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Perspectives | Revenue

The subscription discussion we should be having

If 2016 was the year of the platform, 2017 is the year of the subscriber.

Amid a backdrop of political change, wavering trust in government and media, and the rise of fake news, subscriptions are up among the largest U.S. publishers, proving that consumers value high quality journalism. According to Pew Research, the numbers show that in 2016, The New York Times added more than 500,000 digital subscriptions – a 47% year-over-year rise, and The Wall Street Journal added more than 150,000 digital subscriptions, a 23% rise. Even Facebook recently announced that it’s building a feature that would encourage readers to subscribe to news publications, in response to publisher interest.

And this trend isn’t going away. According to WAN-IFRA’s 2017 World Press Trends report, understanding paying commercial models is the number one priority of publishers this year, particularly as audience revenues surpass advertising revenues among global newspapers.

While the industry rightfully focuses on growing new subscribers and experimenting with business models, the discussion should not end there. What we’re not talking enough about is that subscribers are a distinct audience. They engage with your content in a different way and are loyalists in a different way. Understanding these differences is where publishers will build their revenue strategies to take their businesses to the next level.

Subscribers are Unique

No one will pay for content that doesn’t repeatedly engage them.

Loyal readers, which on average account for the majority of pageviews across all channels, have time and time again proven to be your most valuable as they consume more of your content.

And what is that link between loyalty and subscriptions? Active engagement. A recent report by the MIT School of Management, Turning Content Viewers Into Subscribers, presented the Subscriber Ladder of Participation as an illustration of reader lifecycle. Rather than thinking of your reader journey in a passive way, it encourages you to build your strategy around action: moving readers from Anonymous to Subscriber by encouraging them to act.

MIT School of Management’s Subscriber Ladder of Participation

And this active participation is central to Chartbeat as well – our research has shown that analyzing and optimizing the reader experience around engagement patterns as opposed to just empty pageviews drives returning visitors, motivating users to proverbially ascend the ladder towards subscriptions. Subscribers are loyalists who engage with your content in a unique way, and understanding that engagement is key to driving more loyalty.

As Kritsanarat Khunkham from Die Welt put it, “Our whole subscription model is based on returning visitors—they’re essential. You can only turn users to subscribers when they’re returning. I’d rather have 500 returning visitors than 5,000 one-time users. They’re [the ones] who appreciate my work, who trust my brand.”

Besides the simple fact that returning visitors increase ad impressions, they also represent a crucial point in a publisher’s subscription funnel. Every new visitor is a potential subscriber, but — to put it bluntly — no one will pay for content that doesn’t engage them.

Subscribers are Ideal

Once you’ve engaged your subscribing audience, you need to focus on keeping them and getting more. To do this, you need to study how they engage and drive like-behaviors in your loyal/returning audience to turn them into subscribers.

Khunkham notes that often, their consistent eye on data uncovers what topics their audience is truly interested in. This justifies expanding coverage in those areas, often areas they might not have expected. “Sometimes [our audience is] more interested in political news than we expected, and we have such potential for [an audience] who reads seriously,” he says. “When we can prove to [journalists] that readers engage with their meaningful work, it motivates them.”

In other words, publishers need to start thinking about taking their data past the point of conversion. Once a reader has subscribed, are you continuing to dig deeper into their behaviors and deliver the content that they have demonstrated a complex interest in? Discover not only what content your subscriber communities engage with, but think of subscription status as another lens to evaluate all of your editorial strategies — from social media channels and platforms, to devices and portals, and even relationship-building campaigns.

At the end of the day, understanding new visitors and their journey to return is important, but garnering deeper insights around how subscribers engage with your content differently can unlock durable retention and growth strategies for publishers across the board.

Terri Walter, the Chief Marketing Officer of Chartbeat, works every day to ensure that publishers and newsrooms have the tools and insights they need for quality content to thrive. A digital marketing veteran of 20 years, Terri has worked over the course of her career to position high potential brands and spearhead thought leadership in media and analytics at companies including DoubleClick, Razorfish and Microsoft Advertising.

Industry-Research

Trusting News Project sets out to re-establish news media credibility and value

Fake news is the catch-phrase used by many today to discredit all types of news stories and media outlets. Fueled by social media, the term “fake news” pools all news media—be it respected or far from it—together. However, fake news is not about the inaccuracies of credible news journalists. It’s about setting a specific agenda to distort information and deceive readers with the purpose of a deriving a specific action or outcome. It’s an attack on the truth. And it’s an affront to trustworthy news journalists.

The Reynolds Journalist Institute (RJI) created the Trusting News Project to help confront this attack and enhance the credibility of news journalists. The project was launched to create a dialogue between the news media and the consumer. To get started, 28 newsrooms partnered to asked their audiences (a total of 8,728 respondents) about their views on the credibility of news in order to understand the brands they trust and distrust, what they pay for and why.

Who Trusts Whom and Why?

In total, 70% of respondents report subscribing to one or more news products. Overall, more than two-thirds (67%) of respondents are likely and very likely to trust mainstream journalism organizations. On the opposite end of the spectrum, 33% of say that they are unlikely or very unlikely to trust the news.

Interestingly, those consumers who identified as liberals are more likely to both trust and pay for the news than those who identified as conservatives. Not surprisingly, older respondents are more likely to pay for the news, across both politics and race.

