As we enter 2013, a growing number of publications are turning toward charging readers for digital/online access to content.
Commercial success isn’t however solely about trying to make every reader pay. It’s about extracting subscription value from the fraction of readers who want full content access whilst avoiding potential loss via cannibalisation.
To this end, Simon-Kucher & Partners - marketing and strategy consulting firm - conducted research into the reality (or otherwise) of various myths in news publishing of whether to charge for online content.
A key report finding was that failing to monetise digital content – for relevant audiences - represents a sizeable opportunity cost for newspapers. Failure to charge increases dependence on a declining advertising revenue stream, and creates the risk of cannibalising an already weak print offering.
MYTH 1: Most news readers are unwilling to pay for content
False.
The survey found that:
* Most (86 percent) broadsheet readers thought it fair to pay “something” for a digital subscription.
* Respondents perceived £10.00 per month as ‘normal’ for a digital subscription.
* Nearly half (42 percent) of broadsheet readers – including subscribers and regular newsstand buyers – spend on average more than £8.00 per month on newspaper content.
From these findings, we can conclude that a majority of readers are willing to (and do) pay for content, against widespread free content on the Internet.
MYTH 2: Readers value online content less than print
Partially true.
Although readers assign less value to digital editions, they can be educated to recognise the value therein:
* For 31 percent of respondents, a preference for the tactile qualities of print led them to assign lower value for money to online versions
* 50% of respondents thought £15/month to be “prohibitively expensive” for a digital subscription during the initial round of questioning.
* This went up to £20/month after respondents were led to reflect on the expertise in content creation, and the need for newspapers to charge to guarantee quality news creation. £20/month is the average price for print subscriptions.
MYTH 3: Print readership is declining due to price increases; broadsheets should avoid increasing online pricing
False.
Cover price increase is a smart strategy for broadsheet newspapers to improve circulation revenue:
* Higher cover prices are not necessarily to blame for the drop in the average daily circulation of the UK’s top ten national daily newspapers – which decreased by 22 percent between 1995-2007.
* Despite The Guardian’s 20 pence cover price increase and subsequent 4.4 percent volume drop in September 2011, circulation revenue increased by 20 percent.
In terms of trend impact, lifestyle change is a main driver in falling newspaper readership:
* People remain interested in news but have less time for newspapers.
* The Internet is the top news source for the under-30s.
These statistics imply that newspapers must utilise a successful digital strategy to maintain readership and revenue levels.
MYTH 4: The advantages of penetrating new markets exceed cannibalisation risks
False.
Newspapers risk cannibalising their customer base by providing free websites; instead of buying an app, the occasional print readers and tablet owners might shift to the newspaper’s website:
* According to April 2012 NRS Print and Digital Data (PADD) statistics, The Times was the most popular national broadsheet in print with 5.52 million print readers a month.
* Guardian.co.uk is free and attracts 6.5 million website readers - of which 4.9 million are “website only” readers, increasing its reader base by +120 percent.
* Print circulation of The Times decreased by 13% between 2011-12, The Guardian’s by 23% (74% more than The Time’s).
The Guardian.co.uk example demonstrates that newspapers can successfully grow market share and brand awareness through free websites. However, the impact on revenue is unclear. Firstly, due to the lack of publicly available data, it’s difficult to confirm whether The Guardian’s 4.9 million “website only” readers are “new readers” or former “print buyers”. But The Guardian’s drop in print circulation is likely to have been accentuated by cannibalisation.
Secondly, it’s unclear whether The Guardian’s 6.5 million online readers generate more revenue through advertising only, than The Times’ 295,000 online readers paying £2.00 - £4.00 per week.
MYTH 5: Advertising revenue alone will be sufficient for newspapers’ survival
False.
UK newspapers’ online and print advertising revenues are weakening; advertising revenue migration from newspapers continues and papers can’t expect to rely solely on advertising revenue:
* In 1998 a typical broadsheet derived 70 percent of revenue from advertising and 30 percent from cover sales. By 2008, this changed to 60 percent and 40 percent respectively.
* In 2011, online advertising provided under 20 percent of newspaper’s advertising revenue7.
* Estimates from various sources suggest that the drop in advertising value derived from moving from print to digital can be up to 75 percent. So for every pound received from a print reader, the equivalent from a digital reader is only 25 pence.
Newspapers therefore need to reinvent their business models.
CONCLUSION
With the myths debunked and the reality clarified, it’s clear why newspaper websites shouldn’t be free. Publications should instead:
* Focus on the right audience segment - the 86 percent of broadsheet readers who believe it’s fair to pay for online content.
* Realise that readers understand the value inherent in digital versions and papers can charge accordingly to reduce the cannibalisation impact.
* Encourage readers to develop a payment relationship for digital versions.
