In 2001 Australia's technology industry faced recession after the dotcom crash. I interviewed Professor Michael Vitale of the Australian Graduate School of Management for The Australian Financial Review about hiring skilled workers in a downturn.

His words are just as relevant today as we pull out of another recession:

The main difference between IT companies and the rest of the economy lies in the ongoing, severe shortage of people with the right mix of talent, skills and experience, Vitale says.

It has been going on for some time and shows no sign of abating. The recession might see some companies slow or halt their recruiting, but that’s just like a starving person skipping a few meals – at the end of the day they’ll still be undernourished”, he says.

Importantly, Vitale says despite a severe shortage of talented, skilled, experienced IT workers, there’s no room for compromise.

“Every word in that phrase is important. IT workers need to be talented, skilled and experienced. Anything less won’t do. The shortage doesn’t mean you should be any more tolerant of people who aren’t performing.”

Despite the global financial meltdown and widespread lay-offs, Australia still faces serious skills shortages. The obvious answer is to drag in workers with the right qualifications and experience from overseas.

It’s not hard to attract skilled people to Australia; from many places overseas it can almost look like a Shangri-la. However, the bureaucratic hoops are daunting and, technology skills requirements are a fast-moving target so often, by the time applications are processed, employers demands have changed.

Today’s The Australian Financial Review reports the way the country grants overseas technology professionals entry to the country is set for an overhaul in IT projects force migration target change (the story is behind a pay wall). There’s a similar report at The Sydney Morning Herald : Migration rules set for revamp.

This is going to propel Australia’s economy. There are a number of big tech projects underway and a shortage of suitably skilled people to do the work. I’d like to see New Zealand take similar measures to make sure our nation had the skills it needs to compete on the world stage. Taking unemployed or under-employed professionals from the US, UK and other northern hemisphere countries that can’t or won’t make use of them makes a lot of sense.

Whatever happened to: the Internet-connected fridge? at PC Authority brought back memories of stories I wrote in 2000.

It was just after the dotcom bubble burst, but at a time when there was still interest in the internet and the way it was reaching in to all aspects of life. Despite huge investments and plenty of hype, internet-connected fridges and similar networked kitchen appliances never took off.

In fact they hardly sold at all. Before we look at why the product category failed, here's the colourful intro I wrote for a The Australian Financial Review story in June 2000:

Disney's cartoon movie The Beauty and the Beast featured a castle full of intelligent animated appliances that talked to each other. The film was made as recently as 1991, yet even at that time, the idea of loquacious brooms, smart candlesticks, chatty clocks and even intelligent teapots seemed like pure fantasy.

In fact it was eerily prophetic. Today people in laboratories, software development corporations and marketing departments are working on projects that will put an electronic brain in just about every household appliance you can imagine and provide the hardware allowing devices to talk to each other. By the time Disney’s film celebrates its tenth birthday, the first fruit of their labours will be on sale.

Hopefully the modern smart household devices won’t spend their time in petty cartoonish bickering. For the most part they’ll be swapping information and communication commands from one device to another to co-ordinate their actions. Most likely the signals shuttling between a real world clock and a smart electric kettle will travel by wireless. Though other technologies such as infrared are also under investigation.

The impending failure was plainly obvious even as the appliance companies were still steaming ahead with the products. I interviewed someone selling a fridge that could detect when it was running out of milk and automatically order another litre or two via an online supermarket.

None of this was cheap. The fridge cost more than A$20,000. To order a single litre of milk – which might cost a dollar or so in a supermarket – would cost around $35 by the time the online grocery added in its fees and delivery charges. Colour me Luddite if you like, but I suspect there would be few people willing to fork out that kind of money when they could just stop off on the way home and pick up a carton.

In a story titled Hell's Kitchen, I wrote:

In January, visitors to the International Building Show in Dallas Texas got a glimpse of the kitchen of the future. General Electric showed an Internet-connected fridge that reads food packet bar codes and automatically re-orders items when stocks run low.

