1507 YPC McKean Paid Content

McKean: Six New Rules for Getting Paid for Your Content Yale Publishing Course, July 2015 Slide #1 of 70

The New Rules of Paid Content

Selling digital subscriptions is harder than just slapping up a pay wall. Here’s how to do it right.

New Haven, CT July 16, 2015

Kevin McKean [email protected]


Go Taylor Swift!


“To Apple, Love Taylor”

"We don't ask you for free iPhones. Please don't ask us to provide you with our music for no compensation …”

– Swift on Tumblr June 21 (with above head) after Apple said it would not pay artists for songs streamed during Apple Music’s three-month free trial period


Apple blinked. Now, in fairness … – Taylor was defending music creators, not publishers – and we mostly represent publishers – Taylor has the clout to make things happen …

Source: IFPI Digital Music Report 2015, ifpi.org


Still, the flap left some asking …

“[T]he entire news industry … has allowed the idea of news as a no-value commodity to take hold – with a report from Syria or the Federal Reserve as interesting to advertisers as one of the 4M mentions of laundry posted on Facebook each day, or possibly less so.” – Jane Martinson writing in The Guardian’s media blog


All of you are …

Who are the Taylor Swifts of journalism?


Why • You are working in media at a time when

content* of all types is historically devalued, advertising income is shrinking, the digital ad and platform industries have separated you from your audience and the rules change daily

• Content will never have value unless you say it does – and, fortunately, more and more publishers and editors are doing just that

ӿ Content = a demeaning term adopted for its alliteration with commerce & community; here, content means journalism and other meaningful, timely, lively, accurate and smartly packaged information that speaks directly to people about their interests, needs and fears


Nearly every week you hear of another brand rolling out payment for content, including these


They’ve got plenty of company

And ordinary people routinely subscribe to digital video, news, sports, games, merchandise & more

Subs are now the fastest growing segment of music industry

Source: IFPI Digital Music Report 2015, ifpi.org


What this talk will do

• Highlight the main tools of paid digital content, how they work & when to use them

• Offer a snapshot with specific examples of how the game is played today, with the caveat that the rules keep changing

• Encourage you to rev up your existing digital subscription strategy – or get started now


An important source!

This YPC talk is always based on original reporting plus trade news & documents. But this year, it also draws heavily on an article I wrote for the just-out issue of Folio magazine – which, in contrast to my topic, is offered free to those in the industry (see foliomag.com)


Rule #1: Choose the right business models


Why “models”?

• The word is plural, not singular, because nearly every successful company uses a mix of payment models rather than one-size-fits-all

• Multiple models are needed to accommodate different content types, customers, channels, etc. – even if selling under a single brand


Harvard Business Review At HBR, visitors read five articles a month free, or 15 if they register, but tablet editions come only with a $99/month print and digital bundle (there’s also an $89 bundle without tablets)


Jim Cramer’s Real Money This title, one of The Street’s suite of paid-access-only financial newsletters, recently started letting visitors read 8 articles a month free if they register – a first for the firm Cramer co-founded in ‘96


People, EW & more Time Inc., whose sites were free, started selling a premium People sub with mobile & merchandise a year or so ago, and recently said it would put a paywall on its other titles, starting with Entertainment Weekly


The base models

• Hard paywall + subscription

• Soft paywall (inc. meter) + subscription

• One-off sales


Early “hard paywall” examples

The first paid titles all used hard paywalls – meaning you had to subscribe to see any story; the WSJ and Consumer Reports still use hard or hard-ish walls


Use a hard paywall for …

• Uniqueness: information that is exclusive, first, niche or otherwise sharply differentiated from competitors, especially free competitors

• Frequency of need: may be frequent to sporadic; one item may contain all the value a customer needs

• Purpose: must make or save your money or life • Advertising: may or may not be important to revenue • Market: Often profession-related, such as finance,

business, medicine, law (= expensable or deductible) • Examples: market-moving stock information, new

medical journal report, comparative refrigerator review, exclusive coverage of a trial or hearing


The first successful “meter” FT.com, the Web version of the UK’s premier business newspaper, was the first major content site to launched a metered paywall in the mid-2000s; by 2012, FT’s digital circulation had topped print circ


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Why meters preserve ads

Setting the paywall at 10 or 15 articles a month, a publisher saves her pageviews (= ad $$) while building new sub revenue

Pay wall set at 10 PVs/month

Typical traffic pattern at an all-free site


Use a meter for …

• Uniqueness: same information is often available elsewhere but your version has a unique quality, tone, worldview, humor, depth, savvy, truth

• Frequency of need: constant (daily or nearly); value lies in the stream, not any one particular story

• Purpose: entertain, inform, amuse, motivate, impassion, affirm, etc.

