Publishing Top Stories

Fighting the pervasive mentality that content must be free

The best things in life aren’t free, they’re loved. 

In the table-setting remarks opening the 2019 DCN: Next Summit, I shared a publisher challenge that I strongly believe our industry is well on its way to overcoming: “Fighting the pervasive mentality that content must be free.” 

While there is speculation that subscriptions won’t work for many content companies online, there are a growing number of companies succeeding with subscriptions as well as other direct to consumer revenue models.  

Truth be told: We don’t know if direct revenues from the audience will suffice to sustain the industry in the broadest sense. However, there are positive trends on all dimensions. We’re certainly seeing more evidence across the DCN membership that people are willing to pay for premium publisher services. It’s no longer simply the financial or national news outlets that can garner subscription and membership revenues. Local news outlets, entertainment channels, and new bundles are attracting consumer revenue. We’ve started to capture these learnings in DCN research, as well as through our events on direct audience revenues. 

We see three positive subscription trends happening: 

  1.  If you want to differentiate a news or entertainment service, you need to compare it to the rest of your category on YouTube or the Facebook news feed. Your offering, your brand, needs to clearly stand out as compared to the next best user-generated offering in the ways more and more users are discovering it.    
  2. Every new subscription to a publisher’s product drives more intelligence and more investment back into the product so that the next subscription is easier to convert. In a world of more stable and dependable payments from your audience, it’s also easier to drive a percent of the revenue back into constantly improving the product (see trend 1) whether it be hiring more journalists or adapting the experience to the needs of the audience.  
  3. The population that has grown up with digital devices shops for news and entertainment with the tap of their fingerprint on a mobile device. Subscribing to Spotify, Netflix, Hulu, Apple Music, and more is a way of life for them. They will not hesitate to invest in news and entertainment that they trust and value. Each successful experience drives their behavior going forward and is more likely to bring their friends into the market of paying subscribers.  

Importance of free to Google and Facebook 

Whenever the sentiment is shared that people simply won’t pay for content in the digital age of abundance, it’s likely that Facebook or Google is lurking around a corner. They’re a crafty pair. Often, they prop up this notion with a truly worrying concern: that a shift to paid content will only serve to further divide the public based on ability to pay. However, their intention is to protect their free fortresses. An industry-wide effort and belief that audiences will pay for content is bad business for them. Hence the veiled efforts over the years to spin the narrative and control the outcome.  

DCN has long established that the free digital content market has mainly benefited these two companies. The math is simple, and it’s been cited far and wide. However, it’s important to recognize how critical the free content ecosystem is to their unbalanced equation. And you don’t have to take our word for it. On Monday night, the UK government released the long-anticipated Cairncross Review, which contains over 150 pages of analysis of the digital news marketplace.  

The Cairncross Review highlights two clear problems with the disturbing dominance of the Google and Facebook business models: 

1. The first problem (that forms the foundation of the duopoly’s dominance) is Google’s control over the buying, selling, transacting, and measuring of the digital ad marketplace. As Cairncross so eloquently puts it: 

“Google has ad inventory in the form of Google Search and YouTube videos, and it owns ‘demand side technologies’ (used by advertisers to bid and buy inventory online), such as Display & Video 360 and Google Ads, and supply side intermediaries (that publishers will use to sell their ad space to advertisers), such as Ad Manager and AdSense. It also owns supplementary technologies such as Chrome browsers, Google Analytics (a ‘freemium’ web analytics service that tracks and reports website traffic as a basic free service, with more advanced features that can be paid for), and the Android mobile operating system.”   

It’s clear what’s wrong with this: Antitrust much? 

2. The second problem that bolsters the foundation of these platforms’ superiority is Google and Facebook’s unmatched ability to collect voluminous amounts of personal data on peoples’ everyday interests and behaviors in both the digital and physical worlds. Again, Cairncross astutely captures:  

“Publishers gather user data from their own sites, including login data for their subscribers, but this pales in comparison to the power of online platforms, which have a rich set of user data giving them significant advantage over others in the market. Whether it is search data (Google), the social networks of users (Facebook) or generally the devices, locations, interests and behaviours of users online (both), these players have an unimaginable wealth of information – valuable to advertisers and publishers – about who is coming to which news sites, and who is seeing which adverts.” 

Google and Facebook are fueled by the amount of personal data available to their heavily-controlled advertising systems. Subscriptions inevitably create more user friction and restrict the flow of data. This means that movement towards subscriptions also forces these companies to step outside their carefully constructed profit guardrails. For risk-taking Silicon Valley start-ups, they’re terrible at stepping outside their shareholder comforts. Cairncross hits the nail on the head in calling for regulatory scrutiny (without mincing words) of these businesses — in how they deal with publishers, their position in the advertising market, and how their algorithms make decisions in promoting journalism.  

So, who is the knight in shining armor? 

To be clear, there are also positive moves by industry and government to encourage these developments.   Interestingly, the Cairncross Review takes a similar position to the Canadian government by recommending a tax incentive for subscribers to news, local news, or investigative content. Again, we agree with this recommendation and expect it would help support publishers.  

To their credit, Google and Facebook have made donations to innovation, journalism institutes and, in the case of Facebook, run seminars to share best practices on subscriptions. Again, their profit guardrails make it impossible for real moonshots. So, while these are good efforts, they are not enough.   

And then there is Apple. A company with the leadership, the payment systems, the brand architecture, and lack of dependence on everything in between Facebook and Google’s profit guardrails (data collection, advertising). And, as news starts to trickle out on Apple’s plans for a subscription news service, there is a lot to like in it. However, as I shared with Ad Age, the reported 50% revenue share is offensive especially if it also comes with the risk of another intermediary controlling the customer relationship. I’m frankly surprised they would roll out with anything close to these terms and hopeful it’s merely a head fake.  

I don’t have any proprietary information, but my back-of-the-envelope numbers on Apple’s offering means that the 100 million monthly users of Apple News translate to approximate 10-20 million daily users. Even if 10 million of these users moved into a subscription tier, this is a mere $120 million in revenue. And according to what’s being reported, a paltry $60 million would get divided between all of the participating news companies. That math doesn’t add up. If Apple has higher confidence in their model and ability to expand the market, then they’re going to need to put some revenue share behind it. 

It’s just business. Oh, and the future of journalism.

By Jason Kint, CEO – DCN@jason_kint

Republished with kind permission of Digital Content Next, advancing the future of trusted content

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