Dear Publishers, if you want my subscription dollars (or euros), here is what I expect…
A growing number of publications are switching to the subscription model. But most of them are lagging behind, with a poor user experience. Lousy execution will eventually translate into casualties.
Would you expect Netflix to charge you $13.99 a month for the first year and then jack up the price to $35 a month? No, you wouldn’t. First, the company would face a customer outcry followed by a media storm; then the churn would explode, threatening the very existence of the streaming service (not to mention the competition — HBO, Hulu — taking advantage of this stupid idea).
Would you see the same Netflix trying to lock in customers, in one-year increments, with no way out — “Sorry sir, you still have ten months to go on your subscription, and there is nothing I can do. Have a wonderful day”? Again, certainly not. It’s part of Netflix’ appeal to let people come and go as they see fit. I could go on and on: Would you see Amazon refusing a return? Quite the contrary: they give you all the means to print the return label yourself. Even the customer service of my US-based email router has a chat line available 24/7 that I never saw in the publishing sector.
These are practices of digital native companies that are client-focused. Sadly, most of digital publishers — especially legacy brands — are lagging behind.
I allocate roughly $1800 a year of my discretionary income on news-related subscriptions. They range from large publishers to niche publications related to my activities. As someone aware the value of information, I spend my money with good will, even though I’m mostly a frustrated customer.
The cost of news production is a justification for the price of the service; in-depth, value-added journalism is hugely expensive. I’m currently reading Bad Blood, John Carreyrou’s book about the Theranos scandal (also see Jean-Louis last week’s column about it). This investigation cost the Wall Street Journal well over a million dollars. Another example is The New York Times, which spends about $200 m a year for its newsroom. The cost structure of news operations is the may reason why tech giants will never invest in this business: the economics of producing quality journalism are incompatible with the quantitative approach used in tech which relies Key Performance Indicators or Objectives and Key Results. (For that matter, I’m also reading John Doerr’s book, Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs, which I’ll talk about in a future Monday Note). I had always wished that some metrics of output (I wouldn’t dare say productivity) should have been taken into account in the news operations I was involved with during my career, but KPIs and OKRs do not belong to the news business (unless you are Business Insider, where people are required to churn out a certain number of stories per day).
All right, then. Since quality news costs a bundle, let’s charge the end users, i.e., the reader and the advertiser, as we are in a two-sided market.
Over the last two years, three forces have combined to favor the subscription model: The “Trump Bump,” the growing concern about misinformation and the depletion of the digital advertising business. After years of denial, the ad is finally acknowledged as a blatant failure for the news sector, with all indicators blinking red: prices remain flat, engagement is dwindling, viewability of formats is at its lowest, fraud is rampant, users vote with their ad-blockers, Google and Facebook have sterilized the battlefield (they snatched 84% of the global ad spending last year), and as if that were not enough, the new data privacy regulation concocted by the EU’s bureaucrats will drastically reduce the performance of advertising. While a small fraction of publishers try to reinvent the ad model, the vast majority is still milking the cow, not realizing that its udders now looks like dried apricots.
The biggest concern in news economics is that, over the recent years, the quality of the service — I’m talking about execution — hasn’t improved significantly. I don’t want to go into finger pointing (it will spare me replies to unpleasant emails). But here are examples of weaknesses that should be easy to address:
— Subscription vs. advertising. I will take a radical stance, here. Publishers can’t have both ways; people paying for content should be spared advertising, period. OK, some super-premium or branded content ads could be tolerated; when Lexus releases its clever “Amazing in Motion” commercial or Apple’s “Welcome Home” Spike Jonze clip (delightful), the entertainment value makes them acceptable.
But the essential argument for excluding ads for subscribers lies in the “replacement value” of ads, based on the actual ad revenue per user. Google did some eloquent research on that matter, showing that when it comes to measuring the ad revenue per user, we are talking about a few dollars per year. In other words, just to offset the unrealized advertising revenue, even for its most loyal reader, a publisher would have to increase the monthly rate of a subscription by one dollar, maybe one and a half, in exchange of an incomparable ad-free experience.
Unfortunately, the short-term approach still prevails. Let’s take Bloomberg for instance. It just launched a subscription service for a hefty $35 a month, while showing no intention of sparing the reader from ads, including Taboola’s pollution, probably the ugliest form of promotion ever invented. This disconnect with readers, this inability to reflect the industry trends, puzzles me. Bloomberg’s subscription strategy is doomed: regular readers of the previous version will (like me) will get tired of hitting the paywall and will stick to their current business news subscriptions that offer a broader scope.
— Metered paywalls. This was long the system of choice for publishers. You are allowed to read a certain number of articles per month, then you hit the paywall. One thing is sure, a one-size-fits-all system doesn’t work well. Metered paywalls should be adjusted in accordance to the reader profile, i.e., the probability that the occasional viewer will convert into a paid-for one. There is no point in relaxing the paywall for someone coming only once a month; this person is quite unlikely to switch. On the contrary, it is relatively easy to detect a likely subscriber based on how often she hits the gate. Sounds obvious. But publishers have yet to implement adjustable paywalls.
— Subscription funnel and trial periods: you decide to try a new publication that offers a three month period at a bargain. After one month, you see a $150 charge flaring up on your credit card. Live with it, since very few publishers have decent customer service.
— Locked-in subscriptions. As I described above, if you miss the right window to terminate your subscription, you’re in for another year. Publishers don’t realize that things work differently today: like it or not, consumers expect flexibility in their expense allocations. They hate the idea of being hooked with no exit. In France, marketers from the French paid-TV network Canal+ prided themselves of their subscription management: “Even death isn’t sufficient to cancel a subscription,” as one of them told me once. Well, guess what: the former avant-garde television service is dying. Unfortunately, the hook-the-subscriber tactic remains a widespread model for the news industry. Going the other way is indeed less comforting for the finance department, but it benefits the product managers who will be kept on the edge by a customer that has a choice to stay or leave. In other words, artificially locking your subscribers for an extended period, or imposing a painful exit process, is likely to conceal a weakness in the editorial product.
— Always, unbearable technical flaws. Fact is, the most robust growth in subscription segments are from news outlets that invest the most in technology. The FT.com which will soon cross the 1 million digital subscribers mark, has been pouring a lot of money into the performances of its website and application, but also into data-driven technologies to grow its user base. The Washington Post has benefited from Jeff Bezos’ obsession with the speed and quality of the interface. The New York Times is one of the most accessible under any condition.
Unfortunately, most of the digital publications lag behind. Issues include speed, browser and device compatibility, terrible video players, signup issues (passwords asked for constantly), and all sorts of bugs. Search engines are often so terrible that it is often better to search a website using Google! Same for recommendation engines that, too often, surface irrelevant contents. The most widespread malfunctions involve ad tech. Quite often, ads are just not displayed, or they slow down the rendering of a page. That is another reason to get rid of ads for the subscriber. Above all, anyone who elects to pay 10 or 30 dollars a month for a publication deserves an excellent user experience, which is incompatible with most ad service practices.
Subscription fatigue is looming. The main growth engine — the Trump bump — will soon reach a plateau. Then publishers that offer poor service and little value added will be the first to lose customers. The biggest mistake of news publishers is their belief that the presumed uniqueness of their content is sufficient to warrant a lifetime of customer loyalty. In thinking this, they choose to ignore the current benchmarks of digital services: intuitively, customers expect nothing less than what they get with Amazon or Netflix. These are now the standard for customer satisfaction.
— frederic.filloux@mondaynote.com
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