The concept of the tipping point is an easy one to relate to, not least because it seems to reflect our everyday experience. Things do not always stay the same, nor even evolve smoothly and gradually; but neither do we live in a state of constant revolution. Instead, we can go through long periods of apparent stability only then to find our world turned suddenly upside down in a surprising way. A “tipping point” has been reached.
The term was popularised by Malcolm Gladwell in a book (The Tipping Point: How Little Things Can Make a Big Difference) published in 2000. Examples are not hard to find around us. Why do epidemiologists worry about the reducing levels of measles vaccination in the population? Because they fear that, while the incidence of the illness is still low, we are close to the tipping point where an epidemic could spread uncontrollably through the population. How did confidence in the banking system collapse in a matter of days last autumn? Why did Lily Allen suddenly become so famous by posting on MySpace? How is it that it took years for mobile phones to become widespread then suddenly “everyone” had them? Tipping point situations, one and all!
Demise of Dawsons
Let us come a bit closer to home. I do not know anyone who predicted a year ago the complete implosion of one of our wholesalers, Dawson News. Our FT personal finance columnists certainly did not. As recently as May 2008, one of them wrote that he had “jumped into Dawson” at a share price of 92p. As I write, the shares are below 8p, following the company’s loss of all its major news and magazine contracts. Dawson’s fortunes went from steady state to collapse in the space of just a few months. Without diving too far into the background, it is clear that once some publishers started to walk out of the door, a tipping point was reached where no-one wanted to be left behind and the contagion became self-fuelling and irreversible.
The writer, Bryan Walsh, sums up tipping points as “the levels at which the momentum for change becomes unstoppable”. The examples given above illustrate two key drivers. Firstly, abrupt change may stem from a physical cause (as is the case with a disease epidemic) but it may also have a psychological component. The (temporary) bursting of the house price bubble had something to do with the lessening availability of mortgages but a great deal more to do with loss of consumer confidence. Economists like to use the term “animal spirits” to describe this effect. Secondly, once dramatic change begins, it may be kept going by feedback loops that make trends self-fulfilling: as soon as house prices showed signs of falling, that very fact further depressed confidence which meant that prices dropped still further, and so on. Market bubbles and busts revolve around virtuous or vicious circles.
Are newsagents at risk?
Let us return to the news trade and consider this question: are newsagents an endangered species? Certainly the NFRN has for years been telling us (not without justification) that retailing is under great pressure, that retailers struggle to pay their way and that some of them are shutting up shop. As a press release on the Federation’s website tells us, quoting Stefan Wojciechowski, “Britain’s independent newsagents are closing at a rate of more than one a day, raising fresh fears about their future… Newsagents play a vital role in our society but if nothing is done to protect them they risk disappearing for good.” So, are we reaching a tipping point for news retailing?
The answer is almost certainly no. Some newsagents will close, that much is certain, and other outlets will open. Such is business as usual in a competitive market. Ultimately, if fewer newspapers are sold, there will be less money in the business and one would expect the number of retailers to diminish. But, I would argue, the conditions are not in place to create a tipping point effect. In particular, closure of some retail outlets does not create a vicious circle that in itself fuels the closure of others. On the contrary, if some retailers close, others may benefit financially from increased levels of trade and even local monopolies. So the dynamics of the market exercise a damping effect that restrains, rather than accelerates, the momentum of change. Something similar also applies to the “animal spirits” of retailers: if some close their doors, there may be minor ripples of gloom among their close associates but other competitors will sense an opportunity.
In short, I believe we are in for a slow decline in the number of news outlets, not a sudden collapse.
Rising subs levels
However, I do believe that we are approaching a tipping point for newspaper subscriptions.
Traditionally, the UK has not been a subscription marketplace for news. Whether that fact created our wide retail base, or was the result of it, I am unsure, but the two go hand in glove. The UK has twice as many retail sellers of national newspapers than France, which has a similar population and a much larger geography. The difference is that in France you are quite likely to be receiving your newspaper from a subscription deliverer rather than from a retailer.
FT & Telegraph lead the way
In recent years, the UK picture has begun to change. Actually, the pressure has been building for some time. The Telegraph introduced voucher subs (a peculiarly British fudge) back in the mid 1990s. At the same time, the FT led the way with hand delivery of subscriptions in the London area, a channel which we have built up steadily ever since. A few facts and figures about 2theDoor Ltd, the deliverer in which we have a minority shareholding, may be of interest:
* Last year, it made approximately 4.2 million deliveries, substantially more than Ocado;
* By year end, it was delivering 17,000 copies of newspapers each morning;
* It delivered its 25 millionth copy last year (and will deliver the 30 millionth this year);
* It serves an area with a population of 8.8 million and,
* It works to a standard of 99.8% complaint-free delivery.
While the ability to receive your copy before 7.00 am is a significant customer benefit, for ten years, delivered subscriptions were the preserve of specialist titles like the International Herald Tribune, as well as ourselves.
2008: others join in
However, in 2008 that began to change. One of the key industry events of last year was the entry into the delivered subscription market of the Times, supporting an alternative deliverer to 2theDoor. A few months earlier, the Independent joined the 2theDoor system as a third party customer and, at the start of this year, the Guardian finally grasped the potential of subscriptions and started offering voucher subs, albeit more than a decade after the Telegraph, Times and FT. While not yet a tipping point, 2008 was a year of major subscription development.
Why all this publisher interest in subscriptions? Many readers of InPublishing will be familiar with the arguments, the desire to “lock customers in”, the benefits of obtaining data on your readers and buyers and the opportunity which direct sales give you to measure the return on your marketing investment. For daily newspapers, a key rationale is to increase the frequency of purchase: to take those “occasionals” who pick up your title from time to time and persuade them (with a suitable offer) to buy and read more frequently, preferably daily. Little wonder that the Guardian, which has a huge pool of occasional readers, has found them a fertile selling ground for their voucher offer: the ABCs for May 2009 showed that the Guardian now has over 25,000 of them signed up, impressive going from a standing start just a few months ago. And I have no doubt that we will be seeing other publishers offering delivered subscriptions in the near future, whether through 2theDoor or another operator.
The trends
Will the momentum become unstoppable? I think it is getting that way already. And, unlike what I said about retailer decline, subscription growth has the ability to become self-reinforcing. A good subs offer has the potential to “go viral”, passed on to friends or colleagues, recommended and bought because others are trying it. And on the delivery front, the gaps in retail delivery are encouraging people to try subscriptions, which in turn is likely to lead to a reduction in newsagent delivery, thereby pushing more people to subs. In short, a virtuous (or vicious, depending on your viewpoint) circle. While the retail trade can and will continue to exist and even flourish alongside subscriptions, I believe delivery services in many places will need to be converted into subscription fulfilment operations if they are to survive.
There is a final reason for newspapers embracing subscriptions. The direct relationship with your customers, the ability to interact with them, the monitoring of usage patterns, the precise targeting of offers… These could all refer equally to online services. All newspapers are, or are fast becoming, multimedia news operations in which the printed form is only one of many routes to market. For example, FT.com had a healthy 110,000 digital subscribers in 2008, a growth of 8% on the previous year. For traditional media organisations, having subscription relationships with print-edition customers is a way of enjoying the benefits of new media, and it can also be (as at the FT) a very successful way of enabling the two to be cross-sold. All of which may perhaps help to stave off the ultimate tipping point, the day when we find it no longer profitable to deliver our content in print at all. But that day has not yet come; and it is a subject for a quite different article.
