Know What You’re Getting Into – Hidden Obstacles of Subscriptions

Thought Leadership

Adi Harush
5 min read

Securing Revenue Streams

The New York Times, The Washington Post, Wall Street Journal, LA Times and The Boston Globe. These are just some of the big-name news organizations who are cashing in on the revival of the subscription model for online publishers. After many complained that their advertising revenue dollars were decreasing, due mainly to the duopoly of Facebook and Google who suck them up like a high-powered Dyson, they wanted to secure other streams of revenue. And good for them.

It took publishers a little time to figure out which model worked for them; freemium, hardwall, or metered. They tested different variations of attribution – which users converted to paying subscribers from which source and what did they read beforehand. Eventually, with the use of data to inform conversion strategies, their subscriber base started to grow.

Growth of New York Times digital subscribers from 1st quarter 2014 to 1st quarter 2019. Info-graph taken from Statista.

As of Q1 2019, The Washington Post has over 1.2 million digital subscribers, The New York Times has around 3.3 million, and The Wall Street Journal has an estimated 1.5 million. Among 98 U.S. news publications with more than 50,000 in circulations, around 79% of them use some form of digital subscription model, according to The American Press Institute.

Apart from the larger nationals, local news publications have also experienced some success with subscription models. So much so that Warren Buffet’s BH Media Group purchased 70 newspapers, and he is a firm believer that a local, tightly-knit community is more than willing to pay for subscriptions to keep up to date with news in their locality.

While this is fantastic news (no pun intended) for the continuation of free press and high-quality journalism, this probably isn’t a viable option for the thousands of publishers spread across the online ecosystem.

Not Freely Available

In order to convince someone to part with money for a service, you need the person to feel like what they are paying for is high-quality content that isn’t freely available in other places, or at least that they are deriving some true value from the content that enhances a part of their life or personal interests somehow.

The New York Times’ niche content like crosswords and recipes are of particular interest to their subscriber base.

Speaking on the Digiday + podcast, Dotdash CEO Neil Vogel explained why they won’t add a paywall to their content: “Dotdash will never succeed with a paywall — not because we don’t have great content, but because there are a lot of people writing about similar things. It’s going to be really hard for publishers without passionate audiences to do well.”

It Will End In Tears

When explaining why subscription hungry publishers need to be careful of believing they can just pivot to a paywall, former Times and NPR exec Vivian Schiller warned that, “I’m afraid for most news publishers, it’s going to end in tears.”

Let’s put aside the fact that 79% of readers surveyed by Reuters Institute said it was “somewhat or very unlikely” that they would pay for online news, now or anytime soon, the difficulties publications like The New York Times went through in order to hone in on a subscription model that actually converted, worked and didn’t produce massive amounts of churn, was “a hell of a lot of investment in data and audience segmentation,” according to Schiller.

There are hefty costs associated with entering the subscription model, which Digiday has written about in detail. To sum it up, publishers must invest in a customer data platform to recognize, understand, and segment potential audiences and push them through the conversion funnel, ranging from $50,000 to $250,000. They also need a content management system to distinguish visitors, manage paywalls, and receive payment methods which can cost roughly $70,000.

Besides the costs associated with data and management systems, there is a need for additional roles and department growth within the organization; that means expanding the analyst team, investing more in the marketing department, and creating a customer and tech support service to respond to the paying digital subscribers.

In short, it was really hard, costly, and took The New York Times three long and drawn out attempts to succeed. They even invested in hiring former e-commerce executives in order to help them convert more readers to subscribers. Then there’s the problem with keeping readers engaged – it’s more than most publications can handle.

There Are Other Options

If you’re in the news business, and you’re a trusted brand to your reader base, subscriptions are a viable revenue source, but definitely not the only one.

Even publishers who are pursuing certain types of subscriptions, the freemium model in particular, can still capitalize on ad revenue as a primary revenue source. Publications like Bild in Germany, and The Telegraph in the UK offer most of their content for free, with only around 20% being behind a paywall. Optimizing that traffic and measuring your ad and user performance more effectively could potentially drive as much revenue, or maybe more, as the subscriptions.

When it comes to the digital advertising industry, the days of chasing direct deals for a spread in a national daily are becoming obsolete, but with the advancement of programmatic ads, there is still plenty of options for publishers not looking to pursue subscription revenue at all.

The only change is the way in which some types of digital advertising are being distributed is becoming more complex, and there is a need for publishers to make use of technology in order to understand where exactly their advertising dollars are actually coming from.

In order to generate the most revenue, or at least optimize their current revenue, publishers need to look at a multitude of revenue streams in real time in order to understand the true visitor value of their readers. This is hard to do, but with the right technology to unify and analyze the data, it’s the way to move forward without subscriptions.

Interested In Hearing More? Take A Look At This Short Video To See How PubPlus Can Help You Understand Your True Visitor Value.

Adi Harush
Adi is the Chief Technical Officer at PubPlus with more than 10 years of experience in high tech companies. His technical focus has been mainly large scale web applications and distributed systems. Adi has too many things to do and too little time in which to do them.