Low and behold, the death of the news subscriber is not going as planned. Yes, print subscriptions to newspapers in the United States have declined 8.5 percent between 2010 and 2014, according to the latest World Press Trends report published by WAN-IFRA, an international news media industry organization. Yes, a generation of readers has entered the market never having had a subscription to a print newspaper and likely never will. However, there is an ever-greater trend engulfing the media world, and that is the growing reliance on many media businesses for audience revenue in place of advertising revenue.
Globally, print and digital audience revenue for news media companies exceeds print and digital advertising revenue ($92 billion to $86 billion) and the trend lines continue to separate. Paid digital circulation revenue increased 45% in 2014 and 1,400% in five years. Ad blockers, which have been around for a long time, are now reaching the mass market and becoming a material impediment to digital advertising revenue, in part due to Apple’s new iOS9 mobile operating system.
Also, the migration of digital traffic to mobile platforms that are less advertising-friendly is causing further erosion of the advertising revenue stream. The shifts from advertising to audience revenue and from print to digital platforms appear to be the two defining trends of the emerging new media business mode. What is striking is that the movement from advertising to audience revenue is happening much faster than the migration from print to digital platforms, with far less attention. The future of the industry business model appears to be multi-platform subscriber revenue, and the challenge facing audience analysts is how to acquire, retain and maximize the lifetime relationship with subscribers.
A paid digital-only subscriber can appear as rare as a unicorn. Of the millions of visitors to newspaper websites, a very small fraction of those visitors ultimately become subscribers. Most traffic comes from social sites, and those readers typically leave after the first page view, never to be seen again.
Of the 5 to 10 percent of visitors that read enough content to reach a premium article or metered paywall, only about 1 to 3 percent convert to paying subscribers. As a result, media businesses have found that the best way to grow digital revenue initially is to add digital access to existing print subscribers’ service. It is a tactic long used by cable companies: bundling products so the company will sell more of two services together than they would sell if the products were sold separately.
The analytics that are useful in identifying good candidates for a sales offer are propensity models, also called discrete choice models since the choice to subscribe is a yes or no decision. Observing the decisions of hundreds or thousands of customers presented with offers and using data on their consumption patterns, demographics and other characteristics, analysts can predict an individual’s probability of subscribing. The data that is often not captured but vital for these models are those customers that are presented with offers but decline them. For these models the no’s are as important as the yes’s.
Recent analysis of customers that are engaged on multiple platforms demonstrates that these customers not only remain subscribers longer, but they have lower price elasticity, meaning they will be less likely to stop their subscription following a price increase.
Customers that read the content on their tablet when they wake up, their smart phone on their way to work, their desktop during the day and in print on the weekend are the subscribers that care about your product. The platform is not the product, the content is the product, and these customers want it.
The data needed to identify and analyze this activity is not easy to capture, but it can be done using a combination of digital data capture tools and an “entity resolution” process that combines data on an individual from many data sources using matching logic. Survival analysis is an excellent analytical tool for predicting the life expectancy of a subscriber, and these types of models are helpful in estimating the incremental subscription life gained through retention activities or lost from possible price increases.
Maximizing the Lifetime Value of Subscribers
Once the subscriber has been acquired and has stayed through a billing cycle or two, the next challenge is how to increase the engagement, revenue and lifecycle of that individual. Recently, publishers have found the packaging of content into product offerings that appeal to specific customer segments is an effective strategy to accomplish all of these goals.
To borrow again from the cable TV industry, that industry often package groups of channels together into bundles:
- The basic channel bundle typically includes only the main networks, local public television outlets and perhaps C-SPAN
- The mid-level package includes a few more channels at a higher price point
- The top-level package includes the sports networks that draw the highest revenue subscriptions
News media have a similar opportunity with their digital platforms. The core product is the equivalent of basic cable. Other content topics can be added and packaged with the core product to generate higher revenue and more satisfied customers.
The Atlanta Journal-Constitution, for example, recently launched Dawgnation, a digital product aimed at the legions of University of Georgia sports fans in the region, and the newspaper has several other specialty digital products planned for launch this year. The data that is necessary for this type of product design and packaging analysis is the site traffic and advertising revenue by digital customer. With that information, a segmentation exercise can identify groups of customers with similar consumption patterns and a business case developed for different product offerings.
Two graphs showing Customer Segments with different Consumption Patterns:
Better Products for All
Ideally, the result of these changes in the media industry is that publishers will focus considerable attention on the needs and wants of their paying subscriber audience. Product offerings will no longer be developed primarily with advertising inventory as the primary motivator for product design and content.
Instead, it is likely that higher quality print products with specialized digital products will be developed that appeal to target customer segments that will form a larger audience overall. Newspapers have been abandoning the mass-market audience strategy for quite some time since the advertising and print publishing economics no longer supported that business model.
With digital platforms able to cheaply reach a world-wide audience, it now pays to focus on niche audiences wherever they may be and provide them with world-class products they will pay for. Premium products can be offered at premium prices, which should benefit advertising revenue, too.
Long-live the subscriber.