Subscriptions: why now
There are at least three reasons for the rise of the subscription economy.
The first one is the rise of broadband Internet around the world, which makes it easier to build digital services for a sizable market.
The second is the rise of the access generation, millennials and post-millennials who value access over assets and see any physical possessions as unnecessary baggage. As Tien Tzuo puts it in Subscribed, these younger customers want “the ride, not the car. The milk, not the cow. The new Kanye music, not the new Kanye record.” They like convenience and personalisation, and expect companies to provide them with a reliable service. These are the customers behind the rise of Zipcar, Netflix and Spotify.
The third factor is the ability to analyze customer behaviour in real-time. “Today businesses are closer to their customers than ever before,” says John Warrillow in The Automatic Customer. “All those customer interactions are being fed into mathematical models, which are run by computers that are now capable of storing and processing billions of data points in seconds.” These interactions can create a virtuous cycle. Subscription companies can watch how their customers use their service and tweak it accordingly. There’s no need for surveys or focus groups.
A few newspapers adopted digital subscriptions in the first years of this century. Most of these efforts failed. There are many reasons why subscriptions didn’t work at the time. Payment systems were clunky. Digital advertising was still attractive for general newspapers. People weren’t used to paying for services online. Smartphones and tablets didn’t exist yet.
Things started to change after the Great Recession. The FT introduced a flexible pay model in 2007. The Times and The Sunday Times adopted a hard paywall in 2010. The New York Times launched a metered model in March 2011. In the last few years, many newspapers have followed this path in different flavours. Freemium and metered models have flourished in European countries as diverse as Finland, Germany, Italy, Poland and France.
The paper I publish today explores what news companies with reader revenue models are doing through structured interviews with 26 media executives from 15 news organisations. Some of these outlets run digital subscriptions. Others have reader revenue models with a less transactional value proposition. Most of them are based in Spain and the United Kingdom. Some are based in other European countries such as Denmark, Sweden, Italy and France.
The paper doesn’t analyze either the virtues of different pay models or the price of the offerings of every particular newspaper. Its main goal is to explain the strategies news outlets are applying to deal with the profound changes required by a subscription business in the hope that some could be used by other news organisations elsewhere.
Why Spain and the UK
Most of the news organisations featured in this paper are based in Spain and the United Kingdom. These media markets have a few things in common. Both have similar percentages of people willing to pay for news according to the Digital News Report: 10% in Spain, 9% in the UK. Newspapers operating in both countries share the blessing (also the curse) to publish its content in a global language. Unlike the Nordic countries, they don’t have the competitive advantage of a language almost no one speaks outside their market. The Internet provides them with an open field where they compete with outlets based on the other side of the Atlantic. They can pursue traffic overseas.
Spain and Britain have very different media landscapes. Tabloids and digital-only news organisations are mostly free in the United Kingdom and operate under the shadow of the BBC. Most national broadsheets and magazines, however, have been running pay models for a few years. The Financial Times, The Times and The Sunday Times operate with hard paywalls. The Telegraph runs a freemium model. The Guardian combines memberships and contributions with several subscription options. News start-up Tortoise is exploring a promising model through newsletters, sponsorships and events.
Spain is on the other side of the spectrum. Digital-born newspaper eldiario.es had more than 35,000 paying members in January 2020 and several regional newspapers are running digital subscriptions. But not a single national legacy news organisation was running a substantial pay model in July 2019. This is changing. El Mundo launched a freemium subscription model in October 2019. El País is launching a metered paywall in the first quarter of 2020. Other outlets are expected to follow suit in the next few months.
Access to the full report
Suárez, Eduardo (2020). How to build a good reader revenue model: lessons from Spain and the UK. Oxford: Reuters Institute. Oxford University.