Schibsted shares short-term effects of COVID-19, long-term effects of subscription strategy

By Shelley Seale

INMA

Austin, Texas, USA

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Schibsted started the latest chapter in its consumer digital subscription model in 2017, aiming to double digital revenue to reach US$100 million in 2020 — a goal it is on track to meet. 

Tor Jacobsen, senior vice president of consumer business for Schibsted, shared with INMA members a look at the company’s strategy and how it has changed over the last couple of years during a members-only Webinar on Wednesday. He also shared what Schibsted believes will be the most important drivers for the subscription market going forward and how the company plans to deal with them.

Jacobsen also touched on the impact COVID-19 is having on their strategy and business a whole: “It’s impossible to conclude after two or three weeks how long this will last — if this will be a deep recession that will leave a lot of people unemployed, or will it just boost the trends we already see? It’s too early to say.”

As a leading media company in the Nordic countries, Schibsted includes more than 20 brands in Sweden and Norway, with 1.2 million total subscriptions — 770,000 of which are digital. Schibsted saw the digital economy was booming, with the subscription model growing rapidly:

  • Subscription-based companies have grown their revenue more than 300% in the past seven years.
  • Overall, they are growing revenue about five times faster than S&P 500 and U.S. retail companies.
  • Subscription services are growing: More than seven in 10 adults subscribe to one or more services.

“Companies that are subscription-based are outperforming other companies,” Jacobsen said. “It’s an opportunity for us to really realise success.”

The subscription trend is a global one that spans many industries, from newspapers to streaming services, software, e-commerce, and home networks.

Companies from many different industries are using the subscription model with success.
Companies from many different industries are using the subscription model with success.

Schibsted’s markets in Norway and Sweden are some of the most attractive markets in terms of share of people who have paid for online news in the last year. Those figures are 34% and 27%, respectively, compared to ranges from 7% to 16% across the rest of Europe.

Schibsted goals and digital transformation journey

 

Schibsted has set a goal of reaching $100 million USD in reader revenue in 2020.
Schibsted has set a goal of reaching $100 million USD in reader revenue in 2020.

Jacobsen led Webinar attendees through the journey Schibsted has taken so far in its digital transformation:

  • 2014: The company asked themselves how it could monetise journalism. “We really thought still that advertising could save us.”
  • 2015-2017: A much more aggressive sales and volume strategy, and more data-driven. A focus on obtaining subscriptions.
  • 2018-2019: It was more about retention. “We needed to work with the churn and getting people to stay. We were much more customer focused.”
  • 2020 and onward: Where will the growth come from?

The team realised the aggressive growth they had seen in digital subscriptions during 2015-2020 couldn’t last, Jacobsen said. “It will slow down. We saw the percentage increase slowing down each year. It was starting to go from double digits to single digits, and it will flatten out after a while.”

The important thing was how to make sure the revenue would still grow.

Impact of the COVID-19        

Now that the presentation reached 2020, Jacobsen stopped to talk about the COVID-19 pandemic, which affected Schibsted’s plan in a significant way, as it has all news publishers.

“What we see now is that corona has given us an effect of extreme traffic — most of the brands doubling in traffic, most of the brands doubling in subscription sales. Also [increased] engagement on the site, and also the churn is going down.”

Schibsted brands are now seeing extreme growth again, but Jacobsen said it’s impossible to tell what effect this will have in the long term.

Four main drivers for subscription revenue growth

“If you set aside the corona for the short-term effect, we see four things for increasing the value of our product going forward,” Jacobsen said, outlining four methods Schibsted plans to use to ensure continued digital subscription growth.

Schibsted has identified four main drivers for continued digital subscription growth.
Schibsted has identified four main drivers for continued digital subscription growth.

1. Increase the value of paid products.

“There is a big job to be done here,” Jacobsen said. “Our paid product is not that special; it’s too similar to our free offer,” Jacobsen said. Paid subscribers get access to more articles, but the value is not distinct and high enough.

