Hello! This is Readers First, a monthly newsletter for INMA members on reader revenue innovation. I’m Researcher-in-Residence at INMA. E-mail me at: grzegorz.piechota@inma.org or text me on our Slack channel. 

I’m hosting the next online meet-up this morning — Wednesday, February 20 — at 10 a.m. New York time or 4 p.m. Berlin time. The confirmed speakers come from Brazil, England, Sweden, and the United States. Register now. 

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1. APPLE NEWS. What if 50% from Apple is actually more than publishers get, on average, from Google?

The debate: The launch of Apple’s news subscription service is near, and publishers seem to be negotiating with the tech giant through the media. Is Apple’s 50% cut a fair share or rather an “insane” one?

In the news: Reportedly, Apple plans to launch this spring a paid tier for its News app, offering “all-you-can-read” access to articles from a variety of news and magazine brands.

• Facing slower growth in sales of hardware, Apple re-focuses on growing services, such as subscriptions to TV, news, and magazines.
• The News product will be priced around US$10 a month. Apple offered the split 50:50, in which Apple keeps 50% of revenue, and the rest goes into a pool to be divided among publishers according to the amount of time users engaged with their articles.
• The debate about whether the 50% is fair misses the point because the actual amount depends on the total revenue and the number of entitled publishers.

Sizing the opportunity: At the end of 2018, Apple News reached 85 million monthly active users. If half of them would eventually subscribe, and that would be a ratio similar to the Spotify’s free vs. paid users, it would translate into a US$5 billion business.

• By December 2018, Apple already had 360 million subscribers to its software, content, and other services, of which 120 million signed on in the past year. Apple Music alone amassed 50 million paid subscribers.
• The total active installed base of Apple devices around the world is 1.4 billion. Today, Apple News is pre-installed in Australia, the United Kingdom, and the United States.
• The News service is targeting casual readers who demonstrate no preference for any particular brand; this group of readers made up 55% of visitors to news Web sites worldwide in 2018. Currently, they use various Google products, Facebook, and others as their gateways to news (source: Chartbeat).

Dividing the pool: The pool of US$2.5 billion would be one-fifth of the ad revenue that Google shared in 2018 with all Web site publishers in its ad network.

• How many publishers will be entitled to publish in Apple News? Expect many fewer outlets than the two million sites that carry Google ads.
• Texture, a paid magazine aggregator app acquired recently by Apple and reportedly embedded into the new News app, features just 200+ magazines. How many news brands does the paid tier require? One hundred? One thousand?
• If the total number of publishers featured in a paid tier of Apple News will be no more than 1,000, the individual pay-outs could be even 300 times higher, on average, than from Google.

The worst-case scenario: The success of Apple News is not a given. The history of Apple Newsstand offers a proof: It launched with a fanfare in 2011 and expired quietly by 2015.

• If the project stands, even the publishers that had not joined it would be affected. Apple News would become a reference point regarding price, user experience, product attributes.
• If this project fails, publishers have no breakthrough in monetising casual readers, and the monetisation gap between subscribers and visitors stays as wide as it is today.
• For example, an average annual revenue per subscriber of The New York Times in 2018 was US$119 (calculation based on the company’s Q4 report). A revenue per visitor, monetised with ads, was 70 times lower or just US$1.72.
• Big publishers continue to expand their bundles aiming at casual readers with products, such as the Times’ Cooking. Small publishers are left to experiment with other pricing models, such as micropayments.

Let’s debate: Join Yasmin Namini, a digital consultant and former chief consumer officer of The New York Times, and Peter Wolodarski, editor-in-chief of Dagens Nyheter, in discussing the platform challenges on stage of the upcoming INMA Media Subscriptions Summit in Stockholm on March 21-22.

