I attended some great conferences and parties in Toronto and Vancouver this past June; conferences are a good time for reflection and to learn something new. In Vancouver, I learned about a site called “Creative Commons” (http://creativecommons.org) that protects a writer’s digital distribution rights through licenses. I attended an entertaining seminar, “What it really takes to get Paid for Digital Content” at Magnet in Toronto, presented by Kevin McKean, VP/Editorial Director Consumer Reports. This seminar is the inspiration of this month’s posting. Paid Digital Content – Creating scarcity in cyberspace – Part One – B2C, part two will be on the B2B market, and will be published this fall.
[I will like to congratulate Nathalie Cuerrier from the Canadian Geographic as our second quarter winner of our Kindle Fire Tablet Contest sponsored by Godengo+ Texterity. We will be giving one out every quarter this year and the next draw will be September 30, 2012. If you have already entered you will be included in the next draw. If you have not, you can ENTER HERE.]
Today, the digital landscape is a ubiquitous, infinite source of free content. It is a market where 'Supply is greater than demand'. How do publishers break through the clutter in cyberspace and create value in this environment?
Value is created in any industry based on scarcity. How do publishers create scarcity for their content? Scarcity is created when you restrict access to the content and you can do this with a paid subscription. There are a variety of paid models to think about – website pay wall (website login), metered website (free sample articles), digital magazine (Zinio, Texterity), magazine app (Apple, Google, Amazon) and all you can eat monthly subscriptions (NetFlix).
The experience of Consumer Reports in the USA, with the pay wall model, suggests that there is a healthy appetite for paid digital magazine content. People are willing to pay for their “expert advice" through their product recommendations, comparative ratings and individual test reports for comparison. They have succeeded in generating 3.3 million paid subscribers for their website content and it took them 14 years to get to this industry leading milestone. CR did not totally lock down the website; there is still some free stuff like consumer news, general buying advice and product videos.
Digital subscribers are 40% of the total audience of 8.3 million with print subscribers totaling 4 million and other products 1 million. CR charges $30 per year for an online subscription and $29 for a print magazine. If you buy both you can get approximately a 40% discount off the second one so a print + digital sub is a little over $40/yr.
Here is what Kevin McKean had to say about their success and the outlook ahead for publishers:
“It used to be that publishers could only charge for content that was exclusive and totally unique. The Product Ratings at Consumer Reports are a good example — you can only get them at CR, and CR has been able to build up 3.3 million paying online subscribers as a result.
What’s new today is that publishers are starting to be able to charge for news content, mainly via the so-called ‘metered’ model. But that’s a game changer, since news has become such a commodity on the Web. It means that publishers who produce *better* news — like the New York Times — can open up a subscription revenue stream that few have had before.”
19 New Brunswick Newspapers go to a pay wall
The pay wall model is being adopted for newspapers in Canada in New Brunswick. The 19 newspapers owned by the Irving Family in the province have gone to a pay wall model at the beginning of 2012. They are selling subscriptions for $19.95/mo with unlimited access to all 19 publications, with a Print (6 day home delivery) + Digital bundle for $16.95/month. The print + digital bundle is $3 cheaper than just the digital and is a strategy newspapers are using to drive print sales and enhance their lucrative flyer distribution network.
There is no free content available on the website and it is a hard pay wall and traffic to the site may suffer. This strategy hinges on the monopoly status of Irving newspapers in the province as the only game in town for residents of New Brunswick. Perhaps, this is the strategy behind Warren Buffett’s purchasing of local newspapers to create an all you can eat regional news subscription service.
One of the risks of a pay wall is the drop in traffic to the website and corresponding lower advertising revenue. Some of the early lessons learned when The Times of London launched their website pay wall in July 2010, they saw a 42% drop in traffic (3.1 million to 1.78), with 1 in 5 readers willing to pay for online content. Paid readers were more engaged as they consumed 42% more content than the free reader. It was reported that as of Oct 2011 The Times had 111,036 paid subscribers. The Times has some free content available and is a soft pay wall ie. the meter model.
On the tablet front, the Online Publishing Association has just released a survey on June 12 – “A Portrait of Today’s Tablet User” and provides a snapshot of mobile buying habits. The research suggests that magazines apps offer a solid digital revenue opportunity. The survey showed that magazine apps were the #1 paid app with 10% of online purchases. Digital consumption habits show 31% of tablet users read magazines (#8), while watching video is #1 (54%). Paid apps account for 23% of all tablet apps downloaded in the past 12 months, with 72% of users buying an app. The users spent on average $359 in online purchases through the tablet in a year. Below are some more interesting facts on reading and purchase habits on the tablet (click graphs to expand).
But do you have magazine content that people will pay for? The CR example I feel is an extreme end of the value proposition. While news was thought as a free commodity, people are willing to pay for in-depth news reporting as the New York Times experience suggests, as they sold 324,000 subs 7 months after it was launched. Kevin McKean closed out his talk with these words of wisdom: “Ultimately, the best content will WIN”.
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