Rival fridge-maker Whirlpool’s device had a detachable wireless pad that could download recipes.

At roughly the same time, Sunbeam was showing an alarm clock that turns off an electric blanket while switching on the coffee machine. It also has bathroom scales that send your weight details to the gym.

Elsewhere companies have been promoting net-enabled microwave ovens that allow busy office workers to send cooking commands via the web and have dinner cooked by the time they return home.

All heady stuff. But mainly nonsense as I went on to point out. My main story didn't use this language, but in effect it said appliance makers who were suffering from low margins on dull products took a look at the high-tech companies and their huge profits and decided to get in on the act.

…companies in the low-margin, mature, distinctly unsexy appliance business regard the Internet as a kind of commercial viagra that will rejuvenate their profit margins and enable them to satisfy every woman’s needs for ages to come.

Maybe. But there are major obstacles to overcome, not least of which is consumer apathy. To date sales of high tech kitchen devices have not exactly set the market alight.

The kind of gung-ho marketing commandos who flog these products aren’t the sort to let customer indifference stop them, but there are other problems.

Above all there’s a lack of standards. Kitchen appliance makers and computer companies have formed into a number of camps around various communications protocols and, guess what? Devices made by rival companies can’t talk to each other.

In other words, it was obvious these products weren't going to fly.

The signals coming from Fairfax are jumbled, but the message is clear. Australia and New Zealand's largest publisher plans to follow Murdoch and charge for online news.

The signals are confused because on Friday, Stephen Hutcheon at the Sydney Morning Herald wrote a story about readers’ reluctance to pay for online news. On one level Hutcheon’s Not happy, Rupert: readers say they won't pay for online news was a simple dig at the rival News Corporation – complete with an unflattering photograph of Rupert Murdoch. He says News’ announcement was followed by 140 reader comments – mainly from angry readers threatening to go elsewhere the moment charges are applied.

Clearly Fairfax's left hand doesn't know what the right hand is doing because Sunday saw Tom Hyland write Fairfax, News to charge for online at The Age website. He also wrote the longer Stop the presses. Hyland had the unenviable job of quoting Fairfax chief executive Brian McCarthy who told him; “charging for online access was essential if publishers were to maintain their newsroom staff.”

You always know things are going to get tricky when a newspaper executive uses a word like 'monetising' and Hyland quotes McCarthy getting his teeth around that in the very next paragraph. He went on to talk about a two-level model at the The Age and the The Sydney Morning Herald websites.

Of course Fairfax is no stranger to charging for online content. The company's The Australian Financial Review has long been one of the regions few major titles to eschew the free online model and charge readers. By all accounts the AFR's pay wall hasn't been successful, but it will have taught the company useful lessons about turning reader clicks into money.

Practical subscription models are possible. Micro-payments need more work and may never be a serious option.

Many traditional newspaper publishers plan to charge for online news and other material. Or maybe it would be more correct to say they hope to charge.

Online publishers mainly earn money from advertising. They say, with some justification, this doesn't generate enough revenue to pay for the teams of journalists and editors who produce online newspapers and magazines. It certainly doesn't deliver the 'rivers of gold' profits they enjoyed back in the heyday of newspaper publishing.

But publishers wishing to switch from an advertising revenue model to a charging model or a mixture of advertising and pay-to-read face an up-hill struggle.

For a start, only a small percentage of existing readers are willing to pay any money. Judging by what I've heard from the industry, publishers believe somewhere between one and 10 percent of existing readers would be willing to hand over money.

The number depends on many factors including the value of the material being offered. But most publishers who've tried this in the past have only managed to sell paid subscriptions to one or two percent of online readers.

How much does a single newspaper page cost?

Let's for argument's sake here agree that 10 percent of an online publication's existing readers would pay for content. Remember this number is higher than anyone appears to achieved to date.

