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October 22, 2014

The Newsonomics of Spotified News Subscriptions

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First published at Harvard’s Nieman Journalism Lab
Can you make digital subscriptions sing?

In a first-of-its-kind partnership with streaming music leader Spotify, The Times of London has brought a whole new meaning to the subscription bundle — even as the wider media world dissects the mega Comcast buy of Time Warner Cable and the impact of that on cord-cutting, bundling, and unbundling (“The newsonomics of Comcast’s deal and our digital wallets”).

In that leap, we see pioneering thinking about a news company’s relationship with its readers, one that tries to blow life into the much-talked-about notion of membership in the digital age.

It’s a straightforward offer, launched February 9. Pay £6 a week (or $10) for The Times/Sunday Times “Digital Pack,” commit to a year, and you get full across-all-platform access to The Times — plus a full year of Spotify Premium. Spotify, the Europe-dominating streaming-music giant (as U.S.-based Pandora now stretches itself into Australia and New Zealand), just revised its own pricing at year’s end. Its premium offer now provides customers ad-free listening and the abilities to download music and listen offline at a price of £9.99/$9.99.

The Times made the partnership move as it moved forward with price parity. While you can still subscribe to its “Web Pack”, or desktop access, for £2 a week, its all-access “Digital Pack” price of £6 is the same as for seven-day print. While most publishers price digital under print (with a notable exception at the Orange County Register, which launched with price parity), The Times has arrived at the point of saying: Have it either way — same price. Want both seven-day print and all-access? Get the “Ultimate Pack” at a price of £8 a week.

The strategy: Push forward strongly into membership-based digital relationships, giving the customers more — and expecting more in payment.

“It’s a unique relationship,” says News UK chief marketing officer Katie Vanneck-Smith, speaking of the reader/news connection with her Times (and tabloid Sun) newspapers. “We’re now getting closer to the things you love, like the journalism of The Times. Spotify is a perfect partner; it offers another passion with our readers.” Vanneck-Smith, a 20-year veteran of The Times (with a little time off spent at the Telegraph and searching for life’s non-financial returns in India) likes to talk about the “heart of the relationship” between readers and their favorite news medium. In this case, it’s The Times, published since 1785.

“Back in 2000, you could see you had to make a choice,” she says. “There’s room for free journalism. Yet you have to have [reader] payment at the heart of what you do if you want to enhance your journalism, invest in it, and invest in the relationship beyond it into more products and services.”

The Times of London famously went paywall early, in summer 2010, nine months before The New York Times. Its hard paywall (offering only tops of stories to non-payers) drew much criticism. Now critics both in the U.S. and the U.K. have acknowledged that The Times’ tough-love approach has borne some fruit.

Its subscription numbers are impressive: 153,000 digital subscribers and 207,000 print subscribers. Most importantly, the combined total of paying readers now exceeds the number that The Times had when it put its paywall in place. London is still a single-copy city, unlike most of America. Consequently, even with a significant loss in single-copy sales, a trend shared by its peers, its print-plus-digital subscription strategy is making up for it. Those are the big numbers, and ones that News UK CEO Mike Darcey has highlighted as he derides competitor Mail Online’s free, ad-based model and speaks of the reader-revenue imperative.

Under the big numbers are the smaller, more telling ones, and that’s in part where the Spotify strategy fits.

Five years ago, The Times had a subscription relationship with only 15 percent of its readers. Now, says Vanneck-Smith, that extends to 55 to 60 percent of its readers, print and digital. In that quest, its philosophy parallels the smarter news companies, like The New York Times, which is well along on the journey of turning faceless readers into customers, and newbies like The Guardian (“The newsonomics of The Guardian’s new Known strategy”).

In the cold world of brutal ad competition with the likes of Facebook and Google, The Times’ relationship to its ever-higher-paying readers is a key path to its future. That path is credited with reducing The Times’ annual loss to the neighborhood of £6 million, down from £72 million in a five-year span.

Why was Spotify added as an inducement to subscribe or upgrade a subscription? The reasons are several:

  • The audience: Both The Times and Spotify enjoy upscale audiences. But of course The Times skews older and Spotify younger, by a generation — or two. Each has access to an audience the other wants. The mechanics of the deal provides a wholesale Times payment to Spotify for each sub sold. After one year, the Times/Spotify subscriber can buy Spotify on its own — with The Times maintaining the billing relationship, and gaining a commission. This is a digital partnership, something traditionally many publishers aren’t that good at. They like to buy.
  • Passion: Yes, Times readers care deeply about the news, but they also really like music; Times data reinforces that belief. That’s data that The Times couldn’t get at well five years ago, when it had direct relationships with only a sixth or a seventh of its readers — but it can now. Spotify is, in this sense, part two of a passion play. Last year, The Times (and sister Sun) led the way in offering football video to its subscribers. That live, near-live, and next-day highlight video bundling strategy helped build subscribers over the last year. (Axel Springer’s Bild, the largest daily in Germany, is testing a similar football-highlights bundling, and tells me its performance is “on expectation.”
  • Editorial and marketing extensions: Spotify is built largely around playlists, and now The Times is enlisting its own personalities to share their own, like columnist Danny Finkelstein’s, and asking profiled figures like Kylie Minogue to offer theirs as well.

