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October 4, 2017

Newsonomics: Our Peggy Lee Moment: Is That All There Is To Reader Revenue?

It’s an age of ready-to-binge whodunits, exported from the Nordic cold onto our heat-seeking laptops and living room screens. So will anyone take up this mystery: Who killed the news subscriber?

As print subscriptions have plummeted, digital subscriptions have slowly emerged. It’s really a six-year-old phenomenon, as daily publishers followed The New York Times’ 2011 lead with paywalls, and digital subscriptions are still, at best, a work in progress.

Today, they offer a tale of two worlds. The national/globals — The New York Times, The Wall Street Journal, The Washington Post, and the Financial Times — build their new and increasingly digital businesses on digital subscriptions, greatly aided this year by the Trump bump. But regional dailies, both in North America and in Europe, continue to struggle with them.

One ratio highlights the gap. While The New York Times today has twice as many digital-only subscribers as Sunday print subscribers (and three times as many as daily print), most newspapers’ subscriber totals still tilt heavily to slowly dying print. In fact, 90-plus percent of all subscriptions to regional dailies remain to print products, less than 10 percent to digital.

 

First published at Harvard’s Nieman Journalism Lab on Sept. 26, 2017

Follow Newsonomics on Twitter @kdoctor

 

That disparity explains the economic divide we see between the still-transforming-but-smiling national-global press and the local newspapers worrying about their very existence after absorbing double-digit decline after decline in revenue. Reader revenue is working to transform the big press, but largely leaving the local press behind.

All publishers see the similar math. At most, 1 or 2 percent of those mammoth monthly-unique audience numbers they report will actually pay for a digital subscription. (Yes, the actual number of humans is probably a little more than twice as high, in the 3 to 4 percent range, since so many readers use two or more devices — desktop and mobile, for instance — to access news sites. For consistency, though, we’ll go with those numbers of 1 to 2 percent.)

Those numbers are still okay if you’re The New York Times with a U.S. monthly audience of 97 million, according to comScore data for August, or The Washington Post with 92 million. If, though, you’re The Baltimore Sun, The Sacramento Bee, or the Arizona Republic — with audiences one-fifth to one-twentieth that size — the math’s a lot harder.

That’s why we see that huge disparity in digital subscriber counts. The Times has surpassed 2 million paid digital subscribers, while the Post is now over 1 million.

Meanwhile, among the regionals, the Los Angeles Times now ranks first, as I reported Friday, with 105,000. Then, The Boston Globe follows with 90,000, while the Chicago Tribune and Star Tribune can count about 50,000. That’s the high end; for most of the local press, the numbers are far, far lower. Which leads to this question: If daily newspapers can’t successfully compete with Google and Facebook for ad dollars and reader revenue is stalled, what’s their future?

When they look at that anemic digital subscriber growth, they ask the old Peggy Lee question: Is that all there is?

While we can hear strains of that heartbreaking song, we can also hear a new background hum. It’s the hum of new reader revenue strategies.

Today, a few eager entrepreneurs are readying launches. Some of the activity has been fairly public, but there’s lots more going on behind the scenes. Let’s preview what’s coming.

 

The new entrants

Among those new players, consider Tony Haile. The Chartbeat founder is making a simple proposition with his new startup Scroll: Give me $5 a month and I’ll turn off all the ads on a lot of premium news sites.

Haile believes that that pitch (and that price point) he can tap a market far larger than that 1 or 2 percent. He’s planning for growth up to 2 million users. Haile describes his model, and the thinking under it, in an extended Q&A here.

Scroll will launch in beta early next year. Its value proposition might be easily understood by readers, or it may stumble. Haile emphatically notes that he’s not offering “all-access” to top news sites. In fact, whatever paywall limits those sites put on visitors — now often down to 2 to 5 free articles per month — stay in place.

Rather, when Scroll customers reach these “premium” sites, their pages will be ad-free. The sites will recognize Scroll customers and remove ads from the pages they visit, whether that’s a couple or an infinite number in the case of say a free site like HuffPost or CNN.

What do publishers get for giving up ad dollars on those pages? They share in a revenue share pool. Of each $5 monthly payment, Haile says $3.50 will go into the pool. Publishers will divvy up the money based on the amount of time spent on their content by Scroll subscribers.

Haile believes he’s cracked an old nut of cross-title sales, and I hear a fair amount of preliminary enthusiasm for Scroll. Last week, Haile told me he is adding one contracted publisher per week. The names in his pipeline aren’t yet public, but they’re impressive. So is the money — admittedly small bets — that is funding him: News Corp, The New York Times, and European powerhouse Axel Springer have led the $3 million funding. Joining them are Founder Collective, SoftTech, and O’Reilly AlphaTech Ventures.

While Haile’s basic rev-share promise appears to be its major value proposition for publishers, I believe it may end up being as compelling as an on-ramp to subscription sales. There should be no better would-be convert to a $200 a year annual digital subscription than someone already paying something for news.