This means in order for the pay wall to make as much money as the current advertising model each paying reader will have to contribute as much revenue as ten existing readers.

Online advertising is generally charged by the CPM (cost per thousand). Typically publishers can earn around $50 for every thousand page views (I'm using indicative numbers and not precise numbers). This is 5 cents per page view. Then to make the same money a single online page would cost 50 cents to read.

If publishers can only convert 2 percent of existing free readers into paying readers the single page price would rise to $2.50 – which is close to the A$3.50 The Australian Financial Review charges for each story.

Charging by the page for online newspapers

While billing users by the page to view online content may look attractive to publishers, it is not a cost-free transaction. The price of delivering a single web page to a browser is so small it is in effect negligible. The cost of adding a per page billing system to a site with ecommerce gateways, security and the pay wall technology is higher – though still small compared with the $2.50 fee calculated above.

However, that fee would only replace online advertising revenue. As Rupert Murdoch says, the existing revenue isn't enough to pay the bills, let alone make a profit.

On this basis the cost charged per page would need to rise to at least $3.00, but let's say for the sake of argument Murdoch needs to make $3.50 per sold online page to cover costs and keep his shareholders happy.

The micro-payment price is wrong

There's something wrong about charging readers US$3.50 to read a single online story, or for that matter the A$3.50 charged by the Australian Financial Review. It only costs $3.00 to buy a print edition of the newspaper, containing 64 or more tabloid pages. The physical newpaper is and edited by a large team, printed on dead trees, wrapped up and distributed across an entire continent to arrive at a local newsagent, who takes a 30 percent or so slice of the cover price.

It has at least 100 stories – usually plenty of really good reading – and vast amounts of valuable information. All for 50 cents less than the cost of a single online page that cost the AFR's publisher nothing to deliver to your screen.

Not only that, but the printed paper is your property for as long as you want. It's hard saving or downloading the AFR's online content – though you can print it out at your own cost – probably another 10 cents or so on top of the $3.50 you've already paid.

Similar logic applies to any other newspaper sold piecemeal online – it isn't  a sensible purchase. There are times when it makes sense to pay for the odd story, but over the long haul it is cheaper to buy the print edition.

In fact a subscription to the print edition is 20 percent cheaper than buying the paper each day directly from a newsagent, which makes purchasing stories online relatively more expensive.

What about digital subscriptions?

If buying online stories piecemeal doesn't make sense, what about digital subscriptions?

The model closest to home for me is The Australian Financial Review which charges A$75 a month for access to the digital edition only – that's the same price as a subscription to the print edition. Which from a reader point of view makes far more sense, but doesn't pass on any of the savings involved in not printing or distributing the physical paper.

Given the costs involved, the margins on this would be huge – which may cause resentment from readers, though probably not the well-heeled types who buy the AFR. But it's important to recognise the Financial Review covers a specialist niche and its readers can afford to pay a premium online – though by all accounts not many do. It would be  harder for a general newspaper to charge this kind of price.

It is clear after looking at the numbers that publishers will follow the subscription model for online content sales and not micro-payments and selling stories one-by-one. Maybe it'll work for Murdoch, after all, this is the man who convinced half the western world to pay for television – something that had previously been free. Yet there are other complications. As The Sydney Morning Herald points out Murdoch's claims that readers would be willing to pay for 'quality journalism' is, well, something of a talking point.

Also, there are privacy concerns about Murdoch's plans. As Wendy Davis explains at MediaPost, Murdoch wants to collect reader data – that's not a move to endear yourself to customers when you're about to hit them up with new charges.

As a journalist and editor, I've a vested interest in publishers finding ways to make readers pay for editorial. Unlike many I'm not in principle against the idea, I don't think it can work without major disruption and top-to-bottom reform of the entire publishing industry. Only a fool would dismiss Murdoch, he knows the media business inside out, but this could yet turn out to be News Corporation's Vietnam.  We'll know soon enough.

