The Newsonomics of Piano Media
First published at Nieman Journalism Lab
Physical construction may be down across the Western World, but there’s a boom in paywalls.
At least 150 paywalls have been erected over the last year or so, in the U.S., U.K., and across Europe. American companies in on that construction boom include Lee, McClatchy, Morris, MediaGeneral, MediaNews, Gatehouse, and Tribune (all powered by Press+), as well as Scripps, Gannett, and Belo. From Sanoma in Finland to The Telegraph in the U.K., a number of dailies are following the trend. Those that haven’t are almost all considering a paywall in some form; many more will launch in the next 12 months.
Think of that building as single home construction, in our aspirational Sim City of happy digital circulation. Once all those homes are under construction, what comes next? Shopping centers. That’s what we’re now beginning to see: Digital newsstand development is booming, with numerous blueprints so far unpublicized. As those newsstands sprout, we’re moving to a new stage of paid content, one with profound implications for newspaper and magazine budgets for 2012 and beyond.
The past week, of course, saw the launch of Apple’s long-awaited Newsstand, part of the lengthy iOS 5 update that put Apple users on hold and may have cost billions of dollars in lost productivity. It’s a funky little newsstand, helpfully placed on our first screens — bumping, perhaps symbolically, the NYT app from its previous slot on my iPhone. Already, we’re hearing that the product is having its intended purpose, multiplying sales.
We can expect other newsstand launches, and re-launches. We’ve already got Amazon’s Kindle Fire Newsstand, emphasizing magazines, and many newspaper publishers are in next-stage talks with Amazon on revenue share and data issues for the next stage of their own involvement.
Facebook’s new design, of course, emphasizes media, so look for its Media Center to include subscription-selling, too, at some point. With Yahoo Livestand and and Google’s Propeller set to launch soon, joining AOL’s Editions, these tablet news aggregation products offer another natural home for subscription sales, though we don’t know how many of them are making that connection at this point.
At this newsstand inflection point, it’s worth taking a longer look at one little newsstand that has been in business for a long time — since May! — and see what we can learn from its experience.
That newsstand is Piano Media, the little 300,000-euro-funded, 10-person start-up, in Slovakia.
Slovakia? Yes, the small (5 million people) country in middle Europe has done what many other nations have only thought about. Piano has gotten almost all of Slovakia’s major publishers and one TV station to work together, agree on a common paywall, and split revenue. That’s been a goal of American publishers since the lost, mid-’90s days of New Century Network.
The newsonomics of Piano Media are straightforward. After Skype conversations, I was able to get an in-person update from CEO Tomas Bella, in Vienna last week, where more than a thousand people from around the world attended the World Association of Newspaper’s World Newspaper Congress and where that paid talk was much in evidence on panels and in private conversation.
Why Piano? Well, you can play on a piano with one finger — but if all the fingers and hands play together, it sounds much better.
That’s a simple description of why newsstands are all the rage. As consumers, we like stuff in a single place. If you’ve got a huge audience of installed users like Apple, Amazon, Google, or Facebook, you’re more than halfway there. If you are in Bratislava, you start with the same idea, and then use your member media to gain awareness. Top-of-mind awareness is what the newsstand battle will be about. Awareness of Piano Media is about 55 percent, according to an independent survey.
For Piano Media, it gains that awareness through a thin, top bar appearing across its nine member websites. (That bar is much like CircLabs has touted in its “Circulate” concept.) Click on that banner and you get this offer: “For a single monthly payment, you can get shared access to premium content on 9 different websites.” Your choices: €0.99 for a day, €2.90 for a month, or €29 for a year. (Is “nine, nine, nine” spreading?) Sign in and get access to all: one price, one login recognized persistently by all member sites. Most buyers opt for the monthly deal.
So this is a newsstand — but it’s not a kiosk, a difference Bella emphasizes. A kiosk just lets you buy a single title, from a collection. It makes use of collective marketing, but doesn’t make use of how we like to digitally read, a little of this, a little of that, without barriers.