Schibsted began to pay attention to the value of its exclusive content. Sports and live rights are big draws for Schibsted readers. Live sports matches, car and horse racing, and other live events such as the Academy Awards offer a high-value opportunity. The data shows what works and what doesn’t.

Podcasts are another opportunity.

“We see that podcast is a huge trend,” Jacobsen said. “But the problem is we are sending them to Apple, we are sending them to Spotify, we are sending them all over the place but not to our platforms and our brands.”

Schibsted has built a market of listeners, but until now has not really capitalised on that. “What we are doing now is including [podcasts] in our subscriptions. We are testing that right now in Sweden.”

The team is also focusing on which articles should be paid or free. They are using data to identify that content which is the most likely to convert and putting it behind the paywall.

Identifying the content that is the most likely to convert to paid subscriptions, and putting those behind the paywall, is an important piece of the Schibsted strategy.
Identifying the content that is the most likely to convert to paid subscriptions, and putting those behind the paywall, is an important piece of the Schibsted strategy.

“I think we are too focused on the competitor situation,” Jacobsen said. “We think if the competitors offer the same article, we cannot charge for it. But usually that’s wrong. People want to read an article from that [specific] brand, so I think the brand is much more important than we thought.”

User experience, and adding value to that, is also important. Currently, the user experience for paid and unpaid readers is the same — the same advertising and no special features for paying subscribers.

Jacobsen mentioned Spotify as a model. Non-subscribers can listen, but they can’t choose their songs or create a playlist — and advertising interrupts every six or seven songs. The subscriber experience, on the other hand, is the complete opposite.

“It’s so much better, and when you come out of it, you’re just missing it very much. I think we need to take a lot more different steps to make the subscription experience much better than it is today,” Jacobsen said. “It’s a lot of work to be done to get there.”

Subscribers should feel that they have a far better user experience and more premium features, he added. Schibsted is currently testing this with some of its brands and users, with a focus on differentiating between paid and free products based on the readers’ needs. They are also improving their onboarding process, giving new subscribers an option to choose an editor or journalist to guide them through it.

2. Develop verticals and top-up products.

The focus is on the bundling, de-bundling, and repackaging of existing products. When Schibsted first began offering digital products, it focused on unbundling that from the print product. Now, the focus is more on bundling.

“We think the next phase will be a little bit more de-bundling or kind of re-bundling again,” Jacobsen said. “People have different needs.”

With digital, Schibsted knows what those needs are and what readers do and don’t like, through data. “It’s about taking care of the different kinds of subscribers and making sure they have the right product at the right price.”

Schibsted is increasing the value of its paid products through live rights and exclusive content.
Schibsted is increasing the value of its paid products through live rights and exclusive content.

Jacobsen gave examples of products that could be successfully bundled:

  • Sports offerings for several Schibsted brands, particularly for live sports.
  • Health and weight loss are big products in the Nordic countries. Personal training add-ons is a good offering to bundle.
  • Parenting segment also presents a good bundling product.

“We really think this is a next phase, both to be more customer-focused but also to be able to maximise the market a little bit more,” Jacobsen said.

3. Repackaging and pricing.

Until last year, the pricing focus was mostly on print. “I think what is important here is that we need to balance value creation and value capturing. We cannot just increase price without looking at the total perspective.”

In the current situation with COVID-19, this will be even more important in the coming months as people lose their jobs and economic realities hit.

“It’s really hard to increase price if you do not increase the value of the product,” Jacobsen said.

When it comes to pricing, Schibsted does a lot of testing in the marketplace and is making data-driven decisions.

Schibsted does a lot of testing to make data-driven decisions.
Schibsted does a lot of testing to make data-driven decisions.

He gave an example of a successful price increase with Bergens Tidende, the biggest regional newspaper in the Schibsted portfolio. From 2013 to January 2019, the BT digital product was priced at US$20 per month. After a lot of testing, the company changed the product in early 2019 to offer three different levels of digital subscription: A basic product at US$23, a premium product at US$28 with more features, and a family product at US$33 (allowing more users).

