Growing revenues directly from readers is a key priority for many publishers in 2020.
As we noted last month, in a deep dive into digital subscription trends, 50% of digital leaders across 32 markets say subscriptions will be their most important revenue stream moving forward, according to a survey in the latest “Journalism, Media, and Technology Trends and Predictions” from the Reuters Institute for the Study of Journalism.
For an industry where revenues have historically been advertising-led, the pivot to subscription is a major shift. And it’s not necessarily an easy one.
As Grzegorz Piechota and George Brock remind us in a recent report (paywall) for INMA, “The Evolving Role of Newsrooms in the Reader Revenue Model”:
“…Media companies must stop functioning as manufacturers and instead become service providers to consumers… The fundamental shift to a service model affects every part of all news organisations. The focus is no longer on the most profitable products but on the most profitable customers.”
Given this changing dynamic, what are the strategic questions that publishers need to be asking? Based on INMA’s report, as well as insights from a wide range of other research studies, conference presentations and articles, here’s my take on the seven most important questions they need to be asking.
1: What content is your audience willing to pay for?
In an era of content proliferation, commodity content is of little value. Most publishers need to focus less on volume and concentrate more on producing distinctive material which isn’t available elsewhere.
Earlier paywall pioneers, such as the Wall Street Journal and the Financial Times understood this. Their high quality reporting – targeting a more affluent, specialist, audience – showed the value of niche and differentiation.
Market analysis, focus groups and analytics tools can all play a role in helping to determine the types of content audiences are willing to pay for, sometimes with surprising results.
At INMA’s 2018 Media Subscriptions Summit, Suzi Watford CMO and Executive VP at The Wall Street Journal, revealed that among WSJ readers, arts and culture content was a top five driver for conversion, highlighting that audiences don’t just come to the publication for business reporting.
2: Is the market big enough for what you want to do?
Alongside distinctiveness and differentiation, publishers also need to consider if there’s enough people willing to pay for your product to make it sustainable (and even profitable).
You don’t necessarily need large numbers to make this work, although you may need a large potential audience, given the lower percentages of the population willing to subscribe.
In France, home to 67 million people, MediaPart, a digital-born subscription-based French news site, has 170k subscribers, paying €11m/month, and generating €16.6 million in revenues and 20% operating margin. It derives 96% of its revenues from subscribers.
MediaPart “has achieved 12 years of unbroken growth in both revenue and subscribers, fueled by (and fueling) hard-hitting investigative reporting in a country that has arguably had too little of that in the past,” observes Rasmus Kleis Nielsen, Director of Reuters Institute and Professor of Political Communication at Oxford University.
Others see potential market size differently.
ProfitWell, a business intelligence platform, found in a survey of over 16,000 current, former, or prospective NYT subscribers, that “people are willing to pay more for financial news and less for domestic news.” Nonetheless, they reminded us, “a few people may only read finance, but the majority of users read a broad spectrum of news and want access to it all.”
Given its goal of having 10 million subscribers by 2025 (it currently has 5 million), the Gray Lady cannot double down on finance – a well served space – at the expense of other verticals. In fact, it needs to expand into other markets, before domestic growth levels off.
The recent addition of a breaking news team in London, for example, is designed to support international subscription growth. It hopes to have 2 million of these in five years time.
3: What is your acquisition strategy?
Publishers are deploying a range of techniques to attract paying customers, recognising that there are many pathways to subscription. These methods include a range of paywall models, pricing and marketing strategies.
Two of the most prominent, and successful, techniques being used by publishers involve special offers and newsletters.
Print magazines have a long track record of offering special prices for new subscribers, and this tactic has been carried over into the digital arena. As the American Press Institute (API) has shared, there are a number of ingredients which can help to make these online efforts as effective as possible.
For local newspapers, and with potentially transferable lessons for larger publications, API found in 2018 study that:
“Regardless of their underlying motivations, many subscribers are triggered by discounts at just the right time. Nearly half of all recent subscribers (45 percent) cited pricing promotions as the immediate trigger, more than double any other factor.”
Another route, newsletters, is not just a response by consumers to information overload. The resurgence of this format reflects its ability to be leveraged by publishers as a tool for lead generation, audience development and to serve as a shop window for their content.
Back in 2015, Digiday revealed that the New York Times had found people were “twice as likely to become paid subscribers if they signed up for a newsletter first.”
Meanwhile, in 2018, Miki Toliver King, Vice President of Marketing at The Washington Post, told WAN-IFRA’s World News Media Congress, that newsletters offered an opportunity to expose “the reader to our content whether or not they come to our site,” creating a means to develop a relationship which they hope will evolve into a paid subscription.
