The majority of today’s readers buy only one news subscription. Many fear this leads to a “winner-takes-all” dynamic in which only large national or global brands such as The New York Times or The Athletic can thrive.
Thus these big players enjoy a cycle: The more subscribers they have, the more journalists they hire, and the more content they offer to readers.
Meanwhile other publishers — especially local and regional news brands — are struggling to catch up and often slowly suffocate, as they lack the oxygen to grow. Local publishers search for new ways to compete in this marketplace.
On Wednesday, INMA held a Readers First Meet-Up in which Researcher-in-Residence Grzegorz Piechota and guest speakers led members through a discussion on the winner-takes-all dynamics in news subscription space and initiatives by smaller publishers to compete.
Across the world’s market dynamics, a great share of reader attention is held by large news publishers such as BBC News and the Daily Mail in the U.K., and The New York Times and The Wall Street Journal in the United States, Piechota said. Digital subscription sales are also largely concentrated within these big players.
There are many reasons for this. Product leaders have huge brand awareness that draws readers en masse to their Web sites — which, in turn, provides them with extensive amounts of data that leads to better content and product, more revenue, and drives expansion.
Many of these brand leaders obtain high numbers of readers outside their home countries. The Athletic, for instance, recently expanded into the U.K. Piechota calculated a business case for its U.K. edition: an average subscriber lifetime value of US$136.
The Athletic’s subscription business model helps the company outspend competitors and disrupt sports news publishing in the U.K. With a projected revenue of US$13.6 million from its first 100,000 U.K. customers in the first three years, less a cost of US$9.4 million, Piechota estimated a profit of US$4.2 million from those 100,000 subscribers acquired in 2019.
“This is going to happen in other markets,” Piechota said, adding The Athletic plans to expand into Germany next. While COVID-19 has slowed this growth somewhat, it hasn’t slowed the growth of other publishers such as The New York Times or The Wall Street Journal.
So the question is: What should smaller or local/regional publishers do to compete with this?
With 2.4 million daily readers across all platforms, Amedia has 650,000 subscribers and a 51% digital share in Norway.
“What we have done for the last six, seven, eight years is we have built a network of local sites all across Norway,” said Pål Nedregotten, executive vice president of Amedia. These all share a common infrastructure, data strategy, editorial and business development, production flow, and product development.
To give an example of this common product development, Nedregotten mentioned Amedia’s Direktesport site. The team has made a joint effort in creating a common upsell product across the networks.
“In Norwegian, it’s called +alt, which is ‘plus everything’,” he explained.
Direktesport offers livestreamed sports with exclusive rights from all over the country. In 2019, it livestreamed a total of 5,000 sports matches and events, up from 3,000 in 2018. The upsell product is not possible without harnessing the network, and content on the vertical is exclusive to newspaper subscribers.
“This is a huge effort in Norway, and it started out really small with a good, solid idea that we’ve been able to scale over time,” Nedregotten said. “It’s been a major success for us. It’s an all-access upsell package. It’s really a very simple concept, where you get access to all 79 newspapers for a small monthly premium.”
This also allows Amedia to serve editorial content from all over Norway to readers in a personalised manner, which has been a significant driver of subscription sales. After transitioning +alt from a free trial to a paid service in May, the service has exceeded Amedia’s goals and usage remains high.
A few challenges still need to be solved, include pricing strategy and potential cannibalisation from other products, Nedregotten said: “These two examples are showing off what you can do when you utilise the strength of your network and when you have a common development platform and common resources, common data and common insights.”
Dallas Morning News, United States
Although The Dallas Morning News doesn’t have the common development platform Amedia has, the company still wants to build that type of network effect, explained Chief Product Officer Mike Orren.
The company has tried to leverage things like trade associations and local media consortium (LMC) to act as that central focal point to get 90-plus media companies to collaborate successfully, Orren said. This consortium has primarily been known as a negotiator between these media outlets and vendors.
“We’re now going beyond that and, for the first time, trying to build a product through the LMC for the benefit of the members,” Orren said.
With competition in online sports growing, the LMC convened to build this collaborative product with the vertical of sports, calling it The Matchup.
