed by the lack of action on that…
What's your approach this time in terms of free vs paid content?
My balance is going to be (once my restraint of trade ends in Sept 2021) to give people a weekly taster with paywalled daily reports. That seems to be a model that works for others. But always keen to try it and see, and pivot if the data suggests otherwise.
I think the Substack way will be viable for me because I have limited ambitions. I only want to support myself and the platform allows me to keep my distribution and production costs low. But I don't see it as a scalable model to recreate a large newsroom and replace the scale of journalism still being done by newspapers, and that will eventually be significantly downgraded, especially without paywalls. I spent the last 10 years trying to create something larger than myself. I'm now scaling back to just try to create something that sustains me alone. I'll leave solving that larger scalability and public good problem to someone else.
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It’s actually excerpted from an ebook of case studies titled “The Next Media Moguls, Volume 2: Lessons from 10 successful media innovators.” You can download the PDF over here.