When the price of your digital product is zero, thatâs about how much you learn about customer pricing. Now, both the pricing and the learning is on the upswing.
The pay-for-digital content revolution is now fully upon us. Five years ago, only the music business had seen much rationalization, with Appleâs iTunes having bulled ahead with its new 99-cent order. Now, movies, TV shows, newspapers, and magazines are all embracing paid digital models, charging for single copies, pay-per-views, and subscriptions. From Hulu Plus to Netflix to Next Issue Media to Ongo to Press+ to The New York Times to Google Play to Amazon to Apple to Microsoft (buying into Nook this week), the move to paid media content is profound. The imperative to charge is clear, especially as legacy news and magazines see their share of the rapidly growing digital advertising pie (with that industry growing another 20 percent this year)Â actually decline.
Yes, itâs in part a 99-cent new world order as I wrote about last week (âThe newsonomics of 99-cent mediaâ), but there are wider lessons â" some curiously counterintuitive â" to be learned in the publishing world. Letâs call it the newsonomics of Pricing 101. The lessons here, gleaned from many conversations, are not definitive ones. In fact, theyâre just pointers â" with rich âhow toâ lessons found deeper in each.
Letâs not make any mistake this week, as the Audit Bureau of CirculationâsÂ new numbersÂ rolled out and confounded most everyone. Those ABC numbers wowed some with their high percentage growth rates. Letâs keep in mind that those growth numbers come on the heels of some of the worst newspaper quarterly reports issued in awhile. Not only is print advertising in a deepening tailspin, but digital advertising growth is stalled. Take all the ABC numbers you want and tell the world, âWe have astounding reachâ â" but if the audience canât be monetized both with advertising and significant new circulation revenues, the numbers will be meaningless.
When it comes to dollars and sense, pricing matters a lot.
Letâs start with this basic principle: People wonât pay you for content if you donât ask them to. Thatâs an inside-the-industry joke, but one with too much reality to sustain much laughter. It took the industry a long time toÂ start testingÂ offers and price points, as the The Wall Street Journal and Walter Hussmanâs Arkansas Democrat-Gazette provided lone wolf examples.
The corollary to that principle? If you donât start to charge consumers â"Â Warren BuffettÂ on newspaper pricing: âYou shouldnât be giving away a product that youâre trying to sell.â â" then you canât learn how consumers respond to pricing. Once you start pricing, you can start learning, and adjust.
We can pick out at least nine emerging data points:
- 33 to 45 percent of consumers who pay for digital subscriptions click to buy before they ever run into a paywall.Â Thatâs right â" a third to a half of buyers just need to be told they will have to pay for continuing access, and theyâre sold. As economists note that price is a signal of value, consumers understand the linkage. Assign what seems to be a fair price, and some readers pay up, especially if they are exposed to a âwarningâ screen, letting them know theyâve used up of critical number of âfreeâ views. Maybe they want to avoid the bumping inconvenience â" or maybe they just acknowledge the jigâs up.
- If print readers are charged something extra for digital access, then non-print subscribersÂ are more likelyÂ to buy a digital-only sub.Â Why pay for digital access if the other guys (the print subscribers) are getting it thrown in for âfreeâ? Typically, Press+ sees a 20-percent-plus increase in signups on sites that charge print subscribers something extra. That extra may be just a third or so of the price digital-only subscribers pay (say,Â $2.95Â instead of $6.95), but it makes a difference. Consequently, Press+ says 80 to 90 percent of its sites charge print subscribers for digital access. The company now powers 323 sites and thus has more access to collective data than any other news-selling source.
- You can reverse the river, or at least channel it.Â The New York Times took a year, but figured it out righter than anyone expected. ItÂ bundled its Sunday print paperÂ (still an ad behemoth) with digital, making that package $60 or so a year cheaper than digital alone. The result, of course, is that Sunday Times home delivery is up for first time since 2006. Itâs not just NYT or the L.A. Times that have embraced Sunday/digital combos. In Minneapolis, the Star Tribune began a similar push in November. Now, of its 18,000 digital-only subscribers, 28 percent have agreed to an add on the Sunday paper, for just 30 cents a week, says CEO Mike Klingensmith (âA Twin Cities turnaround?â). So we see that consumers may well be more agnostic about platform than we thought. Given them an easy one-click way of buying even musty old print, and they will. Irony: If you hadnât charged them for digital access, you probably wouldnât have sold them on print.
