TL;DR – Why don’t we have a flat-rate model for publishing? This proposal by Gruner + Jahr Digital CEO Arne Wolter made publishers in Germany sit up and take notice recently. Behind closed doors, publishers are continuing to heatedly discuss the idea, but I would fundamentally question this approach – a Netflix or Spotify for model for news does not do anyone any justice. A market solution must be able to do more, and I had the opportunity to outline what such a solution should look like in another byline published recently.
Since the summer of 2019, discussions in the publishing industry have become heated in the face of several market studies on the monetization of digital content, from Landesmedienanstalt NRW to Reuters and the nextmedia study. In July, Frankfurter Allgemeine Zeitung even questioned whether it was time for a “Netflix for publishers.” Arne Wolter’s interview in HORIZONT, in which the G+J CEO suggested a cross-market, platform-based flat rate model for publishing content, came at just the right time.
Whilst the trade media have grown rather quiet about the topic since, you can still see it bubbling under the surface, suggesting that the industry is warming up to more permeable paywalls and joint market solutions. Existing models do not monetize sufficiently well and subscription growth rates are flattening out in all media verticals.
However, only a few believe in Wolter’s proposal. This is due to both the type of collaboration that G+J CDO is putting into practice – a flat rate, central solution – as well as justified doubt as to how any publisher with a complete focus on advertising revenues and reach optimization could suddenly acquire expertise in setting up and operating paid content models.
Flat Rates Promise Low Margins
Süddeutsche Zeitung, the number two publication in Germany with a market share of 8.6 percent, is currently said to earn a total of €3.7 million per month from 100,000 subscriptions, each priced at €37. That’s assuming we can trust some very generous calculations. However, this still doesn’t cut it cost-wise. The publication recently introduced an additional, reduced subscription offer: the cheapest option will now start at €9.99 per month. This opens Süddeutsche up to a lot of new readers, but it risks turning existing subscribers to this new offer as well.
So let’s play around with some numbers to see how this could pan out. In order just to earn as much with the new €9.99 subscription in the long term as they did with the higher subscription, Süddeutsche Zeitung would need to have 370,400 subscribers. That basically means quadrupling their market share – just to remain at the same level of turnover.
Ok, then how about offering content on an aggregator: a “Netflix for news”? An aggregator or publisher-spanning platform, with a flat rate set at the most common €10-per-month, would have to have 4.3 million paying readers per month for SZ to achieve the same revenues, given that it has an almost 9 percent market share. And if you subtract the costs for operation, billing and development for the aggregator, the number of subscribers would really need to be even higher. No matter how you turn it around, a flat rate alone is as likely to save the media industry as is offering a cheaper subscription.
This is even more the case when you consider that all the other subscription models are also likely to suffer. After all, even the most loyal subscribers would question whether they should not rather choose the more favorable flat rate package.
One Platform, One Brand
Even today, it is difficult for people to remember an exciting piece of content, let alone the media brand who published it. This is even more true in the case of aggregators and central platform solutions that bundle content. Think about it: off the top of your head, for which movie, apart from the Marvel or Star Wars universe, could you name the production company? For which album or artist that you streamed in recent weeks, could you name the record label?
Aggregators – as the experience of recent years with online newsstands has shown – decouple the content from the actual medium. That’s because content is presented in a uniform layout. The look and feel of the publication – its branding – simply disappears. If the media do go down this road, they would be saying goodbye to the much-envied brand reputation of the New York Times. The only brand that wins in a Netflix for News scenario is that of the aggregator.
Media managers at many German publishers are aware of these points. And it’s precisely this that’s making them shake their heads. In addition, most media houses have justifiable concerns about using a cross-market solution from a competitor. Will it make them stronger? Will they be too dependent? Will technical developments primarily focus on the needs of competitor brands? How long will it take and how much will it cost to roll out, test and refine a functioning model? Where does the competence in the development and operation of paid content models and payments suddenly come from?