Consider the Source

The most trusted news source mentions (based on opened ended top three choices) are:

  1. The Economist
  2. Public television
  3. Reuters
  4. BBC
  5. NPR
  6. PBS
  7. The Guardian
  8. The Wall Street Journal
  9. Los Angeles Times
  10. The Dallas Morning News
  11. The Blaze

The least trusted new source mentions (based on opened ended bottom three choices) are:

  1. Occupy Democrats
  2. BuzzFeed
  3. Breitbart
  4. Social media
  5. Trump
  6. Infowars
  7. Yahoo
  8. Internet
  9. Huffington Post
  10. The Blaze

The Trusting News Project also asked respondents to identify their political ideology based on a 5-point scale ranging from 1 (very conservative) to 5 (very liberal). The self-reported estimates allowed for the scoring of media news outlet by political ideology.

As expected, cited media sources closely align with respondents’ political views. For example, the users who mentioned Rachel Maddow as a trusted source were an average of about 1.35 points more liberal than the scale’s norm. Liberals most often cited The New York Times, NPR, and The Washington Post as trusted, while the brand most listed by conservatives was Fox News.

The Trusting News Project is building strategies to help consumers re-establish trust with news media brands. Identifying and understanding audiences, especially by political ideology, allows newsrooms to inform their approaches to further demonstrate their trustworthiness.

 

 

Perspectives | Revenue

Facebook’s support for subscriptions is a double-edged sword

Campbell Brown, the former NBC and CNN broadcaster who is now Facebook’s head of news partnerships, confirmed in a speech at a digital publishing conference that the social network plans to roll out support for subscriptions as part of its mobile Instant Articles platform.

There have been multiple reports that the company was working on such a plan, including a recent piece by Digiday that quoted a number of sources, but Brown’s speech is the first official confirmation. She said testing of the new feature will begin in October.

This plan is likely to cause some cheering in media land, because a number of publishers have been clamoring for paywall support from Facebook. They have also criticized the lackluster performance of the existing Instant Articles format when it comes to generating revenue.

As with most things involving Facebook, however, this deal sounds like a classic Faustian bargain.

What’s the Deal?

According to Brown, subscriptions will work this way: If a publisher chooses to implement support for a paywall, readers will get 10 articles for free — in much the same way they do with the New York Times’ “metered” access plan. After that, they will be prompted to sign up for a subscription. If they already have one, Facebook says it will make it easy for them to log in.

And what about the revenue — will there be some kind of sharing plan, where Facebook takes a percentage, the way Apple does with its 30%? The company isn’t saying, but it seems likely that there will be, although perhaps not to begin with.

Update: In a statement on Wednesday, Brown said “Quality journalism costs money to produce, and we want to make sure it can thrive on Facebook. As part of our test to allow publishers in Instant Articles to implement a paywall, they will link to their own websites to process subscriptions and keep 100% of the revenue.”

Brown did say that the social network would give publishers control over all of the reader and subscription data involved in the process, which is also likely to come as good news to many. At least they don’t have to hand all of that over to Facebook as well as all of their content. But that doesn’t mean this deal is something media companies should leap at.

The context to this offer, as a number of people have pointed out, is that Facebook is taking some sustained fire for its dominance of the advertising industry (along with Google), with the News Media Alliance arguing its members should be exempted from antitrust laws so that they can present a combined front in bargaining with the digital giants. I wrote about that idea in a previous post.

Not only that, but a number of publishers — including the New York Times, an early partner — have talked openly about how Instant Articles has proven to be a bit of a bust revenue-wise. Some have turned their back on the platform completely, despite Facebook’s attempts to improve things.

The Bottom Line

But the bottom line with this subscription offering is the same as it has been with Instant Articles and Facebook video and half a dozen other things the social networking behemoth has come up with: They are fundamentally designed to benefit Facebook, and to centralise control in its hands, and to generate as much content as possible. Any benefits they provide to media companies are ancillary at best.

If you connect your subscription plan to Facebook, will you get increased reach? Probably. Will it help you drive some new sign-ups? Perhaps. But it’s important to remember that the entity in control of every aspect of that relationship is Facebook, not you — Facebook decides who sees what and when, what it looks like, how it functions, and how much revenue you get.

In other words, you are working on land that has been given to you by a feudal lord, and that rarely ends well.

Mathew Ingram covers the evolution of media and the social web. Most recently, he was a senior writer at Fortune magazine. Prior to that, Ingram was a senior writer at Gigaom.com, one of the leading technology blog networks in the United States, based in San Francisco and founded in 2006 by former Forbes and Business 2.0 writer Om Malik. He also served as the first communities editor of The Globe and Mail, a daily national newspaper based in Toronto.

Perspectives | Revenue

Why the duopoly should help publishers drive subscriptions

A growing number of publishers – non-profit and for-profit – have pushed into subscriptions, memberships and donations. However, it’s been difficult to motivate the big drivers of digital content consumption – namely Facebook and Google – to help push payments for publishers.

There are good reasons for this: The tech giants don’t have an inherent reason to drive subscriptions or put up walls between their unfettered platforms and paid content. But if they truly want to support quality journalism and the good content that delivers so much engagement on their platforms, then it’s important they put time and resources into supporting these publishers.

