There has been a huge shake up in the media industry in the last 10 years as the rise of the internet has disrupted the status quo and provided enormous opportunities for new entrants. But change is by no means just in the past - content consumption is increasingly taking place on mobile which is throwing up challenges when it comes to advertising rates and paid content.
Previous maxims, such as the death of print, seem to be taking longer to materialise for larger publications than initially feared. In fact, many traditional publishers have managed to reorientate their businesses and reap the rewards of an increasingly global audience. Others have staved off their previously ‘inevitable’ decline with successful paywalls and advertising strategies.
Last year we conducted a global benchmarking study looking at how economic and news publishers in 29 countries around the world were monetising their digital content. Perhaps unsurprisingly, due the difference in maturity in different countries, we found that there was no one ‘right’ approach, with a range of strategies found in most markets.
But we did find patterns depending on the maturity of the market with regards to digital device ownership and content consumption. For one, economic and news publishers in mature markets were much more likely to have paywalls. All Swedish publications we looked at had a paywall, along with around 50% of Central European and North American markets, versus 30% in Latin America and Asia/Asia-Pacific.
More mature markets were also more focused on selling digital products with a higher prevalence of digital only and digital/print bundles available to buy. Crucially, average mark ups for cross-media bundles were around 20% on the print only prices, versus discounts of around 20% for digital only products. This shows that publications have found that customers see added value in being able to access content on more platforms and they are willing to pay for this on top of their print subscriptions.
Our study didn’t assess the success of individual strategies, but what we found chimed with my own work in the area. When helping clients develop their product portfolios, profit optimal prices tended to be higher for cross-media bundles than print only, as these customers valued the digital element of the subscription. Profit optimal prices were lower for digital only products, yet usually higher than expected or what they were currently offered for. It was also profit optimal to have a print only product in the portfolio to serve those customers that simply did not value the digital products and were not willing to pay for them.
More mature markets have been forced to deal with the challenges of digital faster than those in developing markets. These patterns have emerged as customers have become more willing to pay for content online and publishers have been forced to become much better at providing the products their customers want, at the prices that will enable them to continue to survive in the digital age. These prices and products weren’t arrived at by accident – consumer research, randomised testing and some clever analytics would have played a part as the stakes become higher and every penny counts.
Increasingly I am also seeing publishers wanting to stretch their understanding of customer needs further – no longer is it sufficient to provide a set of content based products that a subset of customers will pay for. Advertising revenues of course can support this, but paywalls have also meant that a portion of this has been sacrificed.
One developing trend is publications increasing their availability on distribution platforms via revenue share models. Witness the likes of Vice, Buzzfeed and The Daily Mail on Snapchat, whose industry leading mobile cost per mille of up to $100 per mille must have been an attractive proposition! And we’ve seen the New York Times and the Guardian ceding more control to Facebook with Instant Articles, but in likelihood in anticipation of increased page views and access to Facebook’s higher advertising rates.
These publications have recognised that the needs of readers who just visit once or twice per month, mainly via social platforms, simply isn’t best served by their own paid-content models nor their slower to load websites. I wouldn’t be surprised to see more of these kinds of deals.
The other developing trend is the desire to emulate social websites and encourage customers to register their details. This results in more personalised experiences, from the articles they view, to the targeted ads they are served up. In most cases publishers are trying to develop customer lifetime value metrics with this data, in order to understand who the more profitable customers are to acquire and retain. Publishers are building better CRM systems and big data capabilities to support this.
The digital age means that publishers have been forced to adapt quickly. They’ve done this by making more of an effort to understand their customers, giving them the products they want, at the prices they want (including free), when they want them. All this as well as delivering an increasingly personalised experience. It sounds simple when stated like that, but it’s certainly been a long journey, with little space for a breather. And the journey is by no means at an end.
By Nick Zarb, Director at Simon-Kucher & Partners.
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