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The core problem with paywalls and subscription payments
Let's get to the root cause of what's going on and really diagnose the problem publishers face, before we dive into what the future holds.
When it comes to monetizing online content, publishers have primarily relied on the same two tools for decades—advertising and subscription paywalls.
The push: falling ad revenues
Famously, ad revenues are steadily falling. According to the Pew Research Center, even before Covid-19, ad revenues in the US newspaper market had taken a nose dive, losing over $2 billion between 2017 and 2018 alone, a staggering 13% of total ad revenue for the US newspaper industry. Since its peak in 2005, ad revenues have been in sharp decline, with a total loss of 71% of value in the run up to 2018, and this trends continues its precipitous descent.
What happens when an industry's primary source of income takes such a huge hit? We have already witnessed the impact over the last decade:
- "Newsroom employment at U.S. newspapers dropped by nearly half (47%) between 2008 and 2018, from about 71,000 workers to 38,000."
- "Roughly a quarter (27%) of papers with an average Sunday circulation of 50,000 or more experienced layoffs in 2018. The layoffs came on top of the roughly one-third (31%) of papers in the same circulation range that experienced layoffs in 2017."
The local newspaper industry, which is so vital for accountability and transparency in government and the local, county, and state level, has been decimated.
The pandemic was the final straw, causing widespread bankruptcy filings, mergers, closures, and sell-offs for media companies. Poynter has been tracking scores of "newsroom layoffs, furloughs and closures caused by the coronavirus". Here are just a few:
- 22nd Century Media, which published community newspapers in the Chicago suburbs, went out of business.
- The Philadelphia Public Record announced it was going on hiatus on April 2.
- The Bolivar Commercial in Cleveland, Mississippi, closed at the end of April.
- The Hastings Star Gazette, a weekly in Minnesota owned by Forum Communications Company, closed.
- The Bulletin of Woodbury and Cottage Grove, a weekly in Minnesota owned by Forum Communications Company, closed.
- Lake County News Chronicle in Two Harbors Minnesota, will publish its last issue on May 22. It is owned by Forum Communications Company.
- The Merkel (Texas) Mail closed. It started in 1890 and was locally owned.
- Mineral Wells Index in Mineral Wells, Texas closed. It is owned by CNHI.
- Gannett closed the Edinburg Review and the Valley Town Crier in McAllen, Texas.
- The New Sharon (Iowa) Sun will close on June 18. It is owned by Mid-America Publishing.
- The Independent-Enterprise in Payette, Idaho will close on June 24. It is owned by Wick Communications.
- The Press & Journal in Dauphin County, Pennsylvania, published its final edition on July 3. It was 166-years-old.
It hasn't just been local and regional papers feeling the pain. Just this year, McClatchy, a huge media empire that owned newspapers across 14 states in the US, filed for bankruptcy in February 2020.
The writing has been on the wall for ad revenues for a long time, but it was the pandemic that accelerated a sea change in monetization strategies. Now, after decades of the majority of online news, magazine, and blog content being largely free to read, we are starting to see more and more falling behind paywalls.
The pull: paywalls and subscription content
This shouldn't be a surprise. It is no wonder that publishers are resorting to the only other real tool at their disposal. The subscription model has been around for a while, but there are some very well-known downsides to adopting it, especially if your audience has been long accustomed to free access. This explains the slow adoption.
Yet requiring audiences to pay directly for the content they consume is a smart decision and the most logical one, too. It's a well-known concept in economics that it is nearly always better to bring about a change in policy, e.g. social, by tackling it directly rather than indirectly.
For example, if you want to reduce the number of people smoking, it is better to increase taxes on the sale of cigarettes (direct), rather than put a new tax on cigarette companies (indirect). The former will change the behaviour of smokers by reducing their consumption, whereas the latter will just encourage cigarette companies to find efficiencies and maintain prices.
So it goes with ad revenues and paywalls. The former encouraged publishers and advertisers to maximise for traffic and eyeballs, at the expense of creating high-quality content. This is one of the root causes for the rise of click-bait tactics. But with the latter, paywalls encourage publishers to create high-value content that readers are willing to pay for. So requiring people to pay for the content they consume is definitely the right way to go.
However, paywalls as a means for people to pay for content have some serious limitations.
The first issue is that paywalls are a ‘one-size-doesn’t-fit-all’ solution that appeals only to a discrete segment of the potential audience you bring to your site, and excludes the majority of consumers.
These consumers enjoy your content and have a willingness to pay, but they do not want to commit to a subscription. The problem therefore isn't your content or your audience, but the limited number of ways you can monetize your content.
Here's what happens when publishers target the 'massive missing middle' with paywalls: they end up spending more to reach new audiences, reducing prices to convince consumers to subscribe, and earning less from each consumer as they unsubscribe too soon. All this does is put a squeeze on their own revenue.
This leaves publishers unable to realize the full revenue potential of their content.
3 hot trends in content payments
So what can you do as a publisher to expand your tool box of payments? What other pathways are there for you to get paid for the content your readers consume?
Here we lay out our top 3 tech trends on the horizon that we think will start to make a difference to content payment in the coming years.