Dan Conover says the newspaper publishers' campaign to charge readers for on-line news is a suicide pact.

He says while expecting readers to pay for the professionally created content is reasonable, attempts to force them to pay are "post-rational".

Conover points out flaws, including the fact consumers don't want to pay for news and previous attempts to make them pay have failed. But he says newspaper publishers no longer listen to reason and are determined to plough ahead with paid content.

I'd love to see publishers find a way to make on-line news profitable.  But it is a fantasy.

If Fairfax can only convince a handful of Australian business people to stump up cash to read the highly targeted and immensely useful Australian Financial Review on-line, what chance do other newspaper publishers have?

You need nerves of steel to bet against Rupert Murdoch, but this time, he and the other newspaper owners are going in the wrong direction – readers are not going to pay to read news. And they definitely will not do so while there are free alternatives.

Today The Australian’s Media section ran Readers not averse to paying for online content by Nick Tabakoff. As the headline suggests the story looks at an international study by PricewaterhouseCoopers which found ‘readers could be willing to pay almost as much for some high-quality online newspapers as they do for print versions, particularly in specialist news areas’.

Could this be related to the PricewaterhouseCoopers study referred to by Miriam Steffens in The Sydney Morning Herald’s Readers reluctant to pay for online news?

It is.

Now, strictly speaking there’s a thin semantic line between ‘readers being reluctant to pay’ and ‘readers not averse to paying for’. One does not directly contradict the other. But the two headlines are clearly two different interpretations of the same data.

Or as we say in the media, they each have a different spin.

Which is more plausible?

Both Rupert Murdoch’s News Corporation, the owner of The Australian and Fairfax Media, owner of the SMH have a vested interest in the story.

Murdoch has gone on the record in recent days saying he wants to charge readers for online content on News Corporation web sites. The headline on Nick Tabakoff’s story squares nicely with Murdoch’s recent statements on the issue. We all know Murdoch interferes editorially in his papers. While it’s extremely unlikely he had a hand in this particularly story, it reflects the official line now coming from News Corporation.

Fairfax is more complicated. The company’s The Australian Financial Review operates behind a content pay wall. It costs around $3 a pop to view an AFR story, though most paying customers have all-you-can-eat subscriptions. On the other hand the SMH, The Age and the company’s other online properties including New Zealand’s stuff.co.nz are all free to readers and make money from online advertising.

Sadly Brian Corrigan’s Opportunities still there for graduates is behind The Australian Financial Review’s paid content wall.

Corrigan reports that after years of decline, student numbers are climbing again for information technology and computer science courses at Australia’s universities.

It appears people are using the recession to gain skills. That’s a smart move. Earning money is difficult right now. The cost of an education is the same as it was before the financial meltdown, but many other costs associated with studying are lower. So are interest rates, which makes taking a student loan easier.

Sydney’s University of Technology has seen postgraduate IT student numbers rise 25 percent this year. At Queensland University of Technology student numbers climbed 10 percent after falling every year since 2002 after the dotcom bust.

In the mid 2000s I wrote stories for the AFR about technology courses in higher education. At the time there was a fear courses would close  due to lack of demand despite industry’s need for trained IT workers.

Corrigan says there’s still a healthy demand for workers with computer qualifications in Australia. The recession and falling overall employment has barely touched technology with 10 percent fewer tech employers turning up at job fairs. This compares with  next to zero potential employers looking for recruits in other industries.

Further good news appears in Australian IT, where Fran Foo wrote about a rise in the number of computer related scholarships on offer in Scholarships defy crisis. She quotes ACS Foundation executive director John Ridge, who said about 20 new companies had started offering scholarships in the past six months even though the economy had turned south.

It’s not directly related, but Jennifer Foreshew’s Overseas hunt for 200 with IT skills also in today’s Australian IT underlines the message that tech workers with the right stuff are not doing it as tough as everyone else these days. In fact, Peoplebank Australia is planning to import between 150 and 200 tech workers this year.