Speaking of on-ramps, consider LaterPay. The German-founded venture recently exxpanded in the U.S. LaterPay acts on the premise that readers need to sample news content.

Like Scroll, and unlike Blendle — which many in the industry compare it to — LaterPay enables publishers to offer a new paid alternative on their own sites. It doesn’t require learning a new app to use or a new discovery pattern to access news content.

Its premise seems simple enough. Publishers decide how to price individual articles — often in the 39-cent range — allowing readers a cheap taste of premium news content. Then, it doesn’t charge their credit card until they’ve consumed 10 articles. (Hence, LaterPay.) It’s a gimmick — a psychological scheme to break through a barrier to customer payment. Readers can also buy time-based passes, for a week or a month.

That’s a potential small revenue stream for publishers, and it offers — like Scroll — the promise of on-boarding new potential full-freight subscribers.

LaterPay founder and CEO Cosmin Ene has thoroughly thought through the minefield of reader payment.

For those who like to pitch an “iTunes for news” metaphor, he says, “most ones who talk the talk, don’t walk the walk. Walking the walk requires you to unbundle content and sell it in individual pieces, as well as in re-bundled form and in subscription form. After all, iTunes didn’t become known for selling the entire album, but rather for unbundling it and offering your favorite songs piece by piece. iTunes was the first truly user-centric model of the digital economy. By unbundling music, iTunes created a huge consumer appetite and created confidence in subscription models. Without unbundling, we wouldn’t have Spotify and Netflix today.”

Rather than that binary world of pay/don’t pay, Ene, like Haile, indeed believes that’s not all there is: “Walking the walk would require a diversified approach to monetizing content, allowing individual sales and time-based models and not just trying to push towards subscriptions only. There is a whole universe living between ads and subscriptions.”

Ah, that great potential in-between. CEO Cosmin Ene makes a great case for his product, and he’s now out pitching it to U.S. publishers.

He can point to some success in Germany, with a regional daily and with Der Spiegel, the highly respected German weekly. In a limited test, Spiegel both sold an increasing number of articles and grew revenue via LaterPay. But Spiegel doesn’t have a digital paywall, enmeshed in its own strategic complexity, so its test doesn’t tell us everything.

And what of Blendle? With much fanfare (and financial backing from The New York Times and Axel Springer), Blendle announced in December 2015 that it would attempt to transplant its model from the Netherlands to the U.S. That expansion has remained in beta, with the company now pivoting to a Blendle Premium in the Netherlands. “We are indeed still working on achieving product market fit,” CEO Alexander Klöpping told me last week. Klöpping also convinced Nikkei, parent of the Financial Times, to invest new money in the company this spring.

Blendle’s attractive interface won plaudits — and it’s seemed to work in its native country with relatively few major news sources, though with some hiccups — but the U.S. has proved tougher to figure out. Blendle has offered a pay-per-article approach and built its initial plans around being another node of news discovery.

The big point that Haile and Ene, among others in the would-be pay trades, point to: Will consumers want to go to a new branded site to get the branded news they expect from well-known providers?

That’s just the top of the entrepreneurs aiming to create new markets of paying but less than super-fan subscribers. Expect more ferment in this field in the year to come.

 

Facebook subscriptions

Then there’s Facebook, the platform that’s eaten the world, and made it part of many a news industry — and national political — conversation.

No one’s got any doubt that people read a lot of news on Facebook. Publishers, though, remain deeply uncertain about how that reading does — or could — translate to new reader revenue. Over the past year, buffeted by the political winds of fake news, Facebook has worked more earnestly with publishers on “partnership.”

This week, as it prepares to add a subscription feature to Instant Articles, it’s meeting more headwinds from publishers than it expected. While it originally had touted a subscription feature as aimed at aiding the deeply struggling local/regional press, Facebook instead turned to national players. They’re hesitating to join, and that could end up torpedoing the profile, and P.R. benefit, of the initiative.

Yet, Facebook will get some traction — and testing. For Tronc, the third biggest U.S. daily publishers, it’s a third leg in a partnership.

“We were happy with the speed and the consumer experience,” Mark Campbell, Tronc’s senior vice president of consumer revenue, told me last week. “We’re happy with the ad revenue. And so, the third leg of the stool needs to be solved if we are to continue with Instant Articles and expand it to other properties. We’ve been testing Instant Articles in San Diego since April. And on those first two dimensions of ad revenue and consumer experience we’ve been very happy. We just need to shore up our subscription-driving ability, because we can’t enable a free experience ad infinitum.”

Tronc will deploy the next test at the Los Angeles Times and The Baltimore Sun.

Money is one thing; consumer data is another. While Facebook has shown movement on that question, publishers much want a sharing of article consumption habit. Many readers actively consume news on both publishers’ sites and Facebook. How, publishers ask, can they see these customers’ behavior across platforms?

