Digital platforms hold overwhelming power, Guardian Editor Kath Viner said recently. In the West, publishers find themselves stripped of power not only to be the gatekeepers to audiences but also of the power to command the advertising revenue they once did.
“Social media companies have become overwhelmingly powerful in determining what we read and whether publishers make any money,” she said at a recent marketing meeting, according to Digiday.
In the US and the UK, as print advertising ebbs, it is clear that it will not support either the expensive platform that is print or the existing editorial staff. The mother’s milk of media – advertising – has flowed out of print and towards a few digital giants. Media companies are desperate to fix their revenue mix by getting more money from smaller print audiences while they also try to convince digital audiences to cough up cash.
WAN-IFRA pointed out in its 2016 World Press Trends Report that digital advertising growth for newspapers has slowed to less than 10 percent. However digital reader revenue is growing at an impressive clip.
“Paid digital circulation revenues continue to grow at double-digit rates, and have increased 30 percent in 2015 and 547 percent over five years. With revenues of more than US $3 billion, digital circulation is now starting to make up for lost print circulation revenues in many markets,” according to WAN-IFRA.
Reader revenue has become print media’s reflexive response to the ad crisis, but is it enough?
The New York Times neatly exemplifies the promise and the challenge of reader revenue for media in 2016. It recently announced that reader revenue rose to 57 percent of overall revenue, and CEO Mark Thompson said that digital subscriber growth is accelerating. That’s the promise.
While financial publishers like the Wall Street Journal and the Financial Times long ago started moving their revenue mix away from a heavy reliance on advertisers towards readers, it has only been in the last five years that more general interest consumer publications have made the move, largely after the New York Times ploughed the furrow.
In addition to the ongoing, and in some cases accelerating, decline in the print business, publishers are also seeing softness in digital. They are now looking for new products and reader revenue strategies in their search for a way forward.
The New York Times experiments with expanding its paid product portfolio
And now, the challenge. The New York Times’ paid content strategy has been one of the most successful among consumer media brands, and they have been able to continue their digital subscription growth even as pressures remain, if not accelerate, on their print business.
But, the Gray Lady’s recent first quarter results perfectly illustrate the problem that legacy media companies are facing. There is no good news in print, with print advertising was down 9 percent, according to an overview in Politico.
The story that has had media execs breaking out into cold sweats is that digital advertising is under pressure too, as Google and Facebook take home 85 cents of every dollar. The New York Times saw digital advertising decline by 1.3 percent.
And in the face of these losses, like so many other print businesses, the Times continues to cut, finding as many savings as it can in print to reinvest some in digital. It eliminated or relocated about 70 jobs near Paris related to print production, and the cuts to print aren’t over.
“We believe there is considerable scope for further savings in the company, and we will be going after it in the coming months,” Thompson said in the earnings announcement.
Fortunately, the Times has another lever to pull with its digital subs, which are still growing. They netted another 67,000 digital subscribers in the first quarter, and that pushed them even further north into seven-figure territory, “close to 1.4 million digital-only subscriptions”.
To step on the gas in this growth area, the Times is expanding its digital subscription product line, continuing a years long experiment that has seen some successes and some failures. In their quarterly results, they highlighted that their crossword app was pulling in $2 m in revenue. The company also announced an international expansion targeting Spanish speakers.
This experimentation is important, and it is worth other groups, in both the consumer and business space as well as the mass and niche space to keep an eye on what they are doing.
Can print go ad-free and rely solely on reader revenue?
How far print publishers are willing to take the reader revenue model? As of July, US health and active lifestyle publisher, Rodale, announced that it would take one of its titles, Prevention, ad-free as of July this year.
That might not be so much of a prescient move as a Hail Mary pass — the same article reported that Prevention’s circulation had dropped 34 percent in the last two years, from 2.82 m to 1.87 m.
The shift to a premium print product came at the cost of of 40 layoffs. Half of those cuts will come from now redundant ad staff, and the publisher also got the heave ho, according to FishBowl NYC.
In the announcement, Rodale said (emphasis mine): “As a new premium product, Prevention will be a magazine that today’s health-minded consumer wants, needs and will pay for; an authoritative and trusted source that breaks through the clutter and empowers people with the information they need to make decisions when it comes to personal or family health.”
The annual subscription price will increase to $24, which the announcement admitted was “an industry high that exceeds many other monthly magazines”, and the price at the newsstand will increase a dollar to $4.99. For those of you doing the math, the subscription price is a 60 percent discount from the newsstand price, a pretty standard tactic in US print pricing.
To put that in perspective, magazine expert Samir Husni, was quoted in The Morning Call, a local newspaper near Rodale’s headquarters, that the average price of an annual magazine subscription in the US was only $11.
Keep an eye on this experiment to see if publishers can shift readers to thinking of print, and higher quality content, as a premium product that they are willing to premium prices for.
But while the print audiences have declined, desktop and mobile audiences have increased by 14.7 percent and 115.6 percent respectively, so there will be more content for paying subscribers only, according to AdAge.
Whither local media?
Damian Radcliffe did a deep dive into digital newspaper subscriptions recently based on some of the latest research coming out of the US.
The success of the New York Times’ paid content strategy created a land rush as a number of local newspapers and local newspaper groups moved to digital subscription models, the majority, but not all, following the metered paywall approach that the Times has.
Local news groups have had a much more uneven performance from paywalls. The Dallas Morning News is a good example of the challenges of paid content. They have launched paid content strategies twice and rolled them back twice.
However, they might take a third stab at it, with publisher Jim Moroney delivering some Texas straight talk in an interview with NetNewsCheck. “That’s our fault in execution, not because it’s not a good source of revenue,” he said.
And Moroney’s criticism could be, and has been, levelled at the paid content strategies of a lot of local media companies. The marketing is generally poor — more “we deserved to be paid” rather than we are producing something you want to pay for. The user experience is often shockingly bad, and news organisations have been late to leverage data in any meaningful way, especially when compared to Apple, Google and Facebook. To wit, when I joined Gannett in 2014, I was told by one of our really sharp digital ad reps that we couldn’t geo-target ads on their mobile apps.
Gannett raced out of the gate when it launched a paid content strategy in 2012. It added $100 m in reader revenue, but that plateaued until they started adding new reader revenue options last year. They announced in the first quarter of 2016 that digital-only subscriptions increased by 37 percent, but even with that positive note, circulation revenue still fell by 3.2 percent.
The bottom line is that while reader revenue is helping to bail out the sinking ships of legacy media, they are going to need a bigger bucket. They will need to diversify their offerings and bring new and better paid products to market, and they will need to up their game significantly if they have any hope of a future that isn’t simply about being gobbled up by hedge funds.