It seems like not a week goes by without another news organization announcing it’s launching either a subscription or membership platform. This week it was New York Media and Quartz; the former is rolling out a metered paywall, similar to what you’ll find on the websites for The Washington Post or New York Times, and the latter is debuting a membership program that will offer up additional content and a special app for $99.99 a year.
To follow the media industry is to experience whiplash as you watch companies chase one shiny object after another, all in pursuit of a business model that will save them from the ever-diminishing returns produced by display advertising. After BuzzFeed and Vice saw tremendous revenue growth from their native advertising divisions, then suddenly every publisher was announcing the launch of an in-house creative agency that would begin crafting custom content for brands.
We saw the same trend with ecommerce; when Wirecutter received glowing profiles that detailed its rapid revenue growth through affiliate sales, then publisher after publisher starting launching buying guide sites that would make product recommendations and, in return, take a cut of any money their readers spent after clicking on their links.
And don’t get me started on the infamous “pivot to video.” While it’s widely mocked today for how it lured publishers into making foolish investments into an unproven medium, it wasn’t that long ago that media companies were bragging about their billions of Facebook video views and wrapping rubber bands around watermelons.
In many ways, digital subscriptions represent the ultimate holy grail. Unlike print subscriptions, which bring with them the marginal costs of printing and delivering physical papers, digital subs require only fixed costs. Rather than relying on a fickle advertising market that is increasingly dominated by tech behemoths like Facebook, Google, and Amazon, subscription publishers can extract money directly from their readers while also generating a consistent revenue stream that can be relied upon from month to month. And thanks to the metered paywall, which was pioneered by The New York Times back in 2011, these publishers can have their cake and eat it too — distributing their content widely across the internet while requiring their most devoted audience members to pay up.
How can you look at the success of the subscription programs at The Wall Street Journal, Washington Post, and New York Times and not want to get in on that action? The Times, in particular, has seen a monumental turnaround in its business in the last few years. In its recent quarterly earnings report, it announced that it had reached 2.9 million digital-only subscribers, and subscriptions are now a $1 billion business for the company. Roughly 62 percent of its revenue now comes directly from readers.
But will this kind of success transfer downstream as more and more publications pile onto the subscription bandwagon? Many of these companies only announced subscription plays within the last year, and most of them don’t publicly report their revenue numbers anyway. I can’t help but wonder if they’re in for a rude awakening when they realize the subscription business is much harder than it looks.
For one, the market is fairly saturated, with much of the low-hanging fruit already accounted for. As Nieman Lab’s Joshua Benton deftly put it, “how many paywalls will people really pay to click past? It’s worked for The New York Times; it’s worked for The Washington Post and The Wall Street Journal. But does it work for local newspapers? Metro dailies? Weekly or monthly magazines? Digital native sites?” Each new paywall isn’t launched into a vacuum; a potential subscriber must weigh it against every publication to which they’re already subscribed. At what point do they look at their expenditures and decide that one more monthly payment of $5 to $10 is just too much?
The pool of potential subscribers also remains quite small. There’s a large subset of every publication’s readership that simply won’t pay up. Once they hit the paywall each month, they’ll either figure out ways to get around it — my favorite method is to simply open up a tab using Chrome’s incognito mode — or they’ll forgo the website until the meter resets itself at the end of the month. After all, it’s not as if they’d be lacking in plenty of free content in the meantime.
Though the numbers vary depending on who’s doing the polling, studies suggest that as few as 16 percent of Americans are willing to pay for digital news. There may be some elasticity to that number, however; the same study found that it was only 9 percent a year earlier. But either way, every publisher should recognize that upwards of 80 percent of consumers just don’t think it’s worth paying for news on the internet.
And then there’s the sheer amount of infrastructure and technical manpower that goes into not only generating new subscribers, but retaining them. Building a robust subscription business requires much more than simply flipping on a switch and then sitting back as the meter converts readers into customers. Publishers like The New York Times and Washington Post have built up large teams of marketers and engineers who are wholly devoted to creating sophisticated nurturing campaigns.
The Times for instance, has a team of over 100 people dedicated to generating reader revenue, and it’s reportedly tripled the number of staff who are solely focused on subscriber retention; The Washington Post has 25 people whose job it is to reduce churn.
What can you do with this kind of expertise? Recently, the Times has begun experimenting with dynamic paywalls, moving away from a cookie cutter approach and trying to predict the exact number of free articles a particular reader will need to consume before they decide paying for a subscription is worth it. The Washington Post has rolled out all sorts of subscription focused products, including cleaner article pages with infinite scrolls. The Financial Times has doubled down on audio content, viewing it as a gateway drug that will convert listeners into paying subscribers.
Needless to say, most publishers, especially the smaller ones, don’t have access to this kind of infrastructure and manpower. This means they’re going to have to deal with off-the-shelf subscription software, which is limited in its capacity for customization and experimentation.
Don’t get me wrong; a publication would be foolish if it didn’t try to diversify its revenue sources by extracting money directly from readers. But just as the much-ballyhooed native advertising business model proved difficult to scale, I think many publishers will find that subscriptions aren’t the silver bullet they thought they were.
The internet disrupted so many media companies precisely because it removed the barriers that made information so scarce, and no matter how many publishers retreat behind paywalls, that scarcity isn’t coming back. Consumers might place a little bit more value on content than they did a few years ago, but ultimately, they still want it to be free.
Discover the different ways publishers have worked on paywalls this year and where this could head in the future in our Media Moments 2018 report. Download it here.