Late in January, What’s New in Publishing ran a strong feature by Esther Kezia Thorpe on how publishers can generate new reader revenues from micropayments. Ms. Thorpe rightly points out that publishers are still working out a way of sustainably monetizing their audiences, and goes on to make a number of compelling arguments for why micropayments may well be a strong model moving forward.
It was with that article in mind that I recently re-read an article from Nieman Lab summarizing some of the key takeaways from WAN-IFRA’s recently released 2019 World Press Trends report. Within that piece, the author noted the fact that almost all of the growth seen this year came from digital publishing. One quote in particular stood out to me:
“An analysis of data from 248 countries provided by the content analytics firm Chartbeat showed that while traffic from news subscribers remained relatively stable, the number of guest pageviews has increased 76 percent over the 11 months to Feb 2019.”
The fact that subscriber traffic remained stable, while guest pageviews increased considerably, was of no surprise. What did astound me was the article’s conclusion about this particular point: “There’s a lot of room for subscription growth.”
Digital subscriptions have been around for well over a decade, but in the last two to three years publishers have placed ever more increasing value on growing their online subscription numbers. This is in part due to the plateau, and now decline, of digital advertising, as publishers seek to make up the difference in revenue. In the UK, for example, the second quarter of 2019 saw display advertising revenue drop by a stunning 15%, according to the Association for Online Publishing and Deloitte’s quarterly Digital Publishers Revenue Index. Prior to 2015, if we saw steady subscription traffic and a strong growth in casual visitor traffic, I’d have been the first to agree: absolutely, a growing number of people are interested in your site, let’s convert them to subscribers!
But it isn’t 2015. It’s 2020, and the market reality is utterly different. One of the key findings from the 2019 Reuters Institute Digital News Report was that users no longer want to have multiple news subscriptions. The report states with regard to news consumption: “Even in countries with higher levels of payment, the vast majority only have ONE online subscription.” In Germany, for example, 70% of people who pay for news only subscribe to one publication.
Media consumption is now shifting from a ‘push’ to a ‘pull’ model, with consumers preferring to access just the content they want, when they want, in the way they want it. In this context, both Nieman Lab’s own Ken Doctor and INMA’s Researcher-in-Residence, Greg Piechota, have both noted that 98% of online readers won’t ever subscribe to a publication. So why on earth should we assume that anything more than a handful of those guest pageviews that have increased by three quarters will ever lead to subscriptions? We see a totally different sign on the wall – namely that there is a lot of room for incremental revenues, if you can engage and harness those occasional visitors.
Publishing is mostly stuck in a rut, continuing to focus on how to source predictable, recurring revenue. Unfortunately digital online subscriptions in general, and paywalls specifically, only seem to work out for a few. A study this year by Harvard Business School’s Doug J. Chung found that, while paywalls do increase sales for publications with high readership and considerable exclusive content, those with less exclusive content saw losses after charging for digital content. In this way, while a paywall may work for media giants like The New York Times or the Washington Post, most publishers aren’t going to see a significant benefit.
Instead, in order to have success with reader revenue models, publishers need to make it simple and easy for users to consume content. Low-friction models – allowing readers to purchase individual articles, to make voluntary payments (contributions), or to buy time passes for the day’s news – all make it very easy for users to take that very first step from being a user, to becoming a paying customer.
Low friction purchasing models also have extremely attractive unit economics, making them more profitable, from a long term perspective. And the math backs it up. Let’s look at a couple of examples.
Example 1: The Transition from Daily Print to Digital
Let’s imagine a standard print newspaper that’s transitioning into digital. How many pieces of content of value does it print each day (we’ll include both articles and pictorials – consumers value that latter just as much)? Let’s be conservative and say they print 200 pieces each issue.
And how much does it cost to buy one issue of that daily paper? Let’s say, on average, $2.00. That would equal an average cost of 1¢ per article/photo.