“The question became, what could we do as a disparate group of companies to compete in that marketplace?”
The team worked with FTI Consulting to build the business model. “The key thing here is that if you take just the sports-consuming audience of our members, we’re looking at 78 million uniques, which puts us third only to ESPN and Yahoo Sports in terms of sports audience,” Orren said.
Fifteen product leaders in the LMC helped define the concept, and Google News Initiative provided the initial funding. The Matchup has two distinct products: a content-sharing model and a national sports site.
Orren outlined several things that the company pledges to the members:
- The benefits go to the member companies, not to The Matchup.
- Both paid (mainly newspapers) and free/registration (mainly broadcast) publishers would have paths to participation.
- Simplicity will require flexibility.
- Competitors will not appear side-by-side in the local market implementations.
- There would be a minimal commitment and effort on the members’ parts until value was demonstrated.
There are two phases to The Matchup.
- Phase 1: Content share model. This shares LMC member content via The Matchup widget with central curation. Users will visit more often and spend more time on the site, and members will capture more first-party data and subscribers. Widget revenue goes to support The Matchup, and publishers keep the AMP revenue.
- Phase 2: National site model. This provides the hottest matchups of the week and “best of” locally produced content. Audience members will access it only through subscription or membership of a member publisher. SEO authority remains with the publisher, as well as the consumer relationship.
The consortium believes The Matchup will work because it has a wealth of content that doesn’t have a cost to the network for using, Orren said: “We’ve got a big reach, there’s no cost to members to participate, there’s not a lot of risk, and the LMC acting as the owner at the centre of it keeps it from turning into a one-owner show.”
He also acknowledged that several factors exist that could kill the initiative, and that execution would be key. As the team rolled it out, a key challenge was people wanting to get deep into the details of how it would work. “But we’ve got to be nimble as a start-up and not necessarily work out every detail with everyone.”
Though The Matchup is not intended to be a money-maker, it still has to be treated like a business.
Scroll, United States
Tony Haile, chief executive officer of Scroll, recently wrote a story in the Columbia Journalism Review, highlighting his position that news publishers are not really going far enough in their collaborations to compete with the big players.
“I think one of the core things that we have to start with is this notion that for most consumers of subscriptions, there is one slot,” Haile said.
He started by taking a look at the German market. The overwhelming majority of people — 70% — only have one news subscription. “If you are trying to attract a candidate for your site and they already have another subscription, your likelihood of getting them is already down by two-thirds.”
This is true even if prospects are broken down into those with the highest propensity to subscribe to multiple publications — those with high income, high levels of education, and who are extremely interested in news. The majority of those, more than 50%, still subscribe to only one news media publication. Four out of five of these subscribe to no more than two publications.
“What we have here is a situation where it seems like a zero-sum game, at least at scale, for subscriptions between news organisations,” Haile concluded. This is a concept that is often difficult for small, local publishers to get their head around. They think they are not really competing with the big players because they produce such a different offering.
Haile said that is both true and totally irrelevant. “To the consumer, what matters is there is one box they can choose to spend their money with, and they will either choose The New York Times or a local publisher, in general.”
Local publishers need to have that recognition that they are, in fact, competing with the largest behemoths for that subscription.
“You have this fundamental challenge, which is a ‘one slot’ world where the rich get richer,” Haile said. Small publishers have largely used the same playbook that a large company like The New York Times uses, but they are only following half of it. For the behemoths, it’s not just about creating their brand and their unique content. It’s about creating the sheer, massive amounts of content that command audience attention.
He shared a slide that compares the number of news subscriptions people pay for to the amount of time/attention they devote to news sites in general. These figures largely correlate.
“It’s not just about your quality of brand and your differentiation of content. It’s about capturing enough attention for your subscription to be seen as worthwhile,” Haile said. “If you are a local or regional publisher looking to compete with a behemoth, you have to be not just focusing on brand differentiation but also on that attention share.”
The bottom line: It is very difficult for smaller publishers to do on their own.
“The core of it is: How do I create enough value around my subscription to be able to increase my market and awareness?” Haile said. “And I’m OK with taking a trade-off of some ARPU if the increase in my market size and my audience is enough to offset that.”