• Advertising: an important source of current revenue • Market: consumer or newsy content, including news

about a profession or business that accompanies a hard paywalled site

• Examples: news, entertainment, sports, etc.


Use one-off sales for …

• Uniqueness: information that is published infrequently and is either 1) exclusive or 2) comprehensive, reliable, highly focused and, though possible to get elsewhere (even free), takes work to do so

• Frequency of need: any (daily to rarely) • Purpose: often statistical or data source or ranking • Advertising: may or may not be currently important • Market: often profession- or business-related • Examples: annual industry compendia, premium

versions of rankings, online courses, videos of high-value events, special commemorative issues


Note that the meter and other soft paywalls are variations of the “freemium” model that is so beloved by the app & illegal narcotic industries; you offer free samples to get people hooked, then demand payment for better stuff or just more

Screen grabs from the 253rd episode of South Park, “Freemium Isn’t Free,” available on Hulu, which itself uses a freemium model to upsell people to $8/month subscriptions


What’s not on this list

• Micropayments, or any other system where people pay per article they read

• Pundits love this, but it’s a bad business model

Per-use costs force people to *think* about how much they use, so they conserve to save money (or trees or whatever); that’s why we yell at our kids to turn off lights to save pennies on electricity


Rule #2: Don’t alienate existing readers


Let’s get real

• OK, you cannot charge for content in any fashion without alienating people – we all would rather read for free

– That’s why a meter works best for news – it’s less infuriating than a hard paywall for existing readers

• But when adding a hard paywall to a formerly free site, most publishers create new forms of high-value content to justify the purchase


Slate “We had a pay wall briefly in the late 1990s that was seen as a failure because not many people signed up. That left some scars when it came time to get serious about asking readers to pay.”

– David Stern, director of product development


Slate Plus Solution: a premium site with exclusive new content – often backstories, etc. related to the main site but different from it – for $5/month or $50/year; revenue is “meaningful but not business-changing”


Politico Pro The politics-focused website has been all free since its 2007 launch by two former Washington Post reporters, but introduced this new, separate paid service in 2011


Investment vs. return

• At launch, Pro had 30 edit staffers and three verticals

• Now there are 100 people covering 14 verticals, plus 60 in sales and business

• Pro now makes up 50% of all revenue – i.e., it basically doubled what Politico earns


“If a reporter gets a document or a tip … [he/she] taps out a 250-word e-mail alert – often on a mobile phone – so the news reaches subscribers in minutes.” – Martin Kady II, Pro Editorial Director

“We didn’t want to take what was free and make it paid. We wanted to keep Politico the same while introducing new content on Pro that people would pay for.” – Roy Schwartz, Chief Revenue Officer


Lessons of alienation

• Creating new content is conceptually tough and money-, labor- & time-intensive

• Works only if the content is good, totally on-brand and serves a new & real need

– If just “more of same,” use a meter

• But if you have a free site with lots of ad revenue, and must use a hard paywall, it’s the only sure way to preserve that inventory


Rule #3: Consider group sales


Go where the money is

• Of the previous two examples, by far the largest revenue producer is Politico Pro

• That’s partly a function of their different purposes & target customers

• Slate Plus is sold to individuals for private use, whereas Politico Pro is sold to groups of professionals to help them do their jobs


Why group sales Pro’s 1,800 customers include government agencies, legislative staffs, businesses, lobbying firms, consultants and others pay who from $10K to $300+K/year – explaining why Pro has grown so fast.

The same principle is driving a shift to group sales at many professional pubs, including those covering medicine, law, finance, etc.


