The Consumer Trends That Destroyed Media’s Business Model
Major shifts in the way consumers spend their time and money have created a lethal competitive field for news media. Here are some facts and charts about it.
Like many, I was wrong about the subscription model for the news media. I thought that a possible scheme for subscriptions could be: one for national media, in the $12–20 a month range, another, less expensive ($5–$9/month) for local news, and the last one for specialized content, whether it is a business or a leisure publication.
I was wrong. Recent studies show that in most markets, not only is a small 10 percent slice of the readership is willing to pay for an online publication, but, on average, there is room for ONE, paid-for media subscription per consumer unit.
The migration to digital has put news content in direct competition with everything else. News, social, video-on-demand, games, are now fighting for spending allocation, and time spent.
1. How much we spend (or how Netflix eats online news)
In the United States, for the 2015–2017 period, the average income before tax rose by 5.6%. At the same time, money spent on entertainment, all forms included, grew by 12%. That’s twice the rate of the income and four times the inflation rate for the period (source: Bureau of Labor Statistics).
Now, let’s narrow this down to the video-on-demand segment (Netflix, Hulu, etc.) and consider a more recent time frame. For the period 2017–1019, while the inflation was in check at 4.5%, the spending allocated to Subscription Video-on-Demand (SVoD) jumped by 17.5%. For the top quintile of the US households, BLS data show a growth of 159 % in video streaming expenditures for the 2013–2016 period!
Of course, the trend is global. In Sweden, a well-connected country where a staggering 27 percent of people paid for online new, the distribution of spending for selected media looks like this:
Despite a record paying rate for online news, Swedes spent less than $16 a month in digital subscription and less than $8 for print media. And we are talking of a wealthy country with high media literacy.
In France, spending on SVoD has grown by 73% between 2008 and 2017, mostly driven by the loathed Netflix, even if Canal+ pioneered the genre back in 1984. But the channel’s utterly protected competitive environment has prevented both innovation and the ability to listen to the customer.
Spending on cellular plans follows an identical trend: significant in relative terms and growing way faster than inflation. Again, the top US quintile household was spending on average $1,754 in 2017, a 22% increase in four years, almost five times inflation.
For most of the above, we are talking of spending that didn’t exist fifteen or twenty years ago. Hence the terrible scissor effect experienced by the news media sector:
2. Time spent
An identical scenario unfolded for the time allocated to media consumption.
Between 2010 and 2018, the daily time reading a newspaper dropped by more than half, from 25 to 12 minutes, while the reading of magazines dwindled by 38% from 24 to 15 minutes.
Simultaneously, between 2010 and 2018, mobile usage and all of what it carries, went from 8% of minutes spent on various media (radio and TV are not shown here) to a solid one-third of media time.
Consequently, ad spending has brutally adjusted:
The chart above shows that the print’s suffering is not over. While desktop and mobile’s respective time spent and advertising dollars are now in sync, print, with still 7% of ad spending for only 3% of time spent, still has a lot to lose.
3. Conclusions (for now)
- The one-subscription per household resulting from the shift in spending arbitrage will translate into a winner-takes-all system in which a few brands will reap all. No more than five brands in each market might stay in readers’diets, and be able to maintain sizable newsrooms.
- The rest are still facing a major shrinkage. Most news outlets won’t have the resources to be exhaustive in their coverage and will have to focus on what their customers value more, like local, specialized or service-related content.
- Money and time are more than ever intertwined. A media outlet able to convince its readers that the price it asks is a mean to save their valuable time will have a powerful value proposition (that’s the pitch of The Economist, for instance).
- Days are numbered for print. Daily newspapers better get used to it and morph into stronger weeklies, distributed in a highly optimized way, coupled with highly targeted web sites and apps.
— frederic.filloux@mondaynote.com
On the same subject, you can read two other Monday Notes: “Winners and losers of the subscription frenzy” and “Mapping the Brutal Subscription Battlefield”.
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