It is also a matter of principle. If the duopoly in online advertising is going to vacuum up all the online ad growth, then the least they could do is throw publishers a life-line by pushing some people into subscription funnels. And for smaller publishers, the platforms could provide true life support to make sure that news deserts and other underserved areas have thriving news organizations.

Facebook’s Baby Steps

Already, Facebook is developing a way to help people subscribe to news orgs via Instant Articles, according to a report in the Wall Street Journal. The feature is being developed for the mobile Facebook app, and Facebook would like to create a metered model where readers get a certain number of articles free before having to pay up.

But the devil is in the details. Facebook might want to take a cut of the purchases if people pay for content on Facebook. And setting up a meter would have to be variable as some sites have more severe paywalls than others. For instance, the Washington Post, and New York Times have more forgiving walls than the Wall Street Journal or Financial Times.

And yet, this is a problem that really must be solved for the small and medium-sized publishers whose life could depend on these subscriptions.

“Helping news publishers get paid for their digital content is arguably the most meaningful help that Facebook could provide to global journalism,” Lenfest Institute CEO Jim Friedlich told the Journal. “If Facebook truly creates a successful platform for the sale of news subscriptions at scale it will be a powerful and historic game changer for the news industry.”

Google’s ‘Funding Choices’ and Roundtable Chat

Google definitely has a head-start on Facebook when it comes to working with publishers of all sizes. Its Google News Lab has been providing training and tools for newsrooms for a few years. But its early efforts in driving payments to publishers have been underwhelming so far.

In 2015, Google launched Contributor to give publishers a way to offer options to visitors. They could either disable your ad-blocker or pay a per-page fee for your visit without ads. But that effort was scuttled for a new version of Contributor this month that includes “Funding Choices,” a similar message crafted by publishers to give people the same choice as before: Pay up or turn off that ad-blocker. Users can buy a $5 pass and then pay as they visit these sites.

But Google can do more. At a recent Platforms + Publishers private roundtable that I produced at Google’s office in Chicago, one of the most popular breakout groups was around driving subscriptions to smaller publishers – including donations to non-profits. Some ideas  discussed include a potential Chrome extension for donations; and a product called “AMP Revenues” or “AMP Donate” that could drive payments from within Google AMP. And with the data that Google has on potential customers, they could partner to help publishers identify future subscribers.

Why It’s Worth the Challenge

Helping publishers drive subscriptions and donations isn’t an impossible challenge for the tech giants, but it is a challenge. Every publisher has its own kind of paywall, its own membership structure, its own tiers of paid content and services. There’s very little that’s standard, and there are a million different small publishers out there. Not to mention the issues that platforms have just identifying who is trustworthy and not polluting the web with spam and fake news.

However, there are associations that can help the tech companies work with small and local players, including the Local Media Consortium, National Association of Broadcasters, Local Independent Online News Publishers, Institute for Nonprofit News and, of course, Digital Content Next, though it skews bigger.

Sound Reasons Why

Here’s a roundup of reasons why this is worth the effort for platforms:

  • Google wants to organize the world’s information, and if it truly wants quality information from all over the country, all over the world, it will have to help identify and help keep the ecosystem of smaller players healthy. Driving revenues to those players, whether through ads or subscriptions, makes sense for everyone’s bottom line.
  • The platforms have already built relationships with the publishers on so many fronts – around ad-blocking and ad quality, mobile speed, fact-checking – that making a bigger investment in subscriptions will only deepen those relationships and build more trust.
  • Even though there’s a feeling that putting up a paywall will only remove the content from platforms, or send them off the social networks, the reality is that subscription sites still depend on engagement, comments and community (think Facebook Groups) on social media.
  • The tech giants in Silicon Valley already have to contend with enough bad PR, and even global anti-trust concerns, so at the very least this will show that they care about the little guy and gal, the non-profit, the hyper-local, the metro daily.

And speaking of PR, we all know that when Facebook and Google talk about developing new ways to help publishers, we all roll our eyes and wonder if it’s all just for show. On the subject of subscriptions and paid content, this is a chance for the platforms to show that they aren’t all talk and no action. Supporting publishers could make a lasting difference.

Revenue

Media companies lured by the promise of subscription revenue

Media companies are in the midst of a massive shift in revenue strategies from one primarily focused on advertising to one that is more diversified. Without a doubt, subscriptions are highly attractive, given that they guarantee a steady stream of income that is far less volatile than the digital ad market. Ads probably aren’t going away anytime soon, but media outlets are looking for new ways to monetize beyond the traditional ad, and subscriptions offer one way to do that.

As Facebook and Google dominate the ad market, media companies have had little choice but to look for other ways to make money. The Wharton School’s Knowledge@Wharton blog published a post in November, The End of Digital Advertising as We Know It, which suggested that even Facebook could be facing an ad revenue shortfall sometime in 2017. “Facebook has said that ‘ad load,’ or the relative volume of advertising versus content on its pages, isn’t going to be able to fuel revenue growth as much as it has to date,” according to the blog post.

Certainly issues like “ad blindness” and the rise of ad blockers has contributed to worries about ad-driven revenue. However, the attraction of incorporating subscriptions into the mix also reflect the practical limits of the ad model and the advantages of securing a steady stream of income from loyal subscribers.