2. LESSONS FROM THE TRAVEL INDUSTRY. Before Apple launches its news subscription, update your channel management strategy 

An insight: News publishers cannot expect their Web sites and apps will satisfy all segments of readers, especially the casual ones. The key question is: How do you fit various channels in the reader revenue strategy? The travel industry offers a lesson.

Benchmarks: Many industries have been disrupted by digital upstarts. Airlines and hotels have been competing and collaborating with the online travel agencies, such as Expedia and Priceline, as well as price comparison services offered by, for example, Google and TripAdvisor.

• In 2018, 44% travellers said they used price comparison sites every time they booked accommodation; 94% did that occasionally (source: EyeForTravel).
• The key reasons to book indirectly: lower price, convenience of experience, and variety of choice.
• Last year, 15% of all hotel bookings worldwide were made via aggregators; 22% were made on a hotel Web site. The rest were offline bookings (source: Infrarata).
• Half of direct online bookings came from members of loyalty schemes run by hotels.
• The other half, although booked directly, were influenced by listings on aggregators’ sites. Majority of travellers browsed the Web before making the final decision. (It’s the so called “Billboard Effect,” described by the Cornell researchers.)

Learnings: The leading airlines and hotels have developed strategies to differentiate offers between channels. New roles have emerged such as channel and revenue managers, and their cross-functional teams have linked data analytics, marketing, and sales. 

1. Register and monitor individual reader’s engagement and profitability. This lets you adjust benefits to segments and price channels strategically. For example, hotel loyalty schemes offer perks to drive frequency and purchases via direct channels. While valued by consumers, the perks carry a low marginal cost for hotels: Internet access, a free drink, or a late check-out.
2. Differentiate direct and indirect offerings. While choosing the channel, you want readers to experience trade-offs between price, product attributes, and services. For example, customers of aggregators’ sites get lower prices but also stripped-down products, and the assortment available there is limited.
3. Consider the “Billboard Effect.” Your potential subscribers might be heavy users of news or magazine categories, and therefore they likely use content aggregators, too. Being present there, you remind them about the brand. For example, hotels manage discovery by listing selected inventories on different aggregators’ sites.
4. Invest in digital marketing. Get skilled in driving direct traffic and avoid your brands or stories being hijacked by aggregators or competitors. The online competition for search keywords is fierce. For example, airlines or hotels often defend customers by bidding for their own brands against the hijackers.
5. Invest in user experience on your sites and apps. Keep up with the readers’ rising expectations shaped by popular tech brands, such as Netflix or Apple News. (It’s the “Spillover of Expectations” phenomenon, as defined at Oxford’s Said Business School.) 

What does a consumer revenue manager do? Chat with Andiara Petterle, vice president of product and operations at Grupo RBS in Brazil, at our online meet-up on Wednesday, February 20, at 10 a.m. New York Time.

Recommended readings:

• Kelly McGuire, “Hotel Pricing in a Social World. Driving Value in the Digital Economy,” Wiley 2016.
• For the travel industry business news and insights, see Boston Hospitality Review and Skift.

3. BEHIND THE PAYWALL. E-replica of the print edition is the most popular benefit of subscription packages worldwide

Interested in a breakdown of all benefits? E-mail me: grzegorz.piechota@inma.orgor text me via our initiative’s Slack channel.

4. BUILDING HABITS: E-mail newsletters found the single most effective tool to get people to subscribe and prevent churn

Confirmed: Frequency of consuming local news is the single biggest predictor of retaining subscribers — more than the number of stories read or the time spent on a site. These are findings of the U.S. researchers from Northwestern University.

• Last year, academics crunched 13 terabytes of proprietary data from the Chicago Tribune, Indianapolis Star, and San Francisco Chronicle. Since then, they expanded their research to 12 markets in the United States.
• The U.S. study of local news broadly confirmed patterns I found myself when studying national news media across the world for the Oxford’s Reuters Institute: Content usage drives purchase. Behavioural loyalty drives usage. Preference for a direct visit drives loyalty. 

