Dominic Young, a media commentator and founder of Axate Systems, made the case in this week’s INMA Webinar for what the news media industry can learn from the streaming industry — both in terms of things to emulate and things to avoid.
“We’ve all seen the runaway success of some of the big streaming platforms,” Young told INMA members. “We’ve looked jealously at them and wondered how we could pull off the same trick.”
The comparison is relevant because subscription is the core consumer-revenue business model for streaming services, and that’s also the way the news media industry has been pivoting for a while. Just as streaming services have seen extraordinary success in the last decade or so, news media companies have seen increasing numbers of subscribers.
In the cases where the subscription model has worked at scale — cases like The New York Times, The Economist, The Times — it’s been “completely transformative,” he said.
But, taken at an industry level, Young said streaming services are doing much better than news media at attracting subscribers. It’s been difficult to attract a mass audience to news media in the way subscription video on demand (SVOD) does. For instance, a 2021 survey in the United Kingdom showed that while 66% of respondents pay for SVOD, only 8% pay for news.
The recent news that Netflix had “only” added 2.5 million new subscribers thus far in 2022 (which made the share price tumble) “reflects something that’s familiar to many in the news industry,” Young said. “With subscription models, growth eventually starts to slow.”
3 takeaways from streaming services
There are a few ways streaming services have handled this issue that are lessons for the news media industry:
1. Price increases: When Netflix raises its price, many users don’t even notice. Price increases are effective when they work, but Young said they’re extremely difficult to do because subscribers often won’t tolerate the price increase. Young even shared an anecdote of one media company that asked its paywall vendor to raise the price and the vendor said they didn’t know how to do that — they had never been asked to.
2. Diversification: Offering a cheaper, possibly ad-supported version of your product can be effective. Disney+ and Hulu, for instance, both have ad-supported options for a lower price. Some media companies have also adopted this model, with newspapers like the Financial Times, The Economist, and The Times offering smartphone-only versions and The New York Times offering a subscription to only its games. These are niche products based on the main product. And as long as it doesn’t cannibalise your core subscribers, this works well.
3. Discounts: Encouraging new users to sign up with heavy discounts for long introductory periods is the most common tactic Young sees news media companies using. If you can encourage people to form a habit around your product, Young said, “the lifetime value of that subscriber outweighs any loss from the heavily discounted introductory price.” Even this can be challenging, however, especially if the jump from the low starting price to the regular price is particularly dramatic.
Plan for the plateau
Defining growth only in terms of subscribers and not in terms of revenue can be dangerous because “your profits can drop as you’re spending money to attract new subscribers,” Young said. He encourages publishers to “plan for the plateau” that’s inevitable with any subscription strategy.
“This means that, along with thinking about how to retain your existing customer base, you’re also thinking about how to expand it beyond the core group of subscribers — because they will eventually run out.”
Media companies ask subscribers to maneuver three barriers to access their product:
- Agree to pay for the product.
- Complete multiple forms to register, set up payment, etc.
- Make the commitment to pay now and continue to pay.
Each one of these barriers knocks out a portion of the potential subscriber pool, Young said. This is especially true since most people are making a spontaneous decision to read a news story — putting too many barriers in the way of a spontaneous action like that will potentially get rid of most of them.
One idea Young mentioned is to reduce the commitment level while maintaining the price, since “the need to continue paying — and the difficulty in canceling subscriptions — is very off-putting to people.”
Look at who has been left behind
The numbers from the 2021 study in the U.K. can be looked at another way, Young said. “If only 8% of the people in the U.K. pay for news, that means 92% are potential customers.”
While big news media companies like The New York Times or Times of London might focus primarily on a smaller group of relatively affluent readers for their subscriptions, the paid news market is much bigger than that.
“The vast majority of the market is untapped. And, collectively, we already talk to all of them.”
Collaboration is key
Young believes there’s an opportunity for news publishers to try things that streaming services can’t, and his vision includes collaboration.
Before the Internet, Young said, we didn’t force people to walk into a different shop for each news source. With newsstands, “we didn’t have to agree with one another, but we all wanted to be available on the newsstand — to share access to the consumers.”
This kind of “soft” collaboration, as Young calls it, is as-yet unexplored. It means giving every user access to every product “without all these barriers and commitments” balanced by giving every publisher access to every user.
This is “challenging to the orthodoxy of the newsroom today,” Young acknowledged, “where people talk about ‘owning’ users instead of sharing them.”
If, however, we can find a way to make this kind of “soft” collaboration work, Young believes we can take advantage of our “greatest collective asset: our network of consumers” who, collectively, “all interact with the news in some way every single day.” This network is bigger than what companies like Netflix or Facebook have spent a fortune trying to acquire, and the news media industry already has it “because we’re an essential part of society.
“This kind of network is only dreamed of by Silicon Valley mega-companies, yet we haven’t been able to take full advantage of it. This is my challenge for the news industry,” although it means “we need to abandon certain ideas that have become deeply embedded” in the industry.
A challenge to the news industry
We don’t need to “own” users or restrict their choices to succeed, Young said. If your focus is on “owning” users, revenue opportunities are limited. When subscription-based, a company is asking users to make a commitment most of them don’t want to make. “It’s not that they don’t want your product,” Young said, “it’s that they don’t like the price or the commitment.”
Instead, he said, “we can be more successful if we act the way users behave rather than asking them to behave the way we want them to.” The consumption of news is more similar to buying a coffee than it is to paying for a service like Netflix, in that it’s usually a more spontaneous action, he said.
We can, for instance, link revenue to consumption — how often users return to your site and how much time they spend using the product. Then the market isn’t capped by anything in particular and opportunities increase for the news industry and readers alike. The products themselves can improve, as does reader satisfaction. When readers are able to make a choice to pay for something when they think the value is worth it and the price is right, then payment isn’t seen as punishment.
“In a situation where a casual, uncommitted payment is forming a large part of people’s interactions with the news, that will lead quite quickly to product innovation and a rapidly evolving approach to putting the right product out there and encouraging readers to stay within a media network that continues to offer more and more value.”
Young’s optimistic belief is that “the whole market is addressable” as paying customers, and that the “news media can redefine the model of what success means when it comes to media on the Internet by operating as we always have — as a diverse network of brands competing for the attention of users.”
That’s if we can get the formula right, however.
Getting that formula right involves collaboration, shared infrastructure, and an open market. Young said this means “unifying around things that are mutually beneficial, having an open market where we’re not trying to limit what people can do within it.”
While the streaming industry has demonstrated that great success is possible, it has also shown that even the greatest success has limits. But, Young said, “we can break through.”
When huge players dominate the markets and effectively lock everyone else out (the kind of success Silicon Valley has told us is inevitable with networks) the huge players do incredibly well — but they also limit the market. They limit the opportunity for others to enter the market, but they also limit the choices for consumers. Young thinks this results in a smaller market overall.
“My challenge to the news industry is to establish and prove that a network approach to publishing and to monetising publishing will get us past what we see to be the barriers right now and will move us into a new era which is a bigger, more thriving sector — which, by the way, can extend well beyond news.”