Nieman Foundation at Harvard
Is local news worth a dollar a day?
That’s the fascinating question The Boston Globe is now posing to its local readers. It’s a query that should resonate among the press around North America and Europe as well.
Ninety-nine cents has become the golden price of digital media. Ninety-nine cent trial offers are everywhere you look, and $7.99 to $9.99 a month will you everything from Hulu to Netflix to Spotify.
Now the Globe offers a simple proposition: If you want unlimited, cross-platform digital access to our news report, pay a dollar a day.
This isn’t just about pricing. It’s a strategy with several moving parts, building on the foundation of sufficient unique content. The company has gotten better at learning, gaining the courage to price on the fundamentals of analytics and their interpretation.
At 99 cents, the price point breaks new ground for non-national U.S. newspaper sites, whose monthly digital-only pricing averages just under $10 a month — or about 30 cents a day. This is a tripling of what we see elsewhere. It’s also a print-like rate — one that clearly values the content, rather than discounting for the cheaper delivery of digital.
Most importantly, in Boston, it’s working.
That it’s the Globe testing the idea is important. The Globe now sells about 65,000 digital-only subscriptions, which makes it the leader among the regional press in the U.S.
If the Globe’s repricing of digital subscriptions continues to prove itself out, we may well have a new model for reader revenue in the digital age. Given the awful financial straits of the industry, it can’t arrive too soon.
“We’re trying to re-engineer our whole business in terms of offline efficiencies and cost restructuring, and this is a big piece of it in terms of heading us down that path to being a robust digital subscription business in the long-term,” Peter Doucette, the Globe’s vice president for consumer sales and marketing, told me recently.
The Globe had averaged only 57 cents a day, or a little more than $200 a year, per user in digital subscription revenue before the dollar-a-day pricing kicked in. So the new price adds about $160 a year per susbcriber. That kind of math is one building block toward a mainly digital, mainly reader-supported future.
This is a game of ARPU, or average revenue per user (or subscriber, in this case). Increasing ARPU is, I believe, the key to building the next generation of the business. “Our average revenue is up 40 percent,” says Doucette.
The Globe’s analytics tell it that once digital-only readers reach the 13th month of subscription, they’re unlikely to cancel. It’s at that golden point that they see the price increase to 99 cents a day. New subscribers pay 99 cents for the first month. Then, in their first year, the price goes to $3.99 per week, or $15.96 every four weeks. At that thirteen-month point, it’s 99 cents a day.
The Globe has largely moved through a year of that pricing, and is encouraged by the results. “We have migrated the entire base of subscribers that have previously reached their one-year anniversary,” Doucette says. “We are now in the phase of graduating subscribers as they reach their one-year anniversary, and we manage these cohorts on a weekly basis.
“We do see a slightly higher churn rate for subscribers paying 99 cents a day, but only nominally so.” Doucette doesn’t specify a churn — or cancellation — rate, but we can figure it’s in the 5-percent-plus range.
If churn doesn’t go up much when you nearly double the price, what do we make of that? The experience confirms the highly aggressive print pricing publishers have put into place in the last four years: Highly engaged readers will pay more for a good news product than we had ever guessed.
Reader revenue’s share of the newspaper industry’s overall revenue is on the rise everywhere. Across the U.S., reader revenue averages somewhere between 30 and 35 percent of total revenues. The ever-downward spiral of print ad revenue, of course, drives a part of that shift. But U.S. dailies have also been able to grow year-over-year circulation, or reader revenue, by two to four percentage points a year over the past several years — at least through 2013, when data is last available.
Even those few points of increased revenue have been hugely important, mitigating the high-single digit losses on the ad side. Even more importantly, every publisher will tell you she feels more confident about the staying power of reader revenue than ad revenue over the next several years.
The Globe is at the front of the daily pack. It’s priced up both print and digital revenue for a longer time than its peers. “We defined that path many years ago, and we’ve been consistent on it,” explains Doucette.
Call it the New Math of Paywalls. More than 55 percent of U.S. dailies have put up paywalls since The New York Times’ 2011 launch, but their experience hasn’t paralleled the nation’s leading general newspaper.
First, we can acknowledge the local reality. The top regional newspaper in the country can count only about 7 percent of the Times’ 1 million digital subscribers. That teaches us that in the digital era, we value national/global news more highly than local news. By its nature, local news is less dramatic, less an item of conversation, and less commanding of our attention. That doesn’t diminish its importance — but it does diminish, so far, its economic value. The Globe, then, is trying to re-establish that economic value among a big enough share of the local citizenry.
What metrics is the Globe looking at? When the Times first announced its plans in 2010, I suggested that if it converted 3 percent of its U.S. monthly unique visitors, it would have a success on its hands. In the years since, it had pushed over 2 percent, though it’s now something less than that. (Why the drop? The Times’ unique visitor counts have gone through the roof in the past couple of years, as smartphone access has multiplied casual, social-propelled readers. The denominator is growing faster than the numerator.) At the same time, even high achievers like the Globe can convert only about 0.5 percent of total uniques. The Times converts three times or better than the best regional papers.