 

Niches

When I’ve explored potential “Paywalls 2.0” approaches in the past — another spin on getting beyond the 2 percent number — I focused on The New York Times’ digital niche tests.

That testing has been slower than the Times has liked — and it’s being rejiggered again, as the Times completes both top executive and mid-management shuffles.

Of all the forays it has it tried — the late NYT Now and NYT Opinion most prominently — it’s simple old crosswords that have found small traction. The Times now takes in about $3 million a quarter on crossword subscriptions, of which it can count 300,000 subscribers. That’s nice change, and proves out a niche point, but again, is that all there is?

At mid-year, the Times converted its highly useful and attractive free Cooking app to paid, but only for non-subscribers, at a rate of $5 for four weeks. It’s too early to know how successful Cooking may be in finding significant new revenue. In the wings are its tame-the-Platinum-Age-of-TV app Watching and something in health — if it can figure out what enough people will pay for.

Then there’s the launch of The Athletic — perhaps the dear departed National (what Grantland called “The Greatest Paper That Ever Died“) for the digital age.

]We’ll plumb into it more deeply soon, but The Athletic smartly follows readers’ passion. Will enough find reason to subscribe among the welter of free sports news and information? Consider that voice and expertise — two factors that have proven out another Netherlands original, De Correspondent — may make the critical difference here. We can hope so, and will be watching.

 

Are they dreaming?

It’s easy to look that reader revenue landscape and say: No more than a tiny group of people will pay for news. But that sounds like an echo of “Nobody will pay for news,” and today that seems so 2009ish.

Who would have believed The New York Times’ digital numbers — and revolution? I doubt that even the Times executives who put it into place could expect the success they’ve found long after the initial McKinsey estimates.

Similarly, who would have believed that Netflix would evolve from a DVD sender to a global entertainment machine counting more than 100 million worldwide subscribers. Or that Amazon, Hulu, Spotify, and Pandora, among others, would get millions to pay for digital media.

In fact, we in and around the news industry know nothing (or close to it) about where this is all headed — or where it’s been. Consider that in the 1950s — the height of Miss Lee’s fame — household penetration of newspaper sales was more than 100 percent. That’s right — the average household took more than one paper, given the thriving popularity (and great editorial spirit) of afternoon papers arriving for the dinner hour, long after their staider morning competition had hit the doorstep.

More than one paying news subscription per household? That seems as unbelievable as the nadir of news subscription we now encounter. We’re clearly at a low point, with print circulation cratered and digital circ disappointing for the country’s 1,350 dailies. So, maybe there’s a new in-between — somewhere between that apex of “The Life Of Riley” 1955 and “Game of Thrones” 2017.

 

What’s the holdup?

Here’s the fascinating question: Why is seemingly so hard to get people to pay for news? It’s a tougher question that might first appear.

In the spate of answers offered up by those entrepreneurs and others in the news business, we see how many points of buying inflection — and what we might call dis-inflection — there are. Let’s briefly catalog them, some for future exploration:

    • Pricing: Who’s right here? The Times with its couple-of-hundred dollar model, a model borrowed from print? Or Jeff Bezos, with the pricing philosophy he long ago espoused in Sun Valley to those who would become his newspaper-owning peers: Get ’em in the tent cheap, for less than a hundred bucks a year, and extract more value down the line? Or is it the under-$10-a-month crowd, Scroll included, who are borrowing from entertainment models?
    • Sampling: The FT, the father of the metered movement, has come to believe that “trialing” is better than metering. The idea: Readers need at least 30 days to thoroughly sample a new paid product.
    • Experience: Could it be that the news websites, so desperate for revenue to keep the doors open, have made the ad-interrupting experience so nasty that paying consumers avert their eyes and close their wallets?
    • Ad-free: Eliminating ads — the core of Scroll’s pitch — may make sense. But, clearly, on such successful subscription sites as the Times, Journal and FT, readers don’t mind a tasteful ad presence much.
    • Proximity: That’s the Facebook pitch. Fish where the fish are biting.
    • Friction: There are simply too many steps to saying yes — especially on mobile. And lots of other frictions, too: UI, UX, and more.

 

  • Currency: Civil is coming on as a blockchained, Ethereum-based news foray, while Hubii has already become the first Ethereum-based content company
  • Content: Let’s not forget the basics. If a publisher can’t offer sufficient unduplicated, high-enough-quality content, nobody’s going to pay for it for very long. For regional papers that have halved their staffs (and their community knowledge), that’s a huge issue. And few talk about it.

That’s an impressive list. And within it, we see two things. First, how much we don’t yet know about the selling and buying of news products. And second, all the potential in the work being done to get better answers to those questions.

Starved for real consumer affection, news companies can only put another Peggy Lee standard, written by the Gershwins, on their playlists: “Somebody Loves Me.”

Somebody loves me, I wonder who
I wonder who she can be
Somebody needs me, I wish that I knew…

Somebody loves me, I just wonder who
Or maybe, maybe, maybe it’s you.

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