The Hindu shares 7 fundamentals of a successful digital subscription business
Conference Blog | 25 August 2020
The Hindu has been one of the earliest adapters to the digital subscription business in India and has, in a short time, been able to pivot its digital business to the subscription-led business model from the advertising-based business model.
On Tuesday, INMA members attended a Webinar presented by Pradeep Gairola, vice president and business head of digital for The Hindu Group. Gairola shared his experiences getting the Hindu’s digital subscription business off the ground, managing the business with first-mover disadvantages, and leading it to a level that shows a promising journey ahead.
The Hindu Group first put a paywall around its flagship brand, The Hindu, in February 2019. At that time, Gairola said, the team could not find much advice on how and where to start building the paywall. Most publishers in India have not moved to a digital subscription model, and so The Hindu Group started the journey as pioneers in the market.
Gairola outlined seven fundamentals The Hindu learned were vital for a successful digital subscription business, acknowledging these are based on his company’s journey and may not be applicable to everyone.
“News is a commodity no one is going to pay for,” Gairola said. “If we want readers to pay, we need to create some unique content.” Beliefs such as this created doubt within the team as it began the process of building a digital subscription paywall.
This premise that people won’t pay for a commodity that is available for free is a fallacy, Gairola concluded. He cited the example of water, which has been widely free of cost until recent decades when it was bottled and sold — becoming a multi-billion dollar industry. It wasn’t just the water people were paying for; it was the added advantages such as purity and portability.
“We need to remember that unlike water, our news products were never free. We were valued by our readers to pay for [our news] for hundreds of years.”
In the move from print, for which people paid, to digital, Gairola said consumers have been spoiled in the last 25 years by receiving online news for free. But it’s time for news publishers to change that.
Publishers fall into a bad habit of binary thinking about digital news, he said: Either everyone pays or no one pays. The reality is a digital news publisher only needs a small percentage of paid digital subscribers to succeed. For example, The New York Times has had a paywall for nine years, and still less than 3% of its Web site users pay for a digital subscription.
The time is ripe now for creating a reader revenue model in India, based on several factors, Gairola said:
- People are starved for time.
- Society is more affluent.
- Paywalls are increasingly successful in other parts of the world.
- Customers care about getting credible news.
- There has been a year-over-year increase in the percentage of readers worldwide who are willing to pay for news.
- There are huge challenges to building a brand new, digital-only brand (as opposed to existing publishers transforming into digital brands).
“All we need is a leap of faith,” Gairola said.
2. Optimise overall revenue
When The Hindu began preparing to launch its digital subscription model, the first question the team asked themselves was, “What is at risk?” They identified two main factors at risk:
- Audience reach.
- Ad revenue.
They decided they would not care only about subscription revenue, but rather would focus on optimising it in conjunction with other revenue, such as advertising.
“We chose to start with a soft paywall,” Gairola said. Between the launch of that in February 2019 and September 2019, they saw a steady increase in subscriptions with no adverse effects on reach or the ad business.
At this point, they were ready for the next stage, which was to move to a metered paywall in October 2019. Readers reacted enthusiastically, and in the first month the metered Hindu paywall resulted in an increase of 80% in subscription revenue over the previous month.
However, the company also saw an immediate impact on search traffic, losing out on 20%. The traffic decline resulted in a large loss of programmatic ad revenue, and the overall digital revenue for October 2019 declined by around 15% from September. It took several months to completely recover from this and begin to grow the overall revenue.
“In the last few months, this patience has paid off,” Gairola said. “We have witnessed a steady increase in our subscription revenue and overall digital revenue.”
The current share of digital subscription revenue to overall digital revenue is now more than 50%.
“Patience is very critical to this journey,” Gairola added.
3. Right price
With 30 million unique monthly users, if each user paid only one rupee for monthly digital access, the revenue would be massive. However, Gairola said he is not aware of any publisher in the world that has been able to scale a business with micro-pricing.
“Pricing is an extremely critical decision. Our experience has shown that if we price the product low, we may very well be making compromises on the future of the product.”
Pricing must be done with the aim of building a viable business.
In April 2018, The Hindu Briefcase app was launched, priced at approximately US$1.33 per year. The idea was to start with a low price and then increase it later; however, when they increased the price to US$2, they lost subscribers. They lowered the price to US$0.66, but the price point was too low to sustain the product, which ended up shutting down in June 2019.
“What we learned from this experiment is that price is not as related to our news as we had thought,” Gairola said.
This lesson was in mind as the team formulated the pricing for a Hindu digital subscription. They conducted reader research, and finally decided to price it at US$16 annually. They also were committed to never charging a lower price for the digital product than they did for the print newspaper.
“Remember, paying subscribers are less forgiving,” Gairola said. They expect a news publisher to deliver speed, look and feel, and convenience.
4. Technology strategy
This is the second most important factor for success in digital subscriptions, after journalism, Gairola said.
He admitted The Hindu was not prepared, from a tech standpoint, to offer a digital product. “Our new subscribers paid not because of us, but in spite of us. I often wonder what our journey would have been if we were tech-prepared for readers.”
