Go only ten years back – and digital subscriptions to news sites and apps at Schibsted amounted to pretty much nothing. For 2020 it is an anticipated 1 billion NOK business.
Back then, a decade ago, news media companies around the world applied free as a strategy. Free content was expected to drive frequency, which again would drive interactions with ads and capture more data to monetize on in the ads business. Users were to pay with their data, like on YouTube, Facebook, and Twitter.
However, it turned out ads alone is not a sustainable business model for news media.
For more depth, watch the full presentation given at Newscamp 2019
A profound shift to user revenue
Over the last half-decade, I’ve witnessed a profound shift in the digital business model from being financed by ads to depend on user payments.
It’s more evident in Schibsted regional papers such as Aftenposten and SvD, but can even be spotted in our more tabloid papers VG and Aftonbladet. After more than a decade with declining customer bases, Schibsted’s customer bases are once again growing, now fuelled by digital subscriptions.
Crucial to be user-centric
A strong user business forces you to be user-centric. I strongly believe that being user-centric is the only way for any business to survive the digital disruption hitting every industry from media to car manufacturers, from framers to hairdressers. When people’s behaviors change, the business needs to change too.
To my experience, the accumulated historical knowledge in management groups has lost some of its value. In 2019 you need to turn to users and user data to get answers to your strategic questions and not solely rely on senior managers’ previous experience.
More digital-only than print subscribers
Today Schibsted has more than 800 000 digital-only subscribers to our news sites and apps in Norway and Sweden. We now have more digital-only subscribers than print subscribers and we are compensating volume decline in print with a volume increase in digital subscriptions.
But volume is only half of the way, it is by driving income you prove yourself as a business. Income from digital news subscription grew by 34% from 2017 to 2018. And the growth is also impressive in absolute numbers from about 500 million to just over 700 million NOK per year.
What is almost as impressive as the digital growth is the fact that we are now compensating volume decrease in print with a price increase, keeping the top-line for consumer business more or less flat.
Not bad for a business that was said to die!
We have reached a POC, a proof of concept. We have proven that people are willing to buy digital news products.
But the churn is high, around 9% average monthly churn for our digital subscriptions. The bucket is leaking. There is a willingness to buy, but the value proposition to stay on as a customer needs to strengthen in order for people to keep paying.
To further fuel digital growth we need to tackle the churn challenge. By filling the holes in the leaking bucket we will get more effect out of the sales and marketing efforts we pour into the bottle. This will fuel further growth.
I see three challenges we need to overcome:
Challenge 1: The paid experience needs to be superior to the free experience
For digital news subscriptions, there is seldom much money to be made in the conversion moment, all the money is in retention. We need to give users not only a reason to buy, but a reason to stay and not wanting to go back to the free experience.
In my mind that can only be done by having a distinct difference between the free and the paid experience.
Challenge 2: