Increase in digital subscriptions and decline in ad revenues—trends seen prominently in the current crisis—were actually already underway, indicating a deeper and likely, permanent transformation of the publishing business.
COVID-19 appears to have accelerated them. This is the key insight from the latest Digital Publishers Revenue Index (DPRI), a quarterly report on UK publishing from the Association of Online Publishers (AOP) and Deloitte.
“The fastest rise for six quarters”
Revenue from subscriptions and sponsorship rose by 24% and 10% respectively in Q4 2019, compared to Q4 2018, according to the report.
“In the final quarter of 2019, which included a general election, we saw a remarkable 24% increase in digital subscriptions; the fastest rise for six quarters,” says Dan Ison, Lead Partner for Telecommunications, Media and Entertainment at Deloitte.
The ‘subscriptions spike’ underscores UK society’s reliance on the digital publishing industry as a key source of information and entertainment.Dan Ison, Lead Partner for Telecommunications, Media and Entertainment at Deloitte
“This is welcome news for the industry, given the parallel continued decline in revenue from advertising display formats,” he added referring to the 22% decline in display advertising for the same period.
53% of publishers reported revenue increases in Q4 2019, down from 58% who said the same in Q4 2018. However, 24% publishers reported high growth (over 25%) in Q4 2019 compared to 16% who reported the same in Q4 2018. There was an overall 6.2% decline in digital publishing revenues in Q4 2019 compared to the previous year.
Another recent Digiday survey of 127 publishers found that subscriptions increased for 29%, decreased for 14% and stayed flat for 57% in Q1 2020.
“Seismic change on the cards”
While these are challenging times, exacerbated by the pandemic, the figures could be indicative of structural transitions that were happening before COVID-19. Publishers may already be on the way towards building a more reliable revenue portfolio. One that is less reliant on advertising.
“While digital publishers have been seeing great audience figures during the global pandemic, this has not been matched with advertising revenue coming in,” comments Richard Reeves, Managing Director, AOP. “And so we expect to see publishers place a greater emphasis on alternative revenue streams such as ecommerce to compensate.”
Collaboration has always been key to addressing industry challenges, and in difficult times we often see true innovation. With seismic change on the cards, digital publishing could well reshape for the better over the next 12 months.Richard Reeves, Managing Director, AOP
“The current crisis has been unique in that it has caused some massive accelerations of shifts already taking place,” writes Digiday MD, Editorial Products, Shareen Pathak. “The decline of ad-supported media, the pivot to reader revenue and the overall “boring,” simple-but-hard principles of making content that people will pay for.”
I think there’s a transition in the industry, where we’re moving from a content-centric model to a user-centric model.Daniel Hallac, SVP, Consumer Products, Vox Media
Pathak adds, “News publishers are pushing subscriptions directly in order to make up for lost ad revenue. And as we detailed earlier, publishers with strong subscription businesses and other ways of diversified revenue streams and low cost structures will win.”
“Shifting focus to long-term value”
Moreover, subscriptions are an important and controllable way to generate revenue according to Digiday’s subscription strategies guide. A 2019 research by the company found that subscriptions also have a lower resource allocation cost. The survey found that 75% of publishers surveyed allocated less than 25% of their company’s resources to subscription products.
The present crisis also presents a great opportunity for publishers to figure out subscriptions as engagement is high and CPMs are down. “It’s never been cheaper to invest in the long-term,” comments Slate CEO Dan Check. “So we’re shifting focus to long-term value.”
“As households and business leaders remain cautious of discretionary spending during COVID-19, communicating the value of subscriptions will be fundamental in ensuring revenue growth in the year ahead,” suggests Ison.
In the longer term, subscription revenue will grow in importance as a solid bedrock for publishers looking to diversify their business models.Dan Ison, Lead Partner for Telecommunications, Media and Entertainment at Deloitte