Tests show most people choose the middle offering, and Schibsted saw 60% of sales in the premium tier. Revenue rose with this new offering.

The company is also using market-based pricing in some products where real-time input on individual price sensitivity changes how the product is priced. This has resulted in a 26% ARPU increase.

4. Link or combine relevant subscription products.

“Schibsted has a lot more than just media companies, and what we see in our next portfolio is that we have a lot of subscription-based companies,” Jacobsen said. These include home delivery services, online education, podcasting, and doctor services.

Schibsted identified many subscription-bases services already in its portfolio, which are ripe for bundling into digital news subscriptions.
Schibsted identified many subscription-bases services already in its portfolio, which are ripe for bundling into digital news subscriptions.

“The same customer is using a lot of our brands,” he added. Yet these are all on different platforms and need to be linked better. “Maybe you should have a customer journey that maximises these possibilities.”

For example, if the data shows a certain subscriber has children, then they may be interested in some of the offerings that are geared towards children. “But we don’t combine these things smartly today.”

Customer loyalty is also a factor, and Jacobsen said rewarding loyalty with premium offerings is important.

Conclusion

“Of course we see that corona can change all of this,” Jacobsen said. “It’s offering some new challenges, but also some new opportunities and some things we should really follow very closely.”

Q&A

INMA: The virus situation has doubled Schibsted traffic, and your churn is down. How do you think it will affect things in the more long-term?

Jacobsen: That’s so hard to say. We need to look at it as a short-term consequence right now. The long-term effect is very hard to say because it’s this information need short term. But we see some medium-term effect. They need some e-learning, some online courses, some direction. It’s a situation where the world is totally strange.

INMA: Can you share what kind of podcasts you’re planning to put behind the paywall?

Jacobsen: We think some of the sports podcasts. They’re being tested behind the paywall. Things within parenting will probably be behind the paywall. I think the most important thing here is that we’ll actually go through and do the testing on how it will be done. As we see it right now, some of that will be behind the paywall.

INMA: What are the main differences between different kinds of media concerning digital subscriptions?

Jacobsen: In many ways there are some big differences. One thing for instance, with sports live rights, it’s more important for the tabloids in subscription revenue. Advertising is still the big chunk of revenue and digital subscriptions are still a smaller part, 20%-30%.

INMA: Can you share more of the strategy in print and digital bundles?

Jacobsen: We have three different products: we have digital, we have weekend that includes print and digital, and then we have complete, which is print and digital every day. All the print subscriptions also have digital access, and a lot of the print subscribers are as engaged on the Web site as the purely digital subscribers. Our print products probably will not change. We feel they are the right products to have for the future.

INMA: Do you control multi-users, as Le Monde does?

Jacobsen: We are really looking into that. Right now we have the family subscription that you can share with four people. Some of our premium plans you can share with one person. But we do not control it. We are looking into if we should be stricter on access, and have it more like Spotify.

INMA: When you are talking about new products, are they are news product-related or other things like e-commerce?

Jacobsen: Both actually. Most of it is news-related, for instance the weight loss and personal trainer product is all linked to news stories. But we have other things that are not news at all, for example, the home delivery service. It’s actually both, but most of the product still are linked to media or journalism.

INMA: Are licenses and live rights profitable?

Jacobsen: Yes, most of it is. I think for us it’s been because we are in the right layer. We are typically in a layer like 20 matches locally. We have some possibilities where we have taken a positive approach.

INMA: What is your paywall strategy specifically during this virus pandemic?

Jacobsen: All the things you need to know as a citizen are for free, of course. We have a role to play in the society to get information out for free. Behind the paywall is information more like how will this affect the economy. The editors think this is so important that everyone should have this. We choose for it to be open article now because of the situation. For us, with this crisis and also with the advertising so affected, we cannot just give away everything. That would put us in a totally impossible situation.

About Shelley Seale

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