Why in the world are pub­lish­ers piv­ot­ing to sub­scrip­tions?

The Insider - - MONETIZATION -

When I look at the state of main­stream me­dia, I can’t help but ask the ques­tion, "Why are so many pub­lish­ers piv­ot­ing back to pay­walls when they didn’t work for most of them be­fore?"

We all know why. It’s be­cause so many legacy me­dia ex­ec­u­tives are like mi­gra­tory birds. They tend to fly in one di­rec­tion, fol­low­ing “the leader” — a be­hav­ior that re­sults in them putting all their eggs into one bas­ket at the ex­pense of ev­ery­thing else. Sorry for be­ing blunt.

Sub­scrip­tion-based paid con­tent is just one tac­tic in a com­pre­hen­sive busi­ness strat­egy. Un­for­tu­nately, too many pub­lish­ers don’t see it as a tac­tic; they view it as the strat­egy. Piv­ot­ing to sub­scrip­tions is a move born, not out of con­sid­er­a­tion for tar­get au­di­ences, but purely out of des­per­a­tion and a com­pul­sion to self-med­i­cate with what­ever pre­scrip­tion worked for the leader.

Ev­ery­one knows that self­med­i­cat­ing is a dan­ger to one’s per­sonal health and the same is true in busi­ness. Tac­tics that work for NYT, WSJ, FT, and WP (no need to spell them out) may, in fact of­ten, do more harm than good for the rest of the in­dus­try.

Af­ter 15 years of train­ing au­di­ences that con­tent is free on the web, a slap in their face with a fee that sub­si­dizes dis­mal dig­i­tal ad rev­enue isn’t go­ing to cre­ate trust, loy­alty, or a value propo­si­tion with peo­ple averse to pay­ing. You can’t just tell read­ers to sud­denly change their be­hav­ior cold tur­key be­cause you couldn’t make your other rev­enue mod­els work. Where’s the value propo­si­tion for them in this pivot? How do you ex­pect to grow en­gage­ment and trust with them if you treat them like cogs in your rev­enue wheel?

Now, there is noth­ing fun­da­men­tally wrong with charg­ing for qual­ity con­tent. We’ve been do­ing it since 2003 when ev­ery­one else was giv­ing news away for free. We just don’t be­lieve read­ers should nec­es­sar­ily be the ones to pay for it, espe­cially when con­sumer­centric or­ga­ni­za­tions like li­braries, ho­tels, air­lines, cruise ships and tele­com op­er­a­tors are ready, will­ing, and able to spon­sor ac­cess on their be­half.

When busi­ness mod­els change in other in­dus­tries, con­sumers have a choice. If my ca­ble com­pany de­cides to change the rates on the pack­age I pur­chased, I can choose to dis­con­nect my ser­vice and cherry pick the shows I like else­where. Many peo­ple are al­ready do­ing that be­cause they can now buy a sub­scrip­tion to a sin­gle TV net­work (e.g. HBO) — some­thing they couldn’t do be­fore. They can also get other TV con­tent for free on YouTube or through more af­ford­able ag­gre­ga­tors like Net­flix. Legacy me­dia is no dif­fer­ent.

Look at the data — past and present

In the sum­mer of 2015, 77 out of 98 US news­pa­pers with cir­cu­la­tions over 50,000 had some form of pay­wall model (62 used “me­tered”, 12 used “freemium”, and three used “hard”).

But it didn’t take long be­fore many news­pa­pers started tear­ing those pay­walls down be­cause they gen­er­ated very lit­tle rev­enue and alien­ated read­ers. It was es­ti­mated at the time that only 1% of rev­enue was gen­er­ated by pay­walls in the US.

So why pivot now?

Ac­cord­ing to Reuters, in 2017, as a re­sult of the Trump Bump, 8% of US con­sumers had an on­go­ing sub­scrip­tion to on­line news; an­other 8% paid for that con­tent in other forms (e.g. do­na­tions, one-off pay­ments).

Com­pare that 16% to the 9% Reuters re­ported in 2016 and that seems pretty im­pres­sive.

But let’s not get overly ex­cited about this anom­aly, be­cause that’s what it is. The US pres­i­den­tial elec­tion did gen­er­ate a sub­scrip­tion surge for the “usual sus­pects” — The New York Times, The Washington Post, Los An­ge­les Times, and Wall Street Jour­nal, etc. But the rest of the coun­try’s 1,000+ news­pa­pers saw cir­cu­la­tion rev­enue — both print and dig­i­tal — con­tinue to fall.

As I was strug­gling to make sense with this lat­est pivot, I re­called the Amer­i­can Press In­sti­tute’s (API) Q1 2017 Me­dia In­sight Project study which sur­veyed 2,199 adults over the age of 18 (rep­re­sent­ing the 50 US states and Dis­trict of Columbia) to de­ter­mine who sub­scribes to news and why. The re­sults were sur­pris­ing.

• API re­ported that 53% of all US adults sub­scribe to, or pay reg­u­larly for, news in some form (e.g. news­pa­pers, mag­a­zines, news apps, do­na­tions).

• Of those who do pay, 52% of them sub­scribe to news­pa­pers in print or dig­i­tal form (that’s 29% of Amer­i­cans).

The study was per­formed be­tween Fe­bru­ary 16 and March 20, 2017, when the coun­try was still bump­ing about the elec­tion. In fact, 27% of those who did sub­scribe, ac­tu­ally pur­chased their sub­scrip­tion “within the last year.” Co­in­ci­dence? I think not.

With­out more cur­rent sub­scrip­tion data, it’s hard to know where the in­dus­try stands to­day in terms of who’s pay­ing and who’s not, but we are al­ready start­ing to see a wan­ing of the Trump Bump. Even the NYT is feel­ing it.

