LONDON (Reuters) - The Financial Times expects its print advertising revenues to be overtaken by subscription and cover price sales for the first time this year, marking a milestone on its road to escape its dependency on volatile advertising markets.
The FT, the only unit of British publishing group Pearson (PSON.L) with significant exposure to advertising, has been at the forefront of making consumers pay for news on the Web, and now makes almost 30 percent of its revenues online.
“It’s obviously a rather challenging time for print advertising so these engines of digital subscriptions and content are essential and valuable,” Chief Executive John Ridding said on Monday.
“We think this year our content revenues should be pretty much the equivalent, maybe even exceed, print advertising revenues for the first time ever,” he told the London leg of the Reuters Global Media Summit.
The Financial Times, with its specialist business news and elite readership, is one of the few news providers to have succeeded in developing a successful online business behind a paywall. Digital subscriptions are now its main growth driver.
The shift in revenue mix also brings the FT, often eyed as a potential acquisition target, more closely into line with the rest of Pearson, which has shed its other advertising-dependent businesses and is aggressively expanding its education units.
The Financial Times Group — which includes other publications and a 50 percent stake in The Economist — brought in 7 percent of Pearson’s total sales last year, down from 15 percent in 2009.
The FT says the knowledge it has about its subscriber base is vital to its success, helping it sell better-targeted advertising for much higher rates than peers, and has vigorously defended its direct relationship with readers.
Earlier this year, it launched a Web-based mobile app, initially for the Apple (AAPL.O) iPad and iPhone and also intended for other tablets and smartphones, that bypasses Apple’s App Store.
This allows it to evade Apple’s 30 percent gatekeeper charge and to keep harvesting its own valuable subscriber data — as well as to develop versions for other devices more easily.
Ridding said the Web app — used by subscribers as well as registered users who have access to eight free articles per month — had just been downloaded for the millionth time.
The FT has more than a quarter of a million digital subscribers and about 4 million registered users.
Ridding said the advertising market remained challenging. Ad sales came in flat for the first nine months of the year, after a sharp shock at the end of the summer.
Sales at the FT Group overall rose 6 percent in the first nine months of the year, as digital subscriptions smoothed out advertising volatility.
“Everything seemed to be normal until quite late even though these problems were bubbling around. People came back from summer and thought: ‘This isn’t looking too good,’” he said. “It obviously is a challenging market.”
Asked about contingency plans for any break-up of the euro zone as the continent’s sovereign debt crisis deepens, Ridding said he was keeping a close eye on costs and trying to deploy resources to growth areas.
“We are just scrutinizing more carefully what we are spending,” he said. “We do have voluntary redundancy programs, and what we are also trying to do is redeploy within the organization, not just editorial but commercial too.”
“Since I was a reporter in Hong Kong following the Asian financial crisis, it does seem that the number of crises and their severity has increased,” he said. “It’s very hard for any business trying to plan in this environment.”
Despite cutbacks by consumers and businesses, Ridding said he would continue to consider price increases for the pink-paged newspaper — it recently hiked the price again to 2.20 pounds ($3.42) — saying it was better value than a cup of coffee.
“I feel that whatever benchmark you take — I tend to use a cup of coffee, a double espresso — it’s hard to see that’s more valuable, when you think of the investment required to have a global network of highly trained professionals.”
Additional reporting by Paul Sandle; Editing by David Cowell