- New products create new markets.Â 70 percent ofÂ The Economistâs digital subscribers are not former print subscribers,Â saysÂ Paul Rossi, managing director and executive vice president for the Americas. Thatâs surprising in one sense, but not in another. Newspaper company digital VPs will tell you that theyâre surprised to see how little overlap there is between their print audience customer bases and their digital ones. The downside here: Many print customers seem not to value digital access that much. The Star Tribune is finding a low take rate of 3 percent of its Sunday-only print subscribers willing to take its digital-access upsell. One lesson: The building of a new digital-mainly audience wonât be easy and will require new product thinking; itâs not that easy just to port over established customers.
- The all-access bundle must contain multiple consumer hooks.Â Sure, readers like to get mobile access as well as desktop and print, and maybe some video. Yet some may especially prize the special events or membership perks they are offered, as the L.A. Times is banking on (and start-ups Texas Tribune, MinnPost, and Global Post have applied outside the paywall model). Some will like the extras, like The Boston Globe telling its new 18,000 digital subscribers, as well as its print ones, that they now get âfreeâ Sunday Supper e-books (âThe newsonomics of 100 products a yearâ). Sports fanatics or business data lovers will find other niches to value â" and ones that make the whole bundle worthwhile. Archives â" and the research riches they offer â" will prove irresistible to some. In 2012, a bundle may offer a half-dozen reasons to buy, casting a wide net, with the hope that at least one shiny lure will reel in the customers. By 2013, expect âdynamic, customized offers,â targeting would-be buyers by their specific interests to be more widely in use.
- While pageviews may drop 10 to 15 percent with a paywall, unique visitors remain fairly constant.Â We see the phenomenon of those who do hit a paywall one month coming back in subsequent months, rather than fleeing forever. âIt may be the second, third, or fourth month before someone says, âI guess I am a frequent visitor here, and Iâll play,ââ says Press+âs Gordon Crovitz.
- Archives find new life.Â Archives have lived in a corner of news and magazine websites for a long time. Theyâve been used, but not highly used or highly monetized. Now, courtesy of the tablet, and a new way to charge, The Economist isÂ findingÂ that 20 percent of its single copy sales are of past issues. Readers will pay for theÂ old in new wrappers, whether back e-issues, orÂ niched ebooks. The all-access offer can be much wider than cross-platform, or multi-device. It can extend acrossÂ time, from a century of yesterdays to alerts for tomorrow.
- News media is probably underpriced.Â Take the high-end Economist. CEO Andrew Rashbass â"Â speaking to MediaGuardianâs Changing Media Summit 2012, in a recommended videoÂ â" said that a survey of its subscribers showed that a majority didnât know how much they were paying for the Economist. When pressed to guess, mostÂ over-estimatedÂ the price. At the Columbia (Missouri) Daily Tribune, an early paywall leader in the middle of America, a recent price increase toÂ $8.99Â from $7.99 has so far resulted in no material loss of subscribers. At Europeâs Piano Media, early experience in Slovakia and Slovenia is that price isnât a big factor, says Pianoâs David Brauchli. âPayment for news on the web is really more a philosophical mindset rather than economic. People who are opposed to paying will always opposed to paying and those who see the value of paying donât mind paying no matter what the price is.â That suggests pricing power. It makes sense that publishers, new to the pricing trade, have approached it gingerly. Yet the circulation revenue upside may well be substantial.
- Bundle or unbundle â" whatâs the right way?Â Mainly, we donât know yet, and the answer may be different for differing audience segments. The Economist started with print being a higher price than a separate digital sub. Then it raised the digital price to match that of print â" to assert digital value. It now offersÂ all-access: one price gets you both. Next up: You can buy either print or digital for the same price, but if you want both, youâll pay more. Itâs an evolution of testing, and so far, itâs been an upward one.
Overall, this is a revolution in more than pricing. Itâs a revolution in thinking and, really, publisher identity.
The Boston Globeâs Jeff Moriarty sums it up well, as his company aims (as has the Financial Times before it:Â âThe newsonomics of the FT as an internet retailerâ) to emulate a little digital-first company called Amazon:
I think overall publishers have to start thinking more like e-commerce companies. More like Amazon. You canât just throw up a wall or an app and expect it to just sell itself. Weâre still building that muscle here at the Globe, and some of our colleagues in the industry are even farther along. We have extensive real-time and daily analytics and are employing multivariate testing to try offers and designs to refine the experience that works best for each type of user.