But conversion of uniques is now too broad a measure of this trade. Rather, the question has become: What percentage of the most engaged readers will subscribe? After all, only those regularly reading a news brand are likely to pay for it.
By that measure, figure somewhere between 4 and 10 percent of the most engaged may pay, according to those I talk to among both publishers and those companies oriented around paywall execution.
At the Star Tribune, the country’s second-highest achieving regional newspaper company — 48,000 digital-only subs — six percent of its “engaged” readers subscribe. Publisher Mike Klingensmith says 36,000 are full-priced subscribers, who have been moved from $1.99 a week to $2.99 a week, and will go further up from there soon. (Another 12,000 Sunday print subscribers pay a small upgrade-to-digital access fee.)
It’s quite clear that one key to success with digital subs is as old as newspapers themselves: the more high-quality and unique content is offered, the more likely people are to pay.
As we approach 2016, raising prices is only one of the new approaches to reader revenue we’ll see. You’ll be hearing more about “dynamic metering” and “price discrimination,” says Matt Lindsay, head of Mather Economics, which works with hundreds of newspaper titles on optimizing circulation revenue.
In tests now underway in several markets,
we are changing the level of the meter for different content sections, and that is driven in part by the ad value of the inventory in that section, but also by the propensity for different audience groups to subscribe. You can be more aggressive that way. Instead of having across the board 10 articles, you can have three articles in one section and five in another, and 10 in a third and so on.
Price discrimination — charging different groups of readers different prices for the same content — is also getting a tryout; it has been used, quietly, by newspaper companies for years in selling print subscriptions.
Trevor Kaufman, CEO of the now merged Piano Media and Tinypass, also sees much new testing coming next year. He expects publishers’ overall take to improve as various niche tests move into the marketplace.
“We’re seeing an average monthly price of $9.80 across all of Piano,” he told me, when I asked how the Globe’s $30 a month price point compared.
Let’s return to the question: Is local news, delivered digitally, worth a dollar a day?
The Boston Globe believes it is, and it’s apparently proving out the point. The question now: To how many people is it worth a dollar a day? If it tops out at fewer than 100,000, that will be disappointing. If it reaches more than 200,000, it will have built a successful model absolutely parallel to the Times’ national/global success.
A model, though, is by definition something others can follow. Can other newspapers see this strategy work?
That’s the big question here, and let’s just take a top pass at it for now. During the two-year tenure of owner John Henry, the Globe has indeed stabilized. While it has seen buyouts, it’s also seen lots of reinvestment, both in its core and its niche businesses, like the new Stat and Crux. The Globe, under editor Brian McGrory’s direction, produces a high volume of high-quality content each day.
That content production is the price of admission into the dollar-a-day world. Given unending cutting of staff, how many newspapers still produce enough local content to toggle that little switch in consumers’ brains: Yes, this is worth a buck a day?
Beyond that gating question, there are plenty others. How much do publishers really know about their audiences — do they have the analytics tools to pick them apart? How good are their digital products, especially their smartphone ones? Are they using best-practice messaging and marketing techniques?
Digital investor and former Wall Street Journal publisher Gordon Crovitz, a founder of paywall tech pioneer Press+ (which was later bought by Piano Media), points to the wide range of reader revenue results across newspapers. That’s driven, he says, by uneven execution: “It’s too big a gap to be a just a reflection of the product.” The conclusion: Publishers must better build on a set of best practices if they’re going to really build reader revenue.
We’ll see how quickly, and how much, the Globe can add to its 65,000 number. In the meantime, though, company strategies that bet on — and build infrastructure to serve — a reader revenue-centric business may be the only ones likely to succeed in the new world.
I had one more question for Peter Doucette: Do you wish — in retrospect — that you had raised prices earlier?
“That’s a tough one,” he told me. “It’s hard to have a crystal ball. We had studied our subscription pricing over the course of a year a couple of years back, and the conclusion was that we had the revenue maximizing price point at $3.99 per week. And we are always trying to find the optimal balance between product vs. value.
“I guess what I would say is that markets and consumers evolve, and this current approach seems to work well for us now, but we will continue to experiment until we find a sustainable business model.”
Given the many vagaries of news publishing, and the profound multiple transitions in motion — print to digital, desktop to smartphone, display digital to branded content, destination to distributed content — we can’t even describe what “sustainable” will look like yet.
One number, though, we should note as a benchmark: 56 percent. That’s the share of the Globe’s overall revenue that comes from readers. (Tellingly, the Star Tribune is also above-average here, at 45 percent.) As reader revenue reaches more than 50 percent and stretches toward 60 percent, the world of sustainability begins to come into view.
