Decades of ‘Free’ News Has Publishers Scrambling to Find Revenue

After decades of giving news away for free, trying to convince consumers to spend $5 on a monthly subscription is no easy feat. Even if many of us hardly blink at the notion of paying $5 or more a day for a cup of coffee.
But with traffic no longer guaranteeing hordes of visitors to websites and the subsequent flourish of advertising dollars, many publishers are being forced to turn to alternatives. Among the best quality revenue options are subscriptions, also known as recurring revenue.
But implementing a subscription plan may not be so straightforward.
How much is too much to charge? How much is too little? How often should readers be charged, monthly, quarterly or annually? When should a subscription be introduced? How should a paywall be implemented, statically or dynamically? How overwhelmed are consumers at this point with the mountains of subscriptions they are paying for from news to streaming to meal kits? And even if they are tired of being nickeled and dimed for every single service, can media really afford not to be targeting recurring revenue?
“You have to decide what it is that your audience will value, build that thing, and then think about what an appropriate expression of that value is, what is the right price to sell it at?” Douglas McCabe, chief executive officer and director of publishing and tech at researcher Enders, told AMO. It’s about the depth of the relationship the newsroom has with its readers. “The richer that relationship is actually, the more valuable the product will be that they create, and the more they’re going to be able to charge for it.”
That means knowing who you are writing for and engaging them enough that they will find a lifetime of value with your product. Acquiring consumers is getting ever harder and more expensive, so the sooner you can convert and retain them into subscribers, the better off you’ll be. It’s a 180 from the past decade-plus of being a publisher, and a necessary pivot if media companies are to thrive into the next decades.
AMO spoke to several subscription model experts about the best options out there.
Michael Silberman from Piano
Media did itself no favors when it generally kicked off its web presence by offering the news for free, creating an expectation that journalism shouldn’t come with a price.
“For years we told people that websites, media, websites are free, right? Media has sort of put itself into this low price category,” Silberman, executive vice president of media strategy at Piano, a platform that helps businesses understand customer behavior.
So what’s the right price for media?
“If you price too high, then you’re going to lose a lot of potential customers, because you’re going to go over whatever that sort of optimal perceived price is, and so significantly decrease your volume. But if you price too low, you’re going to also leave some money on the table,” Silberman said.
Pricing research and testing can help determine a price sensitivity curve for a particular product. For example, subjects are asked what price is so expensive that they wouldn’t buy it; what price is still expensive but they’d be willing to buy it; what would be a bargain price, making it a good deal; and what would be too low a price, making them think that the product wasn’t very good because it was so cheap—like $1 all you can eat sushi would make most people wary.
The price that tends to stick is the “expensive but would buy” category, which tends to be $50 to $100 a year for most consumer media clients, Silberman said.
Another consideration for publishers is that annual subscriptions tend to be over one and a half times more valuable than a monthly subscription over three years based on median retention data.
“When you sell a monthly subscription at the end of a year, you’re probably going to have between 20% and 25% of the subscribers left,” Silberman said. “It could be as high as 45% if it’s a non-trial subscription. With an annual subscription, you’re probably going to have between 60 and 70% of the subscribers left. So way more people stick around at the end of an annual subscription.”
On a monthly subscription, you have 12 chances to cancel before you get to the end of the year. For an annual subscription, you have one chance to cancel at the end of the year.
“When you’re pricing, trying to encourage as many users as possible to buy an annual subscription instead of a monthly subscription is an absolute best practice,” Silberman said. Even if you offer a 30% to 40% discount on annual pricing, you’re still going to make more money off of that annual subscriber than you would a monthly subscriber, and your chance that you’re going to retain them at the end of the year is much higher.
Matt Cronin from House of Kaizen
Media is really, really struggling to make the recurring revenue model work because it’s often unclear who they are serving.
“There’s a tension in the industry in terms of, what is the purpose of the business from a revenue perspective? Is it meant to make money off of the advertising, or is it meant to make money off of the people who consume the product?” said Cronin, founding partner, House of Kaizen, which helps publishers grow recurring revenue products.
“So many publishing businesses and news media businesses in the United States just can’t get beyond their comfort zone with regard to embracing their consumers as their priority… your audience is who you serve as a journalist, but the business of a news publisher is serving the advertiser, and they’re not thinking about their product and the way that a product company thinks about their product. They’re not thinking about their consumers as the people who consume their product. They’re not thinking about building a business to serve the needs of the consumer of their product, and that’s a huge problem. That’s why journalism is struggling, and media is struggling in the United States.”
The strategy and the structure of the business are designed for the advertising market, not a consumer product market.
Publishers are increasingly figuring out that “if you can create higher quality, customers you want to stick around longer, they’re willing to pay more for the product. You don’t have to hard paywall them and charge them $1 a week for the first six months. You can actually get them to pay the full price earlier on and value the content and value the experience earlier on.”