Certainly, software companies have seen the subscription light and heeded the siren’s call of recurring revenue. As an example, Adobe has completely transformed from a company that once sold boxed software to one that sells subscriptions – and has thrived under the new approach.

Moving to a subscription model
Media companies believe they can get a piece of that recurring revenue action and gain the same advantages as software companies. Robbie Kellman Baxter, principal at Peninsula Strategies, a firm that works with companies making a shift to subscriptions, says subscription revenue works best for media outlets with a specific focus. “Subscription models are the answer for many of the best content providers, especially those with content that is targeted for a specific audience. The more specific the audience, the more likely subscriptions will appeal to them,” she explained.

The New York Times is a great example of a company that is making an aggressive push to grow its subscription revenue. It recently published a report that shows subscription revenue has surpassed advertising as the company’s primary revenue source. The company now has 1.5 million digital-only subscriptions, up from one million a year ago, and from zero just six years ago.

While the New York Times doesn’t see ads and subscriptions necessarily competing, the company is clearly putting more focus on the subscription business and is hoping the quality of its content will drive more interest over time. “We consider ourselves a subscription-first business. We believe that the best business strategy for The Times is to provide journalism so strong that several million people around the world are willing to pay for it,” a New York Times spokesperson said.

And The Times is not alone. Eric Hellweg, executive editor at Harvard Business Review, says that focusing on subscriptions is really about facing the reality of a changing ad market. “It’s pretty tough out there for ad-based media businesses if you are not Google or Facebook. And I think that it’s becoming clearer to media executives that the ad market is goIng to get tougher in the foreseeable future. It makes a lot of sense to look at subscription models as a possible way forward,” he said.

Shifting focus
Baxter says that the shift to subscriptions requires a fundamental focus on audience by media companies. “It is not enough to have eyeballs, they need to attract the same eyeballs, day after day, making their content a habit for their subscribers. This means that they really need to know their audience, and to tap into their changing needs,” she said.

HBR’s Hellweg sees it in similar terms. “To get a subscription business right requires some pretty significant changes, that in many ways cut to core of many media businesses. First, you need a product people will pay for in a meaningful way. Then you have to shift to being user-centric, rather than an ad based business, because it’s essential to understand your users and how to serve them,” he said.

When you shift the focus to the audience, it opens up new business opportunities, Baxter says. “When you look at what the audience really needs, why they consume your content, you realize that they aren’t just consuming in a vacuum—they might be trying to be successful in their careers, or to look smart to their friends, or to be in the know about their favorite sports teams. All kinds of new options for features emerge including online community, events and advisory groups,” she explained.

Converting from free to fee
Realizing that the subscription model could be the best way to go is one thing, but getting people to subscribe is another. It can present a challenge to media companies as they make this change, especially since online audiences have come to expect free content.

Jonathan Anastas from The Enthusiast Network, a media company focusing on action sports and automotive enthusiasts, says in 2017 it’s not that difficult to convert people to be paying customers if you appeal to something they’re passionate about. “People seem more willing than ever to pay for access to the content they love. So, the answer seems to be some combination of super high-end quality in the programming itself or how it’s delivered, a reasonable value proposition, an exclusivity window and passionate content or passion around the content. Give people three of those things and you have a paying customer,” he said.

Andrew Sollinger, EVP for subscriptions and events at Business Insider, agrees that if the content is good enough, people will pay for access. “Readers have grown increasingly sophisticated when it comes to understanding what makes for high-quality content. So our strategy of converting prospects to paid subscribers is a simple one: we provide enough access for readers to get a real sense of it. Ultimately our coverage sells itself,” he said.

As the ad model becomes more difficult to sustain as a primary revenue generator, media companies are seeking alternative ways to make money. While eCommerce, conferences and other means of income certainly offer a way, the subscription model with its recurring revenue stream is one that could be increasingly attractive moving forward, especially for specialty media with something unique to offer the audience.

DCN-Research | Revenue

The power of focus: building a strong niche publishing business

The media industry is in a time of great transition, in part due to the proliferation of digital publications and the growth and popularity of social platforms. While industry consolidation might threaten the independence of some publications, there is also an unprecedented opportunity for publishers to communicate their unique perspective to underserved, targeted audiences.

With this in mind—and with the help of funding from the Knight Foundation—Digital Content Next worked with Ascolese Associates on the research report Niche Publishers: How to Create Sustainable Business Models in a Digital Marketplace, released January 18. This niche publisher research examines how 11 digital publications each capture a unique space, attract audiences, and monetize those audiences.

“I know firsthand that we’re much more nimble than larger news organizations. We can try things out quickly. You know, we can try things out and fail fast, or we can try things out and see some early wins and then build on them. I really appreciate our ability to be nimble and flexible and measure our results and make quick decisions.”
Mary Walter-Brown, Voice of San Diego

The research identified two core focus areas for niche publishers that are vital for their success: content strategy and business strategy. According to the report, these core focus areas are made up of seven tactical components, which are discussed in detail: content development, editorial brand, audience development/ delivery, data, KPI’s, revenue streams and operational efficiencies.

Publishers interviewed agreed that superior content is the core deliverable, but content alone can’t drive a publication to success; an integrated business strategy is necessary. While a quest for scale dominates many digital strategies, niche publishers focus on providing distinctive, even unique content that meets the needs of a very specific audience.

