The fatal flaw in subscription models

Many column inches both here at TheMediaBriefing and elsewhere have been dedicated to revenue models, and how individual publishers can monetise their audiences.

Subscriptions are nothing new. Most of the media industry seems to have it all worked out, with millions paying out for Netflix, Spotify, Amazon Prime, Apple Music and more.

But one industry segment hasn’t quite grasped it yet. In a period of rapid change and disruption, news publishers grapple with putting paywalls up, taking them down, growing subscribers and trying to convince people that their content should be paid for.

Subscription’s fatal flaw

Various studies have been done on how people consume news, particularly in the US, but there is very little information on how many different outlets a user will read from. Increasingly, it is the article rather than the source itself which garners attention, with the most widely-known publishers being those who have mastered social distribution.

We put out a snap poll to followers of @mediabrief asking how many different sources they read a day, and the results were telling:

post-sources.png

If every publisher put up a hard paywall overnight, and these people then took out subscriptions to each of these sources, the cost could be anything from £80-£120 a month, if not more.

Paywalls rely on publishers assuming that an individual will only have one or two subscriptions, and therefore that theirs is the only content worth paying for. Yes, on a publisher-by-publisher basis, it is critical that the content they produce is valued and paid for. But on an industry level, it isn’t sustainable.

Paying subscribers to these outlets are skewed in terms of age, and the younger generation have never grown accustomed to handing over money for content, according to Business Insider’s Publisher Paywall Report. I would suggest this is because we now read news and content from a huge variety of sources (both reputable and otherwise). The age of loyalty to a single newsbrand is long gone; digital signalled the death of brand monogamy.

Industry parallels

Many people draw comparisons between publishing subscription models and the success media companies like Amazon, Netflix and Spotify have found.

There is, however, a key difference. Imagine 20th Century Fox, Universal Studios and Warner Bros each charged users a monthly fee to access their films. Very quickly, the model would fall over, and smaller film studios would be unable to compete.

Instead, these studios all come together in an aggregator, like Netflix. Paying a monthly fee becomes a lot more valuable for film fanatics, as they can watch as much as they like from different sources. 

Pure social distribution isn’t the answer for publishing. The catch in the current situation is that Facebook doesn’t pay publishers to distribute articles on their platform. If Netflix refused to pay its content creators, or even charged them to reach their audience, studios would quickly take their films elsewhere.

Yet the point still stands. The average consumer cannot afford to ‘subscribe’ to individual film studios, no matter how good their films are. Similarly, people listened to a much narrower range of music when it cost £10.99 for an album – a luxury purchase. The music industry was disrupted, and Spotify emerged as a way to listen to artists, and more importantly, discover new music from small labels and independent artists. It’s taken almost a decade for the industry to right itself, but it’s getting there.

It’s not all plain sailing for consumers. Many are happy to sacrifice the tangibility of paying a one-off fee for a physical product (DVDs or CDs) to access unlimited content from different sources (films and music) for a monthly fee. There is no sense of ownership – should Spotify close, all the music and years of accumulated monthly payments disappear. But that is the price many have chosen to pay.

Music and films (for the most part) are also valuable in their exclusivity. No one else is legally reproducing Netflix’s ‘The Crown’ for free. To watch it, and keep up with the water-cooler talk, you must have a subscription to Netflix.

This is another area publishing struggles with. Unless the content is niche or special interest, many stories, particularly in news, are easily replicable and available elsewhere for free.

Subscriptions won’t provide a long-term, sustainable solution. Consumers no longer pay for a physical product, and many read across a variety of sources. Publishers with paywalls have implemented them because they value their content and don’t believe it should be given away for free, and they are right in their belief, but not in the isolationist solution.

A happy medium

So is publishing any closer to getting its own ‘Netflix’? There are a couple of examples which may develop into viable options for UK companies in 2017.

Medium have been making media headlines over their decision to abandon the ad-funded model, and there has been a great deal of speculation about which model they might adopt next. At the beginning of February, they announced that they would be launching a consumer subscription product within months, “with the ultimate aim of creating tailored packages for individual publishers”.

With several publishers now pushing content exclusively to Medium, the revenue share deal will have to be very sweet to make up for the loss of the incentivised ad-funded model.

They will also have to make the proposition to consumers completely clear. What are Medium offering that they didn’t before? Even access to a range of top-tier publishers may be enough for some of its 60 million monthly visitors. It doesn’t have to convince many of them to subscribe to quickly bring in money.

Blending models

But perhaps the answer isn’t exclusively in subscriptions.

Blendle, a Dutch online micropayments platform are the most well-known example of a micropayments model. They expanded into the US last year and have since hit over a million users, although only around 150,000 of these are actively using the micropayments system. This isn’t dissimilar from the proportion of users paying fully for Spotify.

Users typically pay 20 – 50 cents for an article, with revenue split on a 70-30 basis between publishers and Blendle. Paste’s Eric Walters ran a feature on how Blendle’s micropayments system works, which is an innovative approach but one which by itself, isn’t enough.

The interesting development from Blendle is their announcement in early January that they will be literally blending their revenue models by adding a new option – access to 20 stories a day for €9.99 a month, alongside a carefully curated personalised ‘Premium Feed’.

The FT reported that Blendle are aiming to capture the ‘group in the middle’ – users who aren’t loyal to a particular publication but who still want to pay to support quality news.

Publishers have been understandably reluctant to get on board with the subscription developments over concerns it would cannibalise their own subscriber base. This may also be a reason why Apple News has struggled to implement any structured cross-publication subscription options.

Alexander Klöpping, Blendle’s founder believes that there is no single solution which will ‘save’ effective monetisation for publishers.

“I think micropayments are part of a mix, together with subscriptions, patronage, events, e-commerce and ad funded media. But in order for quality journalism to thrive, we need to better balance the mix and increase the user experience. No one has figured that out yet.

“Micropayments are part of an ecosystem. By itself micropayments won’t be enough, but they are a part of the puzzle.”

Klöpping also spoke highly of Medium.

“Medium has done a tremendous job in redefining the default place to write on the web, if what you’ve got to say takes longer than a tweet. And they are a big inspiration for what we’re doing with Blendle.”

Another part of the puzzle would be something which enabled individuals to pay for an article. The Guardian’s begging bowl approach is one example, but the process to donate is currently too complex. If someone enjoys an article they have read on a publisher’s site, a toolbar which is as easy to click as the universal ‘share’ button could be a solution.

A collaborative approach

For the moment, paywalls are a good way of providing publishers with much-needed revenue, and sends a strong message to readers that the content comes with a cost, and should be valued accordingly. Our (free) Europe’s successful paid content strategies report highlights a wide variety of publisher’s approaches to paywalls.

But the bigger picture needs to be taken into account when thinking ahead on individual paywall strategies, particularly when catering for the habits of the younger brand-agnostic generation.

It’s time for a collaborative approach to multi-source subscriptions. Otherwise, the ‘Spotify of publishing’ will come along and control those revenue streams in place of publishers.

By |2017-02-16T00:01:00+00:00February 16th, 2017|Analysis|Comments Off on The fatal flaw in subscription models

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