So, what if you made it incredibly easy for a consumer to purchase just one of those articles online? For the sake of this example, we’ll price the article at 50¢.
Now, let’s assume I’m a consumer who really likes the content, but just wants to read that specific article. In one click, I’ve paid half a dollar for just one item. Put another way, I’ve spent close to ¼ of the cost of the entire paper. It’s also fifty times the average revenue value on a per-article basis in our example.
Let’s build it out further. How about if I like the article so much that I share it with my friends on social media? As a result, let’s assume only three of them choose to buy it as well. Well, now I’ve brought you an additional $1.50. Just by giving me, the user, the opportunity to read a single article, I have essentially generated the same revenue for you as a daily subscriber would.
Example 2: The Established Digital Monthly Subscription
Next, let’s take a look at a more prolific publication, with a strong online presence – something like The New York Times. Now, the NYT publishes on average 250 new articles and pictorials online every day. At the time of printing, the NYT’s monthly digital subscription price is regularly discounted as low as $1.00 a week, or $4.00 for the month. $4.00 for 7,500 pieces of content each month gives us a per-article cost of 0.05¢.
Now, with the NYT pushing out as much content as it does, we can’t expect to charge 50¢ per piece of content. So let’s assume I buy an article for just 25¢. Because it’s the quality reporting of the NYT, I share it with my friends and – because it’s so much cheaper than a subscription – as many as 10 of them choose to buy it as well. That’s $2.50 – slightly more than half a monthly discounted subscription – again, generated from just one article.
Is every article going to have that high an ROI? Perhaps not – even if you are The New York Times. But it is a new revenue stream that doesn’t touch the publication’s existing subscriber base and, with the number of articles they publish each day, you could imagine them one day in the future even surpassing the subscription revenue.
Example 3: The Zero-Sum Publishing Game
Let’s take one more example. One that I believe is going to be critical to the publishing industry.
Everyone may want to subscribe to Disney+ and Apple TV+, but no one wants 27 subscriptions to the news. The Reuters Report cautioned publishers that users are less and less happy to pay for more than one monthly news subscription to any platform or service. As a result, the industry finds itself in a dangerous position, if it relies exclusively on subscriptions for revenue generation – a zero-sum situation.
If a user is only going to pay for a subscription to their favorite news publication, then precisely zero revenue will be available for anyone else. If all they are offering are subscriptions, then Publication A gets everything, and Publications B through Z get nothing at all. Put another way, every publisher is vying with every other publisher out there to capture each user’s revenue. For one publication to win, everyone else has to lose. So if the only thing you’re trying to do is generate recurring revenues through subscriptions, then you are forcing people to make a choice – stay with you, or stay with the competition. If they do the latter, then you see no revenue.
But remember – I just showed you how valuable to the bottom line purchasing a single article can be.
The zero-sum game is not how this industry will survive. On the other hand, if you allow people to buy individual articles and go à la carte, even if you don’t get their subscription dollars, you may well generate revenue from people who won’t subscribe – because they read the competition – but who will buy one or two articles regularly.
By doing what they do today – focusing on the predictable recurring revenues generated by subscriptions, rather than on economies of scale – publishers are missing out on an incredible opportunity and leaving money on the table. The industry needs to acknowledge that there is no one catch-all model for every publisher. The path to sustainable revenue streams is – and always will be – a combination of a-la-carte and flat-rate models.
In other words, offer a combination of options – some that are suited for your loyal readers and some that are aimed at your occasional readers. Not only do low-friction models (such as single article purchases) not cannibalize existing subscription income, they’re also a revenue force multiplier in their own right.
Cosmin Ene, Founder and CEO, LaterPay
About: LaterPay’s “use now, pay later” approach empowers publishers to monetize the vast space that lives between ads and subscriptions and turn users into paying customers. Its patented technology enables micropayments without upfront registration, creating a running tab through which users can consume paid digital content and services with one or two clicks – a frictionless experience that turns traffic into transactions.