Bumps aren’t sus­tain­able; they’re just blips on the radar. So in­stead of hold­ing on to the false hope that dig­i­tal sub­scrip­tions will re­main high or even grow, con­sider th­ese three hard truths and start plan­ning a fu­ture around them in­stead.

Truth No. 1: Sub­scrip­tions ( just an­other name for a pay­wall) won’t work for the ma­jor­ity

It’s been proven time and time again that un­less you of­fer some­thing no one else has (unique con­tent, en­ter­tain­ment, ex­pe­ri­ences, etc.), you can’t count on sub­scrip­tion rev­enue alone to save you.

Why? Be­cause too many me­dia com­pa­nies live in the highly-com­pet­i­tive “gen­eral news” cat­e­gory — over-com­modi­tized con­tent that car­ries zero value by the sheer na­ture of it be­ing prop­a­gated by so many oth­ers. Just take a look at the WAN-IFRA 2017 Outlook re­port and it will be­come painfully clear that the gen­eral news herd needs to be culled.

Gen­eral news pub­li­ca­tions that of­fer noth­ing ex­clu­sive are just drips in a fire­hose of worth­less in­for­ma­tion. The fu­ture of pub­lish­ing re­ally is a “dif­fer­en­ti­ate or die” sce­nario. Which leads us to Truth No.2.

Truth No. 2: Con­sol­i­da­tion will con­tinue and it won’t al­ways be pretty

Back in 1992, Bruce Spring­steen re­leased a song, “57 Chan­nels (and noth­ing on)”. It spoke vol­umes about the lack of value most TV sta­tions were bring­ing to Amer­ica.

At that time, print pub­lish­ers pretty much owned the at­ten­tion of their com­mu­ni­ties and the money that came with their mo­nop­oly. It worked for ev­ery­one be­cause pub­lish­ers pro­vided a ser­vice their read­ers couldn’t eas­ily get any­where else. But to­day, with all the gen­eral news pub­li­ca­tions and free sites reek­ing with re­dun­dan­cies, we’ve got thou­sands of ti­tles with “noth­ing on.”

More me­dia con­sol­i­da­tion is in­evitable and, done right, it can be a good thing. Pub­lish­ers in the gen­eral news cat­e­gory need to ei­ther plan their own exit strat­egy now, or com­mit to Truth No.3.

Truth No. 3: Rein­ven­tion re­quires the raz­ing of the old to raise the new

In 2017, WAN-IFRA asked pub­lish­ers what the great­est risk to their fu­ture suc­cess was. I was sur­prised, but also de­lighted to see, that they rec­og­nized their own re­luc­tance to innovate as a se­ri­ous threat. Know­ing the prob­lem is the first step to­wards solv­ing it, right?

So me­dia ex­ec­u­tives know they need new ideas to help them change for the bet­ter. But as best­selling author, Seth Godin, re­cently wrote in his daily blog, “The hard part isn't com­ing up with a new idea. The hard part is fall­ing out of love with the old idea.”

The com­mit­ment to innovate is tough be­cause it re­quires a lot of courage to raze the old to raise the new. But that doesn’t mean one needs to start from scratch; it means rein­vent­ing what al­ready ex­ists into some­thing su­pe­rior. Steve Jobs was a mas­ter of rein­ven­tion. He didn’t in­vent the tech­nol­ogy that turned Ap­ple from a com­pany on the verge of bank­ruptcy in 1998 into one worth over US$100B in 2011. He rein­vented what al­ready ex­isted at Ap­ple, Mi­crosoft, HP, RIM, Nokia, Mo­torola, and at many other com­peti­tors.

By fo­cus­ing on user ex­pe­ri­ence, Steve Jobs rein­vented com­put­ers, phones, cam­eras, tablets, mu­sic, soft­ware and more. He changed the in­dus­try and our lives.

Some­thing’s got to go

The past cou­ple of years have been volatile to say the least in the world and in the in­dus­try. And al­though a few pub­lish­ers have ben­e­fited from that volatil­ity with in­creased rev­enues from read­ers, most have not.

It’s easy to jump on a band­wagon when you’re see­ing it work for some­one else. But that at­ti­tude will have you chas­ing ev­ery new bump, fad, or, craze the cur­rent leader is rac­ing to ex­ploit. Sub­scrip­tions are not go­ing to work in to­day’s over­crowded con­tent world for, oh, let’s say, 90% of pub­lish­ers.

If the num­ber one risk to your busi­ness is your re­luc­tance to innovate and you’re not look­ing to get gob­bled up in the in­evitable global con­sol­i­da­tion that is com­ing, re­mem­ber what Steve

Jobs said about in­no­va­tion and fo­cus, “In­no­va­tion has noth­ing to do with how many R&D dol­lars you have. When Ap­ple came up with the Mac, IBM was spend­ing at least 100 times more on R&D. It's not all about money. It's about the peo­ple you have, how you're led, and how much you ‘get it’.”

Then ask your­self, “Do we have lead­ers who are pre­pared to em­brace in­no­va­tion? Do those lead­ers un­der­stand what be­ing in­no­va­tive truly means? And do we have a team who will em­brace change? Can we raze the old to raise the new?”

Raz­ing the old to raise the new is not easy, but noth­ing worth hav­ing ever is. Steve Jobs be­lieved, “[Fo­cus] means say­ing no to the hun­dred other good ideas that there are. You have to pick care­fully. I'm ac­tu­ally as proud of the things we haven't done as the things I have done. In­no­va­tion is say­ing no to 1,000 things.”

Can you say “no” to the urge to pivot back to sub­scrip­tions and chan­nel your en­ergy to­wards far more in­no­va­tive so­lu­tions? I would love to hear your thoughts. Let’s talk!

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