Almost universally, these niche publishers emphasized something that has become a common theme across digital media: the importance of revenue diversification. Additional revenue streams give non-profit publishers more independence from corporate and individual sponsorships and for-profit publishers some independence from advertising sales.

“The number one mistake that media companies make is that they have a journalistic idea, and it’s not done in tandem with a business idea that operates in synchronicity with the journalistic idea.”
Jim Vandehei, Axios

Many niche publishers interviewed cite repurposing content and digital or live events among their revenue streams. However, other avenues include outsourcing internal talent, a “data store,” and a marketing membership program. Notable among these publishers is a willingness to collaborate and create partnerships that allow them to fight above their weight class in terms of staffing and data resources.

Ultimately, the report finds that a niche publication’s smaller size translates into a flexible and nimble environment and, often, a more entrepreneurial approach to their business. Notable among these publishers is a willingness to collaborate and create partnerships that allow them to maximize their staffing and data resources but also to ensure the viability of this segment of the digital media industry.

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Perspectives | Video

Top 6 trends for publishers in 2017

It’s been a topsy-turvy year for publishers in 2016, with big pushes into video, native advertising and even VR. But the end of the year saw the rise of Donald Trump, and questions about the power of social media and filter bubbles, along with the upside of a “Trump bump” in paid subscriptions and donations at the New York Times, ProPublica and other places.

With 2016 soon coming to a close, let’s look ahead to how the biggest trends of the past year will influence the digital media business in the year ahead.

1. Addressing fake news and the filter bubble
Fake news and the filter bubble, particularly after BuzzFeed’s explosive story on Macedonian teens reaping profits from pro-Trump news sites, have emerged as the topics du jour for media and technology companies following the 2016 election. With users now increasingly aware that red feeds and blue feeds exist as competing truths on their favorite platforms, all parties involved – from technology behemoths like Facebook, Google and Twitter, to media executives and publishers, to individuals themselves – must bear the burden of addressing this issue as 2017 unfolds.

Facebook and Twitter have both announced measures to help stop the spread of fake news, particularly by limiting advertising from fake news websites on its platforms. Facebook has reportedly filed a patent for a technology that would help users spot and report “objectionable content,” and is working with top news publishers to curate content directly into news feeds, both of which would presumably help curb an infestation of bogus content. And news consumers themselves will need to brush up on digital news literacy if they want to understand where content comes from and who’s behind it.

2. Love/hate relationship with platforms continues
Speaking of ups and downs, publishers have had a tough time coping with the growing power of social platforms, especially Facebook, as they command attention but don’t always play fair. Facebook continues to err in disclosing accurate ad and video measurements, while Twitter confuses analysts and consumers alike by banning, and then reinstating, the account of white nationalist leader Richard Spencer. Their standards will have a wider influence on the industry – particularly when it comes to free speech, hate speech, and the limits and freedoms of platforms to censor content.

What publishers can do in working with these platforms is multifold. First, they must consider whether they want to continue to trust and sustain social media ecosystems (that were built in large part on the appeal of their content), while competing with them for advertising and distribution. And if it is the case that Facebook is not investing in publishers the way they should and Twitter is declining in importance, then perhaps publishers need to invest more in other platforms like Snapchat and Google AMP rather than Facebook’s Instant Articles.

More likely, publishers will need to work together to push platforms like Facebook to work more closely on initiatives that are a win-win for both sides. Making sure analytics are right, ferreting out fake news and developing long-term revenues for Facebook Live would go a long way toward collaborative goals.

3. Premium content demands premium subscriptions and donations
Despite Donald Trump’s war with mainstream media, his election has helped the bottom line for news publishers and media outlets. From ProPublica to the New York Times, The Atlantic to Columbia Journalism Review and the Los Angeles Times – all have reported increased readership and interest from audiences, whether in the form of web traffic, donations or direct subscriptions.

Will this paid content boom last? The Financial Times had a similar “Brexit bump” and has largely kept most of its uptick in paid subscribers, so we will see. But it’s interesting that there’s less emphasis on eyeballs-for-eyeballs’-sake and more interest in paid premium content. Two new digital startups, The Outline (from Joshua Topolsky) and Axios (from Politico founder Jim VandeHei), have pushed quality over quantity, with manifestos against the chase for clicks. VandeHei, in particular, is pushing $10,000 subscriptions at Axios. We’ll see if people continue paying up.

4. Too much video, too many native ads
This year saw so many publishers push harder into video, and push harder toward native ads and branded content. On the video side, publishers like Mashable and BuzzFeed went all-in on video, while startups like NowThis and OZY are basically built for video. And traditional publishers like the New York Times, Time Inc. and the Wall Street Journal have invested deeply in their in-house studios to deliver branded content. Vice Media and BuzzFeed have also said that branded and sponsored content offered a substantial chunk of their 2016 revenues.

And that parallels the push by Facebook, Instagram and Twitter to make big bets on video, including live-streaming, where Facebook paid publishers to produce content. But how much is enough, and when do you get to overkill? We know that advertisers love branded content and video ads, and publishers know that their video is eminently sharable on social media, but is this what consumers really want? When you have a glut, only the best quality can survive. People will gravitate toward quality content, toward timely content, toward content with a personality. That means data and surveys will play an outsize role in which types of branded content or video – or heck, branded video – will make it in the long run.