However, the team had decided to be fast rather than to be perfect, and move forward on the journey.
“We approached technology tactically and not strategically,” Gairola said. “We created lots of islands of tech solutions, which found it hard to speak to each other and messed up the user journey and experience. The need is to look at technology as a strategy and see various tools as instruments which come together to create a great hub.”
The problem is not that there is a dearth of technology solutions — the problem is that there are too many. This makes selecting the right tech solutions challenging and overwhelming.
In addition to marketing technology, a successful strategy also needs other tech pieces such as advertising, content, social, e-commerce, data, and management.
“The most important technology you need to invest in is speed of access,” Gairola said. Other important tech factors include:
- Governance, compliance, and privacy.
- Data and insights.
“Given the complex nature of tech decisions and abundance of choices, we strongly recommend that you first decide on your approach to technology,” Gairola advised. “Whatever you decide will have a large impact on your journey.”
5. Imagine small as big
The previous first four fundamentals had to do with starting the journey. The last three have to do with managing the business once it’s off the ground.
Most digital news subscribers access the product on mobile; in India, more than 80% of users consume news on mobile. However, most legacy newspaper publishers still create their content for print first, then adapt it for desktop and then mobile. This is the completely wrong approach, Gairola said, and dramatically compromises the experience of mobile readers.
Instead, publishers should first optimise their product for smart phones, then the desktop Web site, and then the curated newspaper.
Another important consideration is apps. While only 5% of The Hindu users consume the product through the app, those users consume more page views than those who access via the Web site. Gairola believes app users are likely to contribute to a higher share of subscription revenue in the near future and that apps offer an amazing opportunity for subscription revenue, with people spending more than 88% of their mobile time on apps, and are loyal and more engaged users.
The Hindu plans to launch apps for all of its products and migrate users to them, and Gairola recommended other publishers invest in them.
“The moment a consumer gives you a piece of her expensive and very personal real estate on her mobile phone, she acknowledges an interest in you. Cultivate this interest to engagement, and soon you will have a loyal user. Loyal users not only pay for usage, but are your great brand ambassadors.”
6. Failure isn’t a bad word
The Hindu conducted A/B testing on several different potential offer wordings to customers. Though the offers that showed better results were successful with potential customers at first, they failed to return the same results later on.
“We’ve tried to develop the process of asking why with everything we do,” Gairola said, adding that it’s the most important question to ask. The result is that they’ve embarked on an amazing journey of change, which will increase the user experience and the company’s success.
“Outside-in perspectives can be shocking, but ultimately good for the business. Keep looking for them. We have tried to develop a culture of experimentation.”
If they succeed in one out of ten experiments, they consider that a great success, he said. Nothing is considered a “failure” — it is either a success, or a cost of learning.
“Without those investments, we could not have launched our subscription business,” he added.
By accepting that failure isn’t a bad word, Gairola said The Hindu team has learned several very important things.
- Nothing works for a long time.
- What has worked in the past may not work in the future. And what has failed in the past may succeed in the future.
- “Free” is a great word for promotion, but anything that is given absolutely free rarely works. Behind every free offer there should be very well-thought reasoning.
- The most important lesson is that it’s actually less risky to run a large number of experiments than a small number.
7. Your journalism matters
Subscription is a business that is built on the foundation of good journalism.
“During the first months of COVID-19, we took some initiatives that enhanced free access for our readers,” Gairola said. “However, that also started affecting our subscription revenue.”
The Hindu decided to actively appeal to its readers, offering COVID news for free but asking the users to pay if they had the ability to do so.
“The result was that thousands of readers came forward and subscribed,” Gairola said.
Four out of the top five reasons people subscribe to news have to do with journalism:
- Funding good journalism.
- Packaging/story selection.
- Specific journalists.
“We legacy brands have a great position in terms of the position that we hold in the minds of our users,” Gairola said. “We all stand for something. The more sharpened this position is, the better the reader will connect, and our ability to charge.”
In The Hindu’s case, that position is known for its editorials and opinion pieces: “We do a great job of explaining the story behind the story.”
Journalism helps to define the relationship with readers, and publishers should be asking:
- Who is your audience?
- What position do you have in your audience’s mind?
- What role do you play in their lives?
Quality journalism is better than huge amounts of content, Gairola said. In-depth journalism with specialisation sees better ROI, and the depth of stories is more important than the number and the width of coverage.
“In our own experience frontline in publishing, just four stories a day is quite encouraging, Though we have just started our [digital] subscription, our acceptance among subscribers is very satisfying.”
The success of specialised publishers such as Politico, Athletic, and Inside Higher Education demonstrates that niche content performs very well. Gairola said the days of the general reporter are over, and journalists need to specialise now more than ever before in digital publishing.
“The best part of digital is the world has plenty [of room] for every player here. Geography that earlier placed constraints is no longer relevant. In India, we are blessed with a huge population. Even if a publication caters to a very small segment, it could build a viable economy. In India, niche is a must.”
Banner image courtesy of Monoar Rahman Rony from Pixabay.