While the global pandemic has forced several publications out of business, the changing consumer behavior and competitive landscape also allowed some organizations to emerge stronger thanks to the surge in digital subscriptions.
Publications that bet on early on digital subscriptions are already seeing significant gains. The New York Times added 2.3 million net digital subscribers in the last year alone, a number it took four years to achieve when it first launched its digital paywall (it now has over seven million digital subscribers); The Washington Post now has around three million subscribers; The Wall Street Journal added more than half a million subscribers to take its total digital subscribers to nearly 2.5 million in the past year; The Financial Times has more than a million subscribers, almost two-thirds of which are digital subscribers.
Mark Thompson, who led the NYT’s digital transformation, remarked in an interview with McKinsey that the initial psychology behind both the Times and other newspapers was to focus on gaining a bigger audience and transfer the wonderful economics of print advertising to digital. “I didn’t buy that. I think digital can be useful. I think it’s an important adjunct source of revenue. But I never thought it would save the Times. It had to be subscriptions.”
Subscriptions didn’t just help the New York Times survive the global pandemic; they helped it thrive during a very disruptive year. In 2020, its digital subscription revenue exceeded print revenue subscription for the first time in its 170-year old history and became the publisher’s largest revenue stream. Chief Executive Meredith Kopit Levien remarked, “Those two milestones, and our best year on record for subscriptions, mark the end of the first decade of The Times’s transformation into a digital-first, subscription-first company. The last ten years were about proving our strategy of journalism worth paying for; the next ten will be about scaling that idea.”
The transition to a reader revenue model
An analysis from FTI Consulting on a cohort of publishers in the US and Canada as part of the Google News Initiative shows that subscription revenue is projected to scale up much faster than advertising revenue over the next five years. The shift from an advertising-led model to a reader revenue model has become inevitable, with newspapers and magazines steadily losing advertising share. According to GroupM, the WPP-owned media buying agency, in 2000, newspapers and magazines attracted half the advertising spending worldwide. Over the past two decades, their share of the $530 bn market has dwindled to less than 10%, with Google and Facebook taking away a large chunk of the local and classified advertising. The forecast is gloomy as well. Global newspaper advertising revenue is expected to fall further from $49.2bn in 2019 to $36bn in 2024.
So publications need to lean into the idea of being a subscription business first. “For subscriptions to work, you have to have to create a strong relationship with your customers. You have to stop thinking about transactional revenue because that’s not how it works. You need to earn the trust of your subscribers who believe that you will continue to deliver on product quality, consistently add value and hence sign up for your product”, says Tav Klitgaard, Chief Executive Officer, Zetland. The Danish publication leveraged the strong relationship that it created with its members to help it break-even. In 2019, 1000 existing members became ‘ambassadors’ to bring in 3500 members a month to take them to the total of 14,000 members required to break even.
Getting the user experience right
Publications also need to invest in providing a great user experience. Even an excellent editorial product may find few takers if it comes with a poor user experience. “Apart from high-quality, unbiased content and distribution, we have a relentless focus on the UX experience because our customers are on Spotify and Netflix and expect us to be equally brilliant,” says Klitgaard.
He recommends that publications have a freemium or limited period free trial model when transitioning to the reader revenue model. “You need to let people experience your product; otherwise, they are unlikely to sign up, at least when it comes to the media business,” he says.
Having a robust subscription system will help monetize your user base. You can provide limited period free trials and experiment with bundles adding newsletters, podcasts, audiobooks, and events to the mix if you are targeting a younger audience. It allows you to experiment with pricing and tweak various price points depending on user behavior. It also helps in offering a great user experience with frictionless payments and seamless checkouts and retain customers with one-time discounts and promotions, cross-sell.
For readers, it provides the flexibility to pause and reactivate subscriptions or upgrade to higher plans with ease without having to call someone. All the while you can focus on generating high-quality content that will help differentiate you from competitors and drive growth over the long term.
Klitgaard says publishers must rethink their core product to offer what the consumer wants to pay and is willing to pay for the reader revenue model to work. So publishers need to know their prospective subscribers’ news habits, what information they come seeking for, and the format they would like to consume the content.
Also, consumers now are more than ever willing to pay for content. Bloomberg Media expects its consumer subscription business, launched just three years ago, to bring in at least $100 million in 2021, riding on its vertical focus on personal finance, healthcare, entertainment, among others. “What we didn’t know in 2012 was how rapidly Netflix and Spotify and others were going to habituate users to pay for premium content and how much easier it was going to be for users on their smartphones, particularly, to subscribe and unsubscribe quickly. But around the world as a whole, this process of habituation only just begun, and we see more willingness to pay for news,” says Levien.
Join Zetland’s CEO Tav Klitgaard in a fireside chat with Chargebee’s Ashwini Murthy to learn more about how publications can adapt and scale a membership-first model. Register now
Head of Content Marketing, Chargebee
Chargebee automates revenue operations of high-growth, subscription-based businesses. Its SaaS platform helps businesses manage subscriptions, billing, invoicing, payments, and revenue recognition processes. Founded in 2011, Chargebee is used by over 2500 companies in 53 countries using more than 120 currencies. Twitter @chargebee