Until recently, paid content was a topic that, if you brought it up in any publishing house, you were politely asked to leave. “Mr. Ene, paid content is of no relevance for us” – I have heard that phrase time and again in recent years. Even now, Arne Wolter doesn’t seem to be suggesting that G+J is in a hurry: “Many good ideas need several attempts until the right product has been developed and the right time has arrived.” But as publishers are very aware, the time for test runs and restarts is gradually running out.
Nevertheless, the topic of market solutions continues to be met with open ears. Hardly any event in recent weeks has not revolved around forward-looking models for reader revenue generation. Discussions on the sidelines of Dmexco at the conference “Payday for Journalism?” organized by the Landesmedienanstalt NRW, and at the first meetings of the BDZV working group “User-centered Models,” resulted in a list of answers that a cross-market solution has to deliver.
Above all, there is one factor – how the way in which content is consumed on the Internet is fundamentally different compared to purchasing analog products. In the past, readers received their news by subscription or individual purchase, and the publisher’s work was presented to them according to the ‘push’ principle. Today they read what they want, when they want, according to the ‘pull’ principle: they either search for content and click on a suitable link, or they consciously go to a media page. The paperboy from yesterday now lives in my phone and has to give me what I want and how I want it – sometimes in a subscription, sometimes in a time pass and sometimes as a single article. Because this is the only way I will pay for it.
With this in mind, let’s look at some of the questions that publishers should consider regarding a market solution – as it must fit not only the user’s needs but also their own.
1. Starting position for a cross-market solution
Do you already know the brand behind the cross-market solution in the publisher market and among users? Is it likely to be trusted? Are there already integrations in the market? And is a market-wide application possible?
Does participation in a market-wide solution strengthen a competitor or a service provider? Is this service provider in a position of power vis-à-vis the publishers? Are there any tendencies to introduce a competing offer?
3. Brand visibility and control for the individual publisher
Does participation in a cross-market solution keep your own publishing brand visible? Does the technical solution give you control over the content and its look and feel? Are there approaches for generating further revenues, cross- and upselling, bundles or various purchase options? Can you help shape the price for your content? Will the subscription offer be retained?
4. Technological implementation
Does the solution already exist and, if not, how great is the effort for development, testing and roll-out? How quickly and easily can a media brand be onboarded? How flexible is the technology with different media sites? And can the technology handle new content formats such as video or podcasts?
5. Effort/cost of the payment system
What does the cross-market solution cost the individual publisher? What are the realistic costs and expenses for development, integration with your own brands, operation and maintenance? And how expensive are the licenses for a cross-market solution if it is operated by one company for all? What percentage of the revenue remains with the publisher?
6. User focus
Is the offer actually what the user wants? Does it meet their price expectations? Is the purchase easy? Does the user have the choice between different offers, or is there only a one-size-fits-all option? How is content accessed and how can the user see the media brand? And last but not least: does the responsibility of the media to inform society remain intact?
7. Sustainability and proven effectiveness
Is the solution in line with current trends in terms of meeting data privacy issues, without restricting publishers in their advertising business? Is it DSGVO-compliant, for example, but does it provide data? Does the publisher have the option to test the solution risk-free? What would be the possible consequences of a test run? Are there any initial best cases and evidence for the German market or internationally?
To conclude, Arne Wolter is essentially correct: a solution from the market is what the market needs. Users are waiting, the technology is ready and the media need this solution.
But a ‘Netflix/Spotify for News’ does not do justice to any market participant. A market solution must be able to do more. It must be independent, flexible in the possibilities of revenue generation, integrate itself into existing system landscapes without generating horrendous costs, and above all it must be a tool for publishers to deliver on their brand promise and revenue generation goals in a user-friendly way. The user must come to the front.
Only a market solution that operates according to all of these principles – effectively kneeling before the user – can be successful in the long term and for all partners. There are already players on the market who could achieve this and who have many years of proven expertise in operating holistic monetization solutions, without having to spend the cash reserves that publishers need to survive just to develop new infrastructure.
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.