Morning reading: Last week I called Professor Edward Malthouse of the Medill School of Journalism, who led the U.S. research, to chat about the best ways to build habits. “E-mail newsletters,” he immediately answered.

• Professor Malthouse was passionate about the daily news round-ups, as they had become for some the equivalents of the morning habit of print newspaper reading.
• Background: All nationwide publishers in 33 countries that I surveyed last year were sending e-mail newsletters, and 75% publishers offered daily news round-ups.
• Indeed, publishers have been doing newsletters, Professor Malthouse continued, but they rarely have technology skills to include personalised recommendations. And these are key to success of Facebook, Netflix, and other highly engaging media ventures. 

What’s next: Professor Malthouse is designing innovative recommendation systems with multiple objectives, such as maximising both reader engagement and advertising revenue. In theory, these systems could help negotiate conflicted objectives of consumer and advertising business and run fully automated paywalls.

Learn more: Professor Malthouse is joining our online meet-up on Wednesday, February 20, at 10 a.m. New York Time. Get the details and ask a question.

5. LETTER FROM THE ROAD: How to make sense out of the engagement data in the newsroom

The insight: “In many newsrooms, data has become a digital wallpaper,” said Alan Hunter, head of digital at The Times and The Sunday Times of London, whom I visited the last week. “Dashboards show readers’ behaviours on big screens, but journalists rarely look at them as they don’t know how to use it.”

The solution: The Times and The Sunday Times digital team run a study of the content and performance of 16,000 articles to draft a new playbook for journalists: how should they write articles to engage readers more.

• A group of graduates read the articles over four months and described the attributes of journalistic craft: editorial intent, exclusivity, expertise, article type, tone, etc.
• These attributes of the articles were then cross-referenced with performance metrics, such as registration rates of new readers or page views by subscribers. 

The results: “We found readers valued what makes uniquely ‘us’ — stories that were pro-actively differentiated from the generic wire news,” said Alan.

• The best-performing stories were differentiated by expertise: These was specialist coverage by a specialist reporter or at least it quoted experts on the topic.
• News stories told with or through the people whom the news affected stood out.
• Stories explaining the world at a time of international political turmoil performed well, as opposed to coverage of crime and disasters abroad.
• Readers appreciated when the Times’ analysis or explainers challenged their assumptions or their sources of information, but they hated pieces written in a provocative tone.
• The unique take on stories or an exclusive access, such as exclusive reviews or interviews, performed well, too.

The take-away: “Good journalism is what people value. It’s so reassuring to our craft,” summed up Taneth Evans, head of audience development at the Times and The Sunday Times. She made presentations and playbooks for different departments based on the relevant stories. The research served as an ice breaker to get journalists excited about using audience data. 

Post scriptum: In 2018, subscriptions to The Times and The Sunday Times passed half a million, reaching 502,000, of which 51% were digital. 

Surprised? Sceptical? Alan Hunter will answer questions during our online meet-up on Wednesday, February 20, at 10 a.m. New York Time.

Share your story with the peers! E-mail: grzegorz.piechota@inma.org or share on Slack.

About this newsletter 

Today’s newsletter is written by Grzegorz (Greg) Piechota, Researcher-in-Residence at INMA, based in Oxford, England. Every month, I share here results of my original research, notes from visits to digital subscription leaders, reflections on talks at conferences, and my favourite readings. Previous editions are archived online: 

• No. 5: How to monetise the 98% of readers who don’t subscribe.
• No. 4: What’s wrong with subscription product managers.
• No. 3: How New York Times is disrupting magazines.
• No. 2: Driving Loyalty in the age of social networks.
• No. 1: What paywall myths and the tale of the two Posts say about reader revenue.

This newsletter is a public face of a year-long reader revenue and media subscriptions initiative by INMA, outlined here. E-mail me at grzegorz.piechota@inma.org with thoughts, suggestions, and questions. Sign up to our Slack channel.

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