5. Beyond the cutting edge: Bots, VR and edge tech needs to add to bottom line
Virtual reality was a media darling in 2016, but it’s still a far way off from mass consumption. More than anything, it’s going to take actual demand from the consumer, and widespread adoption, for it to become truly profitable. 2017 may not be the year we’ll see that, but the VR and AR markets are expected to grow in the long run as the hardware and techniques for investing in the tech become cheaper.

Bots, meanwhile, will become a hotter topic in the coming year, especially given Microsoft’s forthcoming Azure cloud service that will help developers build bots more easily. Yet again, consumer attention remains an important consideration. While bots may seem like a convenience, and have caught on in Asian countries, developers are going to have to work hard to convince people of their necessity in order for the tech to truly take off and become profitable.

6. The regulatory climate under Trump for M&A and privacy
An incoming Trump administration has Net neutrality advocates worried that a reversal of federal policy is likely despite Trump’s silence on the issue. His main public comment on Net neutrality, from 2014, is a tweet asserting the FCC’s move to reclassify the internet as a utility was “another top down power grab of the Obama administration.” His appointees to the FCC transition team have all been critical of current Net neutrality rules, so this could lead to yet another battle over the rules.

Although Trump promised that he would fight against the $85.4 billion AT&T/Time Warner deal, which he lambasted as “too much concentration of power in the hands of too few,” it seems he may be tiptoeing back on that line. AT&T executives, at least, seem confident the merger will pass regulatory scrutiny after meeting with Trump’s transition team. Whether this suggests more mega-mergers in media and tech likely depends on just how fickle Trump proves to be.

And when it comes to privacy, all indicators suggest 2017 and the following three years will be turbulent times. With more reports of hacking and press freedom under threat, the Signal app – which security researchers say offers the most privacy protection out of all messaging apps – has experienced a 400 percent jump in daily downloads since November 8.

Industry-Research | Video

Buying, renting videos by title is not making the leap to digital

“All-access” subscription services are displacing spending on individual movies. According to a study by GfK, the desire to seek out and purchase content purposefully is giving way to a subscription mindset in a digital world. With so much content now available at will via online and subscription video services, ownership and renting of individual titles is becoming increasingly rare.

However, the report, offered as part of GfK’s The Home Technology Monitor™, shows that many consumers continue to prize their DVDs and other physical media, with their “Director’s Cuts,” audio commentaries, and other special features. They find that members of this viewer segment are less likely to add to their video libraries with intangible digital copies, suggesting that marketers need to be more proactive in understanding and reaching out to videophiles.

According to the study, less than half (46%) of consumers say they have ever purchased or rented a digital-only copy of a TV program or movie, compared with 86% who have ever bought or rented a DVD or Blu-ray disc, and 78% for VHS tapes. Among “digital-never” consumers – those who have never bought or rented a digital program or movie – 70% have bought or rented a DVD or Blu-ray disc, and 68% have done the same with a VHS tape.

In the study, at least two thirds of “digital nevers” mentioned the availability of an SVOD service as an important reason for not buying digital copies of individual titles. Key consumer concerns about digital-only formats include difficulty of use, inability to access all content across all devices, and need for an Internet connection to view.

Among those who do rent digital movies, 33% do so monthly, compared with a 60% frequency for those who rented VHS or disc movies in the past. Not only are consumers reporting fewer overall digital transactions, but also less frequency among those who are buying digital video.

The study also shows that, even though 37% of respondents had purchased DVD or Blu-ray discs that included access to a digital-only version of the video, two-thirds of these buyers have never activated the digital content – mostly because they have “no need” for it or are just “not interested.”

GfK’s report, “Physical versus Digital Video: A Tale of Three Media,” is based on interviews with 1,006 consumers on GfK’s KnowledgePanel®, which combines the capabilities of web-based interviewing with robust probability-based samples.

prosconsDV

Industry-Research | Revenue

MECLABS study points to major opportunity for online news subscriptions

A recent study on the viability of digital newspaper subscriptions delivered mixed signals for a news industry that’s still struggling to adapt its business model to the web.

The study by MECLABS Institute found that 41% of adult news consumers (aged 25 and older with household incomes greater than $40k) are willing, to some degree, to consider purchasing a digital news subscription. That still amounts to a minority of all news consumers, but Daniel Burstein, director of editorial content at MECLABS, says 41% is a big enough number to drive future revenue growth.

“In some ways it’s disheartening to see that over half say no, but overall our takeaway is, ‘Hey, there’s a pretty big opportunity out there,’” Burstein said. “Forty-one percent isn’t a minority so small that you can’t build a business on it.”

Digital subscriptions and pay walls have produced uneven results over the years, but many media critics agree that they’ll need to be the centerpiece of the industry’s business model going forward, especially if online ad-blockers become even more common.

The big challenge now is figuring out how to best implement pay walls so that they maximize subscription revenue without sacrificing too many pageviews. Here are three insights from the MECLABS report and from my conversation with Burstein.

1. Media Companies Can Learn a Lot from Apple
Like news, music was once a product that consumers could expect to access for free, thanks to the rise of services like Napster in the late ’90s. But unlike with news, music consumers have since been convinced to start paying for content again — a pivot evident in the success of subscription-model music services such as Spotify Premium and Pandora One.