4: How can you make the sign-up process as simple as possible?
For many publishers, paywalls have become the primary way that they have pivoted to paid. Typically, most outlets see a huge reduction in traffic when they have been introduced, as publishers move away from scale to super-serving paying customers.
And with publishers also tightening up paywall loopholes, the potential to by-pass them becomes harder. Because of this, it’s important to invest in tools – and the user experience – if/when audiences do decide to sign up.
This includes ensuring a smooth process for mobile registration and payments, access to customer service, opportunities for personalisation and use of new tools like ‘Subscribe with Google’.
5: How can you build habit and reduce churn?
Acquiring new subscribers can be a costly business. The Economist spent £50m ($65.2m) on marketing in 2018, and £56.4m in 2019, for net gains of 36,000 and 13,000 respectively.
And subscriber growth can also be offset by cancellations, as The Los Angeles Times has found, in their effort to double their digital subscriptions to 300,000 by the end of 2019.
“Our future depends on rapid and substantial subscription revenue growth,” Executive Editor Norman Pearlstine and Managing Editor Scott Kraft wrote in a memo to staff. “Performance for the first half of the year, however, has been disappointing,” they added. “While we added 52,000 digital subscriptions, significant cancellations during the same stretch left us with a net increase of only 13,000.”
Because of this, it’s important for companies to place an emphasis on retention and reducing churn. Twipe argues that “There is a growing industry consensus that publishers should invest 3-10x more on engagement than acquisition.” “However,” they note, “many publishers are only just starting to accept this.”
Research from the Local News Initiative at Northwestern in the US has highlighted the importance of habit as an indicator of retention, and the need “to create a value proposition for readers that leads them to become frequent, daily consumers of their news and information.”
Because of this, it is incumbent on media companies to develop, and explore, products which help to forge this relationship.
Newsletters and podcasts are one route, but so are narrated articles. In a recent feature for Nieman Reports, journalist Gabe Bullard shared how Harvard Business Review, The New Yorker, The Economist, and others are using audio to boost reach and retention. At the Danish digital magazine Zetland:
“The average completion rate for an audio story is 90% — enviably high for anyone in a newsroom who has watched on a Chartbeat analytics dashboard as users abandon text stories a few paragraphs in”
6: What role can technology play?
Technology can also play a role, and increasingly will, in shaping the execution of digital subscription strategies.
As journalism.co.uk’s Marcela Kunova has outlined, AI can help predict subscription cancellation and keep readers engaged.
James a “digital butler” driven by AI at The Times and Sunday Times recently exemplified this trend, by creating individualised emails with content that subscribers are likely to be interested in. Sent at the time they are most likely to read it, Press Gazette reports digital subscriber cancellations at the Times and Sunday Times fell by half during a trial of [this] new artificial intelligence software.”
This type of technology is also used earlier in the subscription cycle.
The Wall Street Journal, working with the firm Cxense, developed a Conversion Engine to predict with 90 percent accuracy whether a visitor to WSJ.com will subscribe.
Using 65 different variables – including device type, the number of prior visits to WSJ.com, and data based on location e.g. average income of the users zip code – this is used to tailor the paywall experience, offering sample content to people less likely to subscribe, and a hard paywall for those deemed more likely to subscribe.
7: What might this mean for your work culture?
“Now that newsrooms are chasing subscriptions and becoming revenue centers, the balance of power is also shifting into the newsroom. News organisations must actively manage power shifts and cultural change and invest in change experiments,” advises Grzegorz Piechota and George Brock.
In doing this, publishers will have to think differently, learning lessons from other subscription based media (such as eCommerce providers, as well as TV and Music streaming services), partnering with different types of organisations and making tough calls about culling content which doesn’t fit their new brief.
Alongside this, as outlets like The Seattle Times have done, publishers will want to share subscription data and which stories have helped to drive subscription with the newsroom.
At the Times, and elsewhere, this has often met with a mixed reaction, but as Editor Lynn Jacobson has said, “if something is not doing well and it’s not mission critical then we have to stop doing that and focus on something that is more central to our readers.”
After all, the goal of any subscription-based publisher is “to build relationships with readers that are so strong and so valuable that readers are willing to pay for them.”
In doing this, no one team can do it alone. As Alan Hunter, head of digital at the Times and Sunday Times, explains:
“Journalism on its own is absolutely essential to driving a subscription product but you have to work collaboratively with your colleagues in marketing, technology and commercial to make it really fly.”