“Journalism matters and is in demand again. But one problem for publishers is that this extra interest is producing even less income – as advertisers brace for an inevitable recession and print revenue dips. Against this background it is likely we’ll see a further drive towards digital subscription and other reader payment models which have shown considerable promise in the last few years.”
The Reuters Institute Digital Report
What has happened in publishing lately?
The impact of the global health crisis and related lockdowns have shown that journalism is more important than ever before. People rely on all types of media to be informed, entertained, and socially connected. As a result, media is in high demand.
Ironically, in this time of great demand, many media companies find themselves in a very precarious situation. Generating revenue has become a fundamental challenge that is increasingly difficult to solve. Yet, as publishers face the realities of a new future, two key trends are driving seismic change.
Consumer willingness to pay for quality digital content is growing. Convenience and on-demand are what everybody wants, and the world’s media companies have taken notice. Big entertainment giants like Netflix, Disney, Spotify, and HBO have paved the way for a new kind of premium content. With their offerings, they are leading entertainment consumption into the subscription decade. These changes in consumer-media relationships are now showing their effects within the classic publishing industry. Large commercial magazines, newspapers, and niche media are following the trend.
While consumer behavior is changing, advertising is slowly falling apart. More dollars are being spent on advertising than ever before, but media companies are seeing their piece of the pie shrinking, with most advertising budgets spent on digital ads with the large social media platforms and search engine providers. Within this context, publishers of various kinds are developing new monetization strategies.
The Subscription Model
Perhaps the most popular option for legacy publishers is to put their previously free online content behind a subscription paywall. The textbook example in this field is the New York Times. In 2020, the Times added 2,3 million new digital subscribers. Setting a new record with over 7,5 million subscribers in total, meaning digital subscription revenue is now the biggest revenue contributor of the legacy publisher. 2020 was undoubtedly a unique year where demand for reliable journalism was never higher or more necessary, but it is safe to assume that the subscription or paid-content trend is not a one-time phenomenon. Paywalls are here to stay.
Another potentially more interesting example is the success enjoyed by the sports magazine The Athletic. The large niche publication focusing on mainstream sports has built a loyal and continuously growing subscriber base, proving that it is not only legacy publishers with established user bases that can leverage the subscription model. In 2020, they added more subscribers than ever before and passed the 1 million subscribers mark. The Athletic’s success shows that the paid-content approach can be the leading revenue contributor if the consumer deems the quality work done by the editorial team is worth the cost of a subscription.
These examples can be seen as the natural answer to the latest shifts within the digital publishing landscape. Users are demanding more and better content. If they see value in the content offering, they will pay for it. This transition can be seen as the necessary and natural evolution from advertising-led business models to consumer-first media offerings.
The emergence of e-commerce
The subscription model offers one way out of the problems facing publishers today, and it suits the consumers’ growing willingness to pay for quality digital content. Done correctly, it can also complement another of the trends witnessed in the last year: the inexorable rise of e-commerce. The connection doesn’t seem obvious at first glimpse. While reader contributions allow publishers to move away from commercial activities, e-commerce would seem to resemble the exact opposite, but this is not the case. And more importantly, combining the two allows publishers to build resilient and robust revenue models.
Introducing e-commerce through offerings that are only available for members and subscribers has shown to be very successful, especially for news channels. Selected products and services are offered exclusively to subscribers. In this way, e-commerce drives another new revenue stream while also enhancing the relationship between readers and media brands. As the curator for shopping offers, the publisher can set new trends, sell products aligned with their brand identity, and even create or brand their own unique products.
Subscription and e-commerce monetization models are attractive options for publishers, but it is important to mention that revenue from advertising, affiliate marketing, and other sources will still play a critical role. In the current landscape, publishers with more diversified income streams are better prepared for the increasingly more dynamic nature of the market. If the last year has taught us one lesson, it is that the ability to adapt and to have healthy, diversified economic models are the most critical tools when building sustainable economic models.
The move to readers-first
At Tipser, as part of our work with some of the world’s largest publishers, we have learned that an essential step in creating a sustainable revenue model is to take the readers’ needs into account and put them first. For decades, the media industry has relied on advertising as its main revenue contributor. Shifting this focus will require more than simply adding new income streams. Instead, the media needs to fundamentally reshape what they offer in their digital publications.
With online now the world’s primary form of consumption, digital channels need to become destinations where readers find solutions that meet their various needs. The transition to paid content is well underway, and e-commerce done right can help the digital publishing industry in this critical transition. We see every day how paid content is taking over digital content monetization, and combining it with e-commerce creates a robust and complementary alliance that has the potential to positively impact the future of publishers everywhere and usher in a new era of economic independence.