Burstein says this transition didn’t happen by accident. Rather, he credits Apple for designing appealing products like the iPod, lowering point-of-sale friction with iTunes, and, perhaps most importantly, aggressively advertising the value of its products to consumers. “Apple told the story of why their product was compelling and why people should start buying something that they’d been downloading for free,” Burstein said. “With digital subscriptions, a lot of newspapers take it for granted that customers understand why they should subscribe.”

One promising sign is that consumers already appear to understand the value of news in general. According to the MECLABS report, 71%of respondents said they would consider paying for a print news product (compared to 41% for digital). To close that gap, Burstein says news companies need to better communicate the unique and specific value of their digital products.

“The numbers show that there’s a value proposition in what newspapers offer,” Burstein said. “The question is how to present that value proposition so that audiences really understand what they’re getting from a digital subscription.”

2. The Boston Globe is Proving the Value of Data
The study uses the Boston Globe’s pay wall model as an example of digital subscriptions done right. The Globe currently has about 65,000 digital-only subscribers, and when the newspaper increased digital subscription prices by 74% last year, very few customers cancelled their subscriptions.

“It wasn’t just luck,” Burstein said. “Peter [Doucette, vice president of consumer sales and marketing] conducts a lot of testing to learn about his customers, and he really looks at the data. He saw that once people have been subscribers for a set amount of time, they tend to become far less sensitive to price.”

Like many newspapers, the Boston Globe has adopted a “metered pay wall” that allows consumers to access a certain number of free articles each month before being required to subscribe. But the Globe has done more than many other companies to refine that pay wall through user testing and data. For example, in one experiment outlined in the study, the Globe tested two different pay wall tactics: in one model, consumers received a notification when they’d reached their tenth and final free article of the month. In the other, they received no courtesy notification and instead were prompted to subscribe only after clicking on their 11th article. As it turned out, consumers in the latter scenario were more likely to subscribe.

“By removing the notification, they removed the consumer’s rationing instinct,” Burstein said. “Customers would go through and use the product, and then they’d hit that pay wall faster and be more likely to subscribe. A big takeaway is the importance of testing with consumers to see what works.”

3. Content is Still King
As important as marketing and data analytics are to building a profitable news product, Burstein says companies like the Boston Globe offer an even more critical lesson: Successful business models still hinge on great content.

“One of the key points Peter made to me is that you have to optimize the product,” Burstein said. “You have to invest in good journalism, which the Boston Globe has done.”

But while the Globe and its “Spotlight” team (the paper’s investigative reporting unit that was the subject of the Oscar-winning film) have maintained their commitment to rich enterprise reporting, not all daily metropolitan papers can say the same. The strategy-du-jour for many legacy news operations has been to make deep staffing cuts and to embrace shorter, less nuanced content online. It’s an approach that might work well enough for advertising-centric business models, in which clicks are king. But if the goal is to encourage consumers to pay for news online, Burstein says it’s a losing strategy.

“It’s not a sustainable business model,” he said. “You can’t just keep making the product worse and hope it will sell better.”

Ben DeJarnette is the associate editor at MediaShift. He is also a freelance contributor for Pacific Standard, InvestigateWest, Men’s Journal, Runner’s World, Oregon Quarterly and others. He’s on Twitter @BenDJduck.

mediashift logo squareThis was originally posted on MediaShift, the premier destination for insight and analysis at the intersection of media and technology. Follow MediaShift on Twitter @mediashiftorg, or check them out on Facebook and subscribe to their email newsletters.

Industry-Research

OTT Subscriptions on Track to Quadruple by 2019

New data from Juniper Research shows that subscriptions from over-the-top (OTT) TV providers such as Netflix and Amazon Prime will generate $31.6 billion by 2019, up from just under $8 billion in 2014. According to Juniper’s report Mobile & Online TV & Video: OTT, IPTV & Connected Markets 2015-2019, continued growth in the established markets of West Europe and North America, along with the emergence of key OTT players in the Far East and Asia Pacific, will bring a surge in the uptake of OTT subscriptions over the next four years.

Key OTT findings from Juniper’s research include:

The Growing Trend for Online Video

  • This behavior originated from the trend for DTV given that online video does not conform to a schedule and Internet TV and online video services often see less advertising within the show compared to shows on traditional TV. Consumers are also easily able to share online videos via social networking sites or email, which has been a key driver in the proliferation of such a service.

Subscription OTT

  • Global subscription revenues from OTT services will approach $32 billion in 2019, compared to just under $8 billion estimated in 2014. Continued growth in the established markets of West Europe and North America, along with the introduction of key OTT players in Far East & China and Rest of Asia Pacific, will bring a surge in uptake of OTT subscriptions over the next 4 years.