How it works There’s no “subscribe” button at The Deal, an M&A-focused site owned by The Street; you fill out a “prequalification” form so a sales person can call to talk about a site license


“These enterprise subscriptions are highly negotiated deals with long sales cycles. We have eight feet-on-the-street salespeople in the Americas, and six in London, who develop custom solutions for large clients, plus 10 phone reps who sell to other firms.”

– Elisabeth DeMarse, Chairman and CEO of The Street, where revenues (excluding acquisitions) are up 25% since the company began to emphasize group subscription growth in 2012

Group sales are labor-intensive


Why does this matter to me?

• Group sales work for titles that serve industries where up-to-date information is critical, there is significant money, and current sources are lacking

• But the opportunities are not always obvious.

– Would you have guessed five years ago that a broad political news site like Politico could pull it off?

• Point is, examine your titles & industry with fresh eyes for opportunity; group sales really work


Rule #4: Supercharge your customer analytics


But I have good analytics

• Granted, every publisher has some form of smart, customer-data-driven marketing – but with digital subs, the need becomes urgent

– Only when you know your subscribers on an individual basis can you sell effectively to them – and charge high CPMs to advertisers

• That’s why smart titles pubs use integrated marketing that tracks every aspect of their customers’ history & behavior to tune pitches


Harvard Business Review, for example,

tracks current and past HBR customers

plus registrants to learn their purchase

history, reading habits, webinar signups and so forth. The next step , says

Sarah McConville, VP marketing, is to add social media data “so we know if you are sharing for us.”

HBR’s marketing


Not-for-profits can do this too

The Arts tab of KQED, the SF-area public TV station, draws only a few percent of all visitors – but they donate at a higher rate than other visitors, so KQED wants regular personal contact with these people


Bring in the middleware

For the Arts section, KQED partnered with SF-based startup Eureka King to coordinate its traffic, email & marketing systems to triple email signups

Conceptual diagram by

EurekaKing.com


Remember the “funnel”? • In the classic model, marketers talk about a

subscription funnel – Lots of people see the promotion, a smaller number

click, an even smaller number choose “Buy,” an even smaller number enter their credit card, etc.

– But how many people show up at a non-profit website and donate immediately? Not many

• That’s why Tim Olson, VP for Digital Media and Education, prefers to talk about a “rainbow of engagement” that recruits KQED donors


Rainbow of engagment “The rainbow is similar to the funnel but the engagement is gradual. First, on the right, we target people at the point in their lives when they need us, we let them sample, opt into an email newsletter, maybe persuade them to attend an event. Eventually, on the far left, some will donate and a few become lifelong sustaining members. That’s the same as for the New York Times, Salon, or anybody else.”

Tim Olson, KQED


How KQED hopes to get there

Conceptual diagram by Tim Olson, KQED

This layer is not fully built yet, but would link inputs & outputs to drive engagement


Lessons of analytics

• The evolving digital ecosystem has robbed publishers of the value of their audience

– Every ad network knows your customers better than you, since they see them across thousands of sites

• But yours is the brand they know & trust

• To win, you need to exploit that advantage to forge a bond and lead visitors through a journey of engagement in which financial support (donation or subscription) is a natural part


Rule #5: Exploit the network effect


Paid content for networks

• All digital publishers cross-promote across titles, but publishers with multiple related titles have a special advantage when it comes to driving subscribers

• ALM – the top U.S. legal publisher offers an excellent example …


ALM’s network of law publications

NATIONAL & ALWAYS FREE Law Technology News Corporate Counsel NATIONAL & ALWAYS PAID Supreme Court Briefs AmLaw Litigation Daily

NATIONAL @ 5 ITEMS/MONTH American Lawyer National Law Journal REGIONAL @ 5 ITEMS/MONTH Connecticut Law Tribune New York Law Journal Texas Lawyer Delaware Biz Court Insider Asian Lawyer New Jersey Law Journal & many others

Free

Premium

Metered


Article is blacked out and 5-article policy explained

When you click on your 1st article, a pop-up explains the payment policy


What happens next

• Even if you visit a different ALM title, the system keeps track of your number of stories