Will The Times be regularly signing up more of these passion partners? Vanneck-Smith laughs, noting that the workload involved is extensive and that only true, meaningful mutual value can drive successful relationships. But clearly there’s more in the works.

Bill Adee says The Times’ Spotify deal “gets at what we are aspiring to do.” (How did he hear about it? Via a Rupert Murdoch tweet.) Adee, long a Chicago Tribune digital leader, was recently named to head the new Tribune news spinoff company’s efforts in digital business, product, and partnership.

The Chicago Tribune doesn’t release its digital-only subscription numbers, but figure it’s in the 30,000–40,000 range of other metro leaders like the Star Tribune and The Boston Globe. The Tribune has stood out, if quietly, as a leader in trying to figure out the membership future. It hasn’t cracked the code, but it’s probably doing more wide-ranging innovation around membership than any other daily I’ve seen. As seen on its Tribune Nation page, events, book clubs, products, classes, and commercial offers all try to make new connections with readers.

The Tribune has also offered non-Tribune content as a subscription inducement. Not as sexy as Spotify, perhaps, but the Trib’s seen a little traction in providing wider business content. It has licensed Financial Times, Economist, and Forbes content and plans a wider foray into subscriber-pleasing business content.

Perhaps most worth watching is the Tribune’s Blue Sky Innovation initiative. Aimed to be a digital (and event-based) hub for Chicago’s growing tech community, Blue Sky encompasses content, community, and potential revenue. Its March 9 Mark Cuban event is sold out.

Right now, Blue Sky overall is free, but it may be folded into overall Tribune membership, or niched into a separate paid subscription/membership later this year. Blue Sky positions the Tribune as a convener, a role I think is hugely important in any serious news company’s next-stage strategy.

Overall, this Spotify model speaks to a much larger opportunity, and one that is playing out in an ungainly way across entertainment and news media generally.

Look no further than the announced Comcast acquisition of Time Warner Cable last week. As Comcast prepares to match money and wits with the big boys and girls of digital media selling — Apple, Amazon, Google, Netflix, Facebook — it is trying to figure out what its bundle(s) will look like in 2015, 2018, and 2021. Certainly, it would like to hold on to all those multi-hundred cable channel, $100-plus monthly subscriptions — but it also knows that world is ebbing away; it eked out its first gain in cable subscribers in the last quarter after six years of loss. When did it last gain before then? 2007. It’s no accident of history that that’s also the last year that U.S. newspapers showed a revenue gain year over year. The moneyed legacy world is doing a slow but parallel disappearing act across formats, from cable to broadcast TV to newspapers to magazines.

So last year, Comcast quietly unbundled a bit. Knowing a lot of people just want HBO and local channels, it put together a $40 monthly package for those and Internet access. In a world of $7.99 here (Netflix), $14.99 there (SiriusXM Radio), and $3.46 a week (Atlanta Journal Constitution all-digital), marketers and would-be members may soon be doing all kinds of mix-and-match games.

Media is media. Newspaper business models are far closer to entertainment ones than they used to be. The near-universal all-access pitch demonstrates that. Now, with all-access proven, we move to the nuance of what else to bundle — even as some bundles become undone.

If Spotify can make enough passionate sense to some Times of London subscribers, the same approach may work elsewhere in Europe or in the U.S. (In the U.K., The Times has worked out an exclusive, as it did with football highlights.) If music works, how about Netflix or Hulu deals around movies and TV? With Jeff Bezos standing supreme, with one leg in Amazon’s media-selling business and another in The Washington Post’s news business, isn’t a new D.C. bundle inevitable and logical?

What about membership bundles that may tie together public radio basic memberships, at about $40 a year, and newspaper ones? Overlapping audiences, we’d assume.

In sports, the Orange County Register rolled out a model Register/Los Angeles Angels (of Anaheim!) bundle last year. Many publishers have told me they admired the innovation, though follow-on adoption or adaptation has been scant.

For newspapers and magazines used to self-referential subscription offers, a mindset change is required — and the addition of serious marketer talent, drawn mostly from outside the world of traditional publishing. But the possibilities are near-endless.

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