Bella, formerly editor-in-chief of SME Online, the digital operation of the country’s largest paper, must have good diplomatic skills to have pulled together agreement among publishers to allow cross-title reading, and to test new revenue plans. He’s also in investment mode, heading toward a Round B of funding to expand Piano. In talking with him, here are a few significant principles I think we can draw from the Piano experience:
- The money isn’t big, but it grows as reader psychology changes. Given concerns about sharing data — a big part of the value proposition for publishers, says Bella — Piano won’t disclose how many paying subscribers it has or its revenues so far, other than to say that subscribers are in the five digits with a rapid growth rate. Let’s take the lower end of that and say it is approaching 25,000 digital subscribers. With an overall Internet population of 2.5 million, that would be one percent of the Internet users. Again, it’s similar to what we see from The New York Times to The Wall Street Journal to Axel Springer’s forays: Aim at one percent in the first year, and then grow from there. Core customers, those willing to pay, are a tiny percentage of the overall web audience. Three percent of them, though, may equal your print subscriber numbers.
- A bigger aggregation means more individual revenue. Bella explains that SME had its own paywall from 2004-2006, charging a similar sum as Piano now does. SME’s take “could be something like 10-15 times the numbers” from that first experiment.
- Publishers can spend a lot of time arguing about potential revenue split scenarios, but in the end, human habit is fairly easy to predict. Piano, a for-profit company, takes 30 percent of the revenue, and 40 percent goes to the publisher that sold the Piano sub. The remaining 30 percent goes into a pool, which is divided by actual usage. Most customers using “two, three, or four” of Piano’s offerings. In addition, “there’s 90 percent correlation between where you spend your money [buying the sub] and where you spend your time.”
- There’s always another stage. Such systems are truly platforms in the sense that they give publishers an opportunity to do things. In January, print subscribers of the member pubs will get a 50 percent discount for Piano access, which may help with print circulation losses, felt in Bratislava and Brno as much as in Boston and Birmingham. Most papers in Slovakia are single-copy, though, so the customer connection is weaker, with perhaps less expectation of combo deals.
- It’s about the web product, not a replica. Piano doesn’t feature e-editions or PDFs — they’re selling access to live websites. For Bella, that was essential.
- “The things that people are willing to pay for are not what publishers think.” One of the most popular innovations is a news skimmer — think Google News for Slovakia — simply headlines and quick briefs, which astounded Bella by bringing 80,000 unique visitors monthly, at no cost, since it is machine-driven.
Piano’s prices are low, intentionally, and will be increased as it gains market power. Let’s recall, too, though that the minimum legal hourly minimum wage in Slovakia is only €1.82. About half of subscribers pay for before they hit any paywall. “That’s the strangest thing I’ve seen,” says Bella. “We’re selling peace of mind.” In another words, pay once and you have no fears of ever hitting an intrusive paywall.
The Piano experience isn’t about a little-heard-from place east of Vienna. It’s about scarcity. Bella says that Piano will launch in another neighboring country next month. He notes that there are 10 to 15 European countries with small populations and a smaller number of media outlets, an early sweet spot for the company. Small countries with less than two dozen media outlets, though, aren’t the story here.
The biggest takeaway for larger countries with larger publishers is the thought about scarcity. Round up a critical mass of newsy content and you may find a few percent of digital users willing to pay. Put aside nations of 50 or 300 million. Think about regions, combining newspaper, TV, and magazine companies. Think about certain kinds of topical content, which could be corralled into consumer packages (Epicurious + Mark Bittman + Top Chef Recipes?) that might make consumer sense.
In addition to Piano, we’re seeing new kiosks — of varying flavors — being built out in Austria, Belgium, and France. Some will work; some won’t. These will inevitably compete with the Apples and Amazons, and we’ll follow that skirmish. Since it is the web, the future will be about many forms of distribution and of selling, with the tangibles of revenue shares and customer knowledge the currencies to follow.
We’re still well short of the iTunes for News holy grail here, but we are inching toward it.