– On article #3, you get a popup reminder

– On article #5 from any combination of titles, a final challenge asks you to subscribe

• Thanks to network cross-sells, digital revenue went up 85% after the first elements of this system launched in 2013


Latest: a practice-focused system

Law.com now also divides content into five “practice areas” that sell for $25/month each or $99/month for unlimited for access to all


Lessons of networks

• Sure, ALM is special and its content serves a well-paid profession

• But any publisher with a network – or even just a presence in multiple channels (mobile, video, social etc.) – can use a similar strategy to boost sales across his/her network

• The trick is getting your network to function like one, not like a series of isolated islands


Rule #6: Do it the easy way


Payment systems can be simple

• Pioneers like the FT and NYT built their own metered systems at huge cost (NYT reportedly spent $25M, WSJ over $30M)

• Some still choose custom solutions, but for most

pubs, off-the-shelf is fine


Some off-the-shelf vendors

Founded 2009; NY & London offices; recently bought by Piano; leading provider for news

Founded 2011; NY & London offices; chosen by Slate & Time Inc., among others

Founded 2011; LA-based; “hundreds” of clients

All are easy to install (typically just javascript or a server plug-in), offer multiple charging models, and handle all user interface and billing; they typically take a 10-20% revenue share


Other options

The Hearst-owned CRM provider offers a range of

paid-content options

Its XML extraction enables publishing across multiple platforms without extra production work

This one-price-covers all vendor offers an electronic newsstand in which readers pay $10 or $15 per month to read a range of titles


Lessons of payment vendors

• Choosing one is like buying shoes for a 5-year-old: anything you select will pinch in a year

• So find a solution that gives you room to grow without locking you in


Rule #7: Deliver value beyond content


Going beyond content

• One key lesson from every publisher: to sell digital subscriptions, you must offer more than just words on a virtual page.

– Slate Plus, for example, has only two exclusive stories/day – vs 50-60 on main site – but members get event discounts, special podcasts, extra prominence for their comments, etc.

– HBR just launched a “Visual Library” with graphic downloads and slide-deck versions of articles


Beyond content For wary investment banking customers, The Street offers behind-the-firewall integration so no one can snoop on what they are reading

At MIT Technology Review, subscribers get the annual sci-fi

compendium for free


Hey, anyone up for ribs? Texas Monthly’s BBQ Club offers discounts from partners & early tickets to food events, which are valuable since TM’s Annual BBQ Festival has sold out in as little as five minutes in recent years


Rule #8: Bundle to boost what’s profitable


Yes, you’ve always bundled … … but paid content gives you an extra lever to adjust to drive buyers into the mix of products that maximizes your profit and growth


NY Times pricing in July 2013 … Type Yearly cost after

intro period Comments

Web + smartphone $195

Web + tablet $260

All digital $455

Weekend + all digital $432

Daily + all digital $660

This disparity helped boost weekend subs

Core digital strategy

= includes print


NY Times pricing in July 2014 … Type Yearly cost after


NYT Opinion $78 Enables lower priced entry

NYT Now $104 (ditto)


Web + tablet $260

All digital $455

NYT Premier (+$120) More from loyal customers

Weekend + all digital $452 Raised ~5%

Daily + all digital $693 Raised ~5%


= includes print


… and today Type Yearly cost after


NYT Opinion $78

NYT Now $104 Made FREE after May 2015


Web + tablet $260

All digital $455

NYT Premier (+$120)

Weekend + all digital $479 Raised ~5%

Daily + all digital $728 Raised ~5%


The heart of the digital sub model is unchanged, so it’s probably working, but Times is going for ads or reach with NYT Now, and covering physical costs in print


Lessons of bundling

• Free content has no value to a bundle

• But once you assert that content has value, it can be used to drive business to any channel

– We just saw how NYT used it to push Sunday circ

– Paid digital subs become a perk that can help sell events, annuals, new titles, “gift subs” with renewals, and whatever else you offer

• Paid sites have value, even if few people pay


Thank you! Questions? Kevin McKean [email protected]

New Haven, CT July 16, 2015

Documents

1507 YPC McKean Paid Content