Publishers are keen to get consumers to become subscribers. The problem? Consumers are reluctant.
Most news organizations have focused their revenue efforts on launching subscription services in order to acquire users. These companies use paywalls and a free, ad-supported business model as a funnel for subscribers. And because publishers have experienced strong adoption among users of their subscription services, that's pushed them to continue to invest there.
Sounds great, so what's wrong? This publisher-focused strategy overlooks the needs of users and falsely assumes that most users will become subscribers, according to Paygo Media. This company is offering a new, pay-as-you-go solution based on micropayments in which consumers pay a few cents for an article.
Why users resist subscriptions
Even though consumers will readily pay for other subscriptions (from monthly beauty boxes to video streaming services), they have adopted alternatives for accessing the news.
- Most users aren't subscribers. On average, Americans are more likely to subscribe to news services (20%) than the rest of the western world (11%). Still, 80% of Americans don't subscribe at all and of those that do, 66% subscribe to only one Publication. so publishers shouldn't expect to dramatically increase the total market of potential subscribers.
- Subscription concentration. When users do subscribe to publications, they gravitate to the big three: The New York Times, The Washington Post, and The Wall Street Journal. Combined, these three publications reap in 50% of total subscription revenue.
- Only a fraction of active users subscribe. Being an active user of a website isn't enough. Research shows that 2% to 8% of users who hit a paywall go on to subscribe, and only a fraction of the users navigating to the website even hit the paywall at all (because they read free articles). This means publishers are economically exposed to a very small share of their total audience, usually less than 2% of their monthly active users are subscribers, and keeping them happy leads to a narrowing of the content scope and an echo-chamber of opinions. The New York Times, one of the most efficient Publishers in terms of subscriptions, has over 305 Million monthly active users but only ~7.5 Million subscribers or 2.4%.
Consumers are the most valuable asset to publishers
The most valuable asset to publishers is consumers and yet, a subscription-based model has created a market failure. Users clearly are motivated to consume the content (as evidenced by their visit to the website), but cannot gain access unless they subscribe (something most will never do). This dynamic creates a mismatch in expectations including:
- Distractions on news websites. In an attempt to acquire more subscribers, news websites now feature pop-ups, pull downs, paywalls, offers, discounts, and registration pages. All of these tools are destructive to the user experience. And a better user experience behind the paywall does not help since most consumers never get there.
- Pricing may be too high. Subscription prices don’t take into account the realities of what the user experiences. For example, a $30/month subscription needs to provide a lot of value. As users consume less and feel financially stressed, they will inevitably ask if they’re getting enough value based on how many articles they’re reading and the cost.
- Short-term offers. As Abraham Lincoln famously said: “You can fool some of the people some of the time but not all of the people all of the time.” In an attempt to acquire users who are less engaged, publishers sharply discount subscriptions with offers, for an initial period, counting on users to “forget” the subscription and keep charging them.
- Difficulty to unsubscribe. Publishers discourage users from unsubscribing, by offering churning users more deep discounts. Users are accustomed to feeling “scammed” by a variety of services and if the focus is on “deception” rather than user value, these short-term offers could result in more churn and brand damage.
Why are publishers pursuing a subscription model?
Publishers face a difficult choice because advertising revenue isn’t enough, while subscriptions deliver the business need and are growing exceptionally fast. In conversations with Paygo Media, a pay-as-you-go micropayments service, many publishers recall their initial foray into a subscription model was surprisingly positive, “outstripping our projections.” However, this often proves to be a temporary phase.
The subscription spectrum
Subscribing to a publication makes sense for people who want to consume digital content like a paper newspaper. They can open an app, read the content cover to cover, and pay the monthly bill. These users are the most loyal to a publisher and consume the most content, putting them at the top of the demand curve. These users easily convert to a subscription since the product is a perfect fit.
However, even with the most loyal users onboard, publishers need to attract less active users who aren’t as loyal to the brand or use it as frequently. These consumers require a lot more discounts, incentives, offers, paywalls, notifications, and emails to get them to subscribe. And still, many of them won’t do so no matter what the publisher does.
Rather, these people are frustrated with the heavy-handed marketing initiatives. And the further down the demand curve they are, the less likely a user is to convert -- and the harder publishers need to work at marketing tactics that negatively impact the website experience for most users.
Finally, there are digital natives who consume their content based on shared links, social networks, and recommendations. These people are the least likely to commit to a long-term subscription because they just want to read the article their friend shared.
The pay-as-you-go solution for publishers
Publishers need to focus on the needs of users and the value they derive from access to high-quality journalism. Simply put: Not everyone is a good fit for a subscription. Instead, publishers will be well served by focusing on the 90%-plus of users who want to consume content -- but without the commitment of a subscription.
Paygo Media wants to bridge this gap. By offering users another payment option -- a pay-as-you-go model -- readers can access the specific article they want. And that experience is coupled with a frictionless solution that’s available across a plethora of publications. Paygo believes this user-first mentality will drive long-term value for participating publishers.
In fact, Paygo user testing and modeling shows that many more users' needs will be met, and at a higher price without the commitment of a subscription. Publishers can dramatically increase revenue (when compared with an advertising-supported model alone), while building a base of happy users, and broadening access to high-quality journalism.
Finally, by granting access to users who can get full access to particular pieces of content at a relatively low price, publishers will also benefit. That’s because users can read the story and learn more about the publication, which could ultimately lead to better engagement and future subscriptions, as well.159