Wednesday, February 22, 2017

The Fatal Flaw in Subscription Models

[ed. At one time I thought micro-payments might be the answer but I'm not so sure anymore. It seems any subscription service has to provide some additional 'value added' benefit, beyond the quality of its reporting. Think Amazon Prime, which besides free shipping also provides music, streaming tv and original programming. Not sure what the answer is, but if recent trends are an example I expect aggregation or consolidation among numerous news sources to be the most likely option. What that means for a blog like Duck Soup is probably eventual extinction (or a more restricted focus on topics that don't require subscription services.]

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:

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.

by Esther Kezia Harding, Media Briefing | Read more:
Image: uncredited