Michael Brunt from HBM Advisory
“I guarantee most people are not maxed out on pricing, but… We need to make sure that our subscribers are getting value from it, and we need to work out how to increase engagement in order to do that,” said Brunt, co-founder, HBM Advisory, a media consultancy.
He ranked the value of types of content as such, from least valuable to most:
- Descriptive: content telling news of what’s happened.
- Predictive: content telling people something is happening, and what might happen as a result.
- Prescriptive: content telling you what has happened and what you need to do as a result of this.
And the most valuable content includes:
- Unique content that can’t be found elsewhere.
- Content that feeds a passion (think hobby magazines).
- Content that provides proximity to expertise.
“What it really, really comes down to is engagement. And engagement is not a marketing problem, it’s a content problem,” Brunt said. “Engagement is the biggest indicator of churn level, but it’s also the biggest indicator of value people are getting from it.”
Brunt researched Economist subscribers, asking how much they thought they paid for a subscription. The answer was somewhere between £300 and £400 a year.
“I was like, ‘Damn, you pay £180,’” he said. “It’s also about value, and how much they think they’re getting from it. And people have a very little clue how much they spend on their things.”
And value rarely comes from quantity. In fact, Brunt said every publication creates too much content, and that’s in part because publishers have been trained to feed Google.
Madeleine White from The Audiencers
The way you first introduce yourself to a reader matters. Some readers might only plan to stop by once, and if blocked automatically by a paywall, they may never return. But if you have a dynamic paywall that recognizes them and gives them a few free stories before putting up a wall, you have a greater chance of turning that consumer into a loyal user.
“By giving them access to that premium article, you’re allowing them to uncover the value that you have to offer and become more engaged to then come back to your site in the future,” said White, co-founder and editor-in-chief of The Audiencers, a newsletter owned by Poool, an audience management platform. “I truly believe that dynamic models in terms of reader revenue are the future, the only kind of way to survive, because it’s a way of putting the reader first, and it also allows the publisher to adapt the model to their own specific audience.”
Data on readers—both old and new—can also help shape pricing options. For example, for more “volatile” readers, having to commit to an annual offer might be too big a commitment, so they’ll be shown a monthly offer and a deal for the first period. For more engaged readers, they’ll be shown an annual subscription.
Those small changes can double conversion rates, White said, even if they are essentially selling the same subscription plans, just differently.
Another theme that White has been hearing about is lifetime value and customer acquisition costs.
“Too many publishers are doing no priced offers for too long. So it’s like one pound for six months or something. And so then, by the time you get to the point when someone’s paying full price for anyone that can actually continue to pay afterwards, how long is it going to take for you to get back that cost of acquisition?”
Douglas McCabe, from Enders
“My starting point with all of this is publishers are absolutely terrible retailers. They have no experience of doing this stuff,” said McCabe, CEO at Enders. “They’re certainly not very experienced at working out what prices to set, how to think about discounting, how to think about segmentation, how to think about audience cohorts who might have a different perspective on value for different kinds of products, and so on.”
The internet has done a good job of “unbundling” things, creating a battery of different products that are sold individually. And some publishers are now trying to undo that. Take The New York Times. While one can still subscribe separately to cooking or sports, the Times is re-aggregating its products into a single bundle. “Most publishers have not really quite got to that point in their thinking yet.”
“The ambition around all of that is the expression of a much grander plan around how you think about disaggregation and re aggregation,” McCabe said. But “their subscription pricing is still slightly behind where it needs to be, but it’s an expression of that process playing out live in the marketplace, and gradually they will get to the point where it’s much simpler and much easier for the consumer to understand. So I don’t think they’ve got it right now, but I think they’re on a journey.”
When pricing a subscription, not enough publishers are thinking the value they provide readers before they think about pricing.
“They often jump to pricing as if, somehow it’s a preordained concept that’s kind of floating around in the ether,” McCabe said. “You have to decide what it is that your audience will value, build that thing, and then think about what an appropriate expression of that value is, what is the right price to sell it at?”
“You’re seeing very extreme price points in the market. The Times of London is charging for about 30 pounds a month and doing actually rather well, whereas other products have set much lower price points and aren’t getting nearly as successful take up,” McCabe said. “This is to do with the confidence with which publishers can market their products and define exactly what that value is for the audience that’s prepared to pay for it.”
Niche and local publishers can lean into the community that is going to value it and build that relationship—and ultimately extract the right value from it.
“Without getting that kind of community aspect absolutely right, those companies are at risk of relying on lower price points that are effectively dictated by products and services that are nothing to do with the product they’re creating, and that’s not a good place to be.”