 OTT providers at the forefront of 4K delivery

  • As of March 2015, some content is available in the online space, most notably from Amazon Instant Video, who have around 30 movies available in 4K, as well as several of their original TV series. Netflix also provide some of their original shows such as House of Cards and Marco Polo in 4K. Netflix had been providing 4K content to all subscribers since April 2014, but in October of the same year it announced that it would charge those subscribers who wanted to enjoy their 4K service a higher fee. It is now the company’s most expensive service tier at $11.99 per month and requires users to sign up for a ‘family’ plan that allows the simultaneous stream of up to 4 programs.
  • Pay-TV incumbents see bundled packages as the way forward
  • One of the biggest threats to the traditional TV industry, is ‘cord-cutting’- consumers cancelling their satellite or cable TV services in favour of cheaper deals from streaming companies such as Netflix and Hulu.
  • Many broadband service providers now offer quad-play packages, which add mobile to the current triple-play system, making for an even more appealing package. In February 2015, the UK triple-play provider BT purchased mobile network EE for £12.5 billion ($20.2 billion) with deal expected to be finalised in March 2016. With the addition of EE, BT will now be able to offer quad-play packages.
  • However, the emergence of services such as Sling TV, offering a cheaper OTT alternative to cable and satellite subscriptions while providing a range of quality entertainment channels, may serve to disrupt this model.

In addition to the full research, Juniper has also published the whitepaper, OTT ~ A Threat Networks Can’t Shake Off.

Total Subscription OTT Revenues (%) Split by 8 Key Regions 2019: $31.6 Billion
Total Subscription OTT Revenues (%) Split by 8 Key Regions 2019: $31.6 Billion

 

Total Subscription OTT Revenues (%) Split by 8 Key Regions 2019: $31.6 Billion

Source: Juniper Research

 

 

 

Innovation | Revenue

Q&A with Rob Grimshaw, Managing Director, FT.com on Subscription Model Success

This Q&A is part of OPA’s “Three on Three” series where we ask three industry executives the same three questions on a topic to uncover actionable insights. Today’s Three on Three is with Rob Grimshaw who is the Financial Times Board member responsible for the commercial development of the FT’s B2C digital business and product portfolio.

Rob Grimshaw HeadshotQ: When conceiving of a subscription-based model, initiative or product, where should you begin strategically?

A: I think the key things are: First, think about what is unique and different about your product. What are people going to come to you for, as a publisher, that they won’t go to anybody else for? Perhaps it is a particular columnist or topic that few other people do. Identify something that differentiates you in the marketplace and that’s how you’ll approach it from a content point of view.

Second, take advantage of the flexibility that the web environment offers. You don’t have to put up a gigantic blank door on the site that says “pay to enter”. The web offers many ways to do these things: You can build sampling in, you can use these freemium models. Many publishers find that once the paywalls are in, you don’t see advertising suffer at all, which has been our experience.

Thirdly, look to third parties that can help with the task of building your subscription offering. It can be quite challenging technically, certainly more difficult than running a free access site. There is an ecosystem of third party providers that can help you with these projects and help you shortcut some of the processes to get something out to market more quickly.

And one last bit of strategic advice is to consider the wider benefits of having a subscription model and how to take advantage of these. Subscriptions create a direct relationship with your audience. You learn so much about them including demographics, onsite behavior and other information that can be very powerful from a marketing and advertising point of view.

Q: Please describe one of your subscription-based initiatives and the way in which you feel it is particularly innovative.

A: We’ve done many at FT.com. A recent one was fastFT, a feature we launched earlier this year, in May. fastFT is what I would call the FT’s intelligent first response to the news. It provides a continuous stream of content, managed by a team of eight journalists based around the world—in London, New York and Hong Kong—so they can maintain the output 24 hours a day. The goal was to boost engagement on FT.com.

Engagement is absolutely critical to the success of subscription models. We see very clearly that people whose usage of the site drops off are far more likely to cancel and, of course, those who don’t use it in the first place don’t subscribe: a simple equation there.

When we were thinking about increasing engagement, we factored in how competitive the web environment is. We need to communicate to our subscribers that they’ll never miss anything on FT.com so they aren’t tempted to look for information on other sites. This product marked a radical departure for the FT including changes to our newsroom culture and changes to the editorial process. With fastFT, the emphasis on speed-to-page without sacrificing accuracy, authority and all things that make the FT great.

I think that this product offers an excellent example of the commercial needs of the business being creatively translated to a product.

Interestingly, we’ve seen that over half of users come through mobile devices and a third of subscribers who visit fastFT stay longer than 10 minutes on the site.

Q: What advice would you give in terms of approaching subscription models creatively?

A: I would give two tips:

The first one is to look outside of the boundaries of the publishing industry. Think about it: The news publishing experience with pay models and online retail, which is what this is, is relatively new. There are others who have been in this game much longer. You can gain a lot of inspiration by looking at or talking to people from the online retail industry and others pioneering the space. Look at the gaming model and the way they’ve set up things to get you to make in-app purchases. They’ve developed brilliant ways to ease payment and even make you feel like you aren’t paying anything.

The second thing I suggest is to test, test, test. We are in a world where there are a multitude of multivariate testing tools available. These tools allow you to test different page designs and sign-up forms against each other live on line. The insight you gain from those processes is tremendous. Often what you discover can be counter intuitive. The data helps you understand what is really happening and design better offerings as a result.

In his role as Managing Director, FT.com, Rob Grimshaw is the Financial Times Board member responsible for the commercial development of the FT’s B2C digital business and product portfolio.

Note: This Q&A is part of OPA’s “Three on Three” series where we ask three industry executives the same three questions on a topic to uncover actionable insights.

Also in this series:

Q&A with Michael Crosby, Chief Operating Officer, The Deal on Subscription Model Success

Q&A with Interview with Sarah McConville, Vice President of Marketing, Harvard Business Review Group

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