1) Trade your subscriptions like assets
One way to look at your current subscription model is to think of it as two products: one is the regularly priced one, say monthly, and the other is the discounted version, say annually. There are pros and cons to each. The monthly subs bring in higher revenue over the long run, though at the risk of churn, while the annual subs are better for stability of cash flow, though for less revenue. Ideally, even though it brings in less, every subscriber would be an annual subscriber because a bird in the hand, and all that...
Well now there are some startups that could help you cash in on the difference. Pipe is one where they help any business with recurring revenue trade their subscriptions like you would a financial asset. As they put it, "Companies use our platform to sell the recurring revenue from a cohort of customers to investors for dilution-free capital."
For example, say you had 10 monthly subscribers. You could trade them on Pipe to an investor who would pay you now, upfront the value of 10 annual subscribers. The investor keeps the difference as the 10 monthly subscription payments get passed on to them during the course of the year, while publishers get the safety and stability of the annual recurring revenue paid immediately.
What about churned customers? If you traded a monthly subscriber who cancels their subscription, it's no problem! You can swap them out for an active monthly subscriber with no penalties or fees.
Pipe also conveniently integrates with your existing subscription manager system to sync up all the payments, so you don't have to, as well as with your accounting software so it's all kept up to date in your books.
It sounds like a long shot, what with the blockchain bandwagon still falling short of all its promise so many years after the first bitcoin was mined in 2009. But the technology has come a long way in the last decade, with multiple different companies pushing hard to bring the tech to a sustainable fruition.
No, people won't be paying with Bitcoin. That would be like using betamax video tapes to record YouTube. The Bitcoin tech was revolutionary for its time, and set the stage for the blockchain revolution to come, but it is too rigid and the incentive structures too misaligned for it to become a genuine consumer payment system.
So what could be?
There are number of competitors out there, including some specifically designed for publishers. The Brave browser platform, for instance, is not just about promoting user privacy. It can also collect contributions from readers and distribute them directly to content creators.
Brave users can opt in to an e-wallet to buy BAT (Basic Attention Tokens). When they land on a content site they can either give a tip or allow the browser to auto-contribute based on your browser behaviour. A great innovation, though the downside is that users are anonymous so publishers do not get any data on who is tipping them, making it a short-lived interaction with no prospect for future engagement.
An alternative on the horizon, and due to come out of beta in 2021, is IOTA. Run out of a non-profit foundation in Germany, IOTA is looking to build the first cryptocurrency that will finally solve the blockchain "trilemma": secure, scalable, decentralized.
Right now, every crypto and blockchain project fails at this test, more often that not at making it scalable. For instance, Bitcoin, Ethereum, and others become slower and more expensive the more people who use them. This kills scalability.
IOTA, however, is not your regular blockchain - in fact, it's not a blockchain at all. While it has all the properties of an idealised blockchain, it is actually made from a different structure altogether, which they call the 'Tangle'.
If their experiments succeed - and by many indications they are headed that way - they will be the first to allow for the decentralised sending of currency over the Internet, both securely and scalably. Best of all, every transaction would be free with no fees attached.
This creates enormous opportunities for the Internet of Things, which is what IOTA is designed for, and for businesses interested in operating seamless payments between devices.
Publishers could, in the very near future, be receiving feeless payments not from readers but from their devices, which would pay based on exactly what was consumed by the device. Alas, no such company is yet using IOTA for such a purpose, but one day they might, so it's one to watch.
Maybe publishers don't have to wait for the futuristic crypto experiment to succeed just yet. You guessed it. StreemPay is a new platform that can help publishers charge users for exactly what they consume through a pay-as-you-scroll system.
Importantly, this approach avoids the key problems of other tools that were built to help publishers monetize their content, namely micropayments and aggregators.
Micropayments created too much of a barrier for users, requiring them to cough up a credit card every time they wanted to access an article. Aggregators, in the meantime, were great for users because you paid a flat fee and got access to lots of content, but terrible for businesses who lost traffic to their sites and had to split the fees among them.
With StreemPay, publishers have a new tool that bridges the gap between free and subscription content. It works like this:
- A StreemPay user will land on a publisher's site and get instant access, no login or registration required (saving publishers the hassles of complex conversion funnels and flawless checkout flows).
- They browse content as much as they like and StreemPay tracks the value of what is consumed, down to the pixel.
- At the end of the month they get charged once to cover what they spent and the funds are distributed to the publishers accordingly.
By giving users a flexible way to pay for exactly what they consume, they remain in control of their expenses, while publishers have a powerful new tool to identify highly qualified leads, target new audiences, collect data on what their content is actually worth, all the while making revenue. That's a pretty great result!
For those publishers just starting out StreemPay is free and easy to test. It has no cost to sign up and is low risk to try out. It can be rolled out on a limited basis, say targeting a particular segment of users. You could even build it into your marketing team's A/B testing and see if some of those hard-to-convert users bite!
The future is looking up for publishers
With fast paced technological advancements, it is only time before publishers will have a rich array of tools to help them better and more efficiently monetize their content.
Paywalls are great, but they aren't a panacea. They need to be supported by other payment options that form part of a richer payment ecosystem, allowing publishers the flexibility and stability to focus on creating more great content.
Good luck with your mission to monetize. If you're interested in learning more about StreemPay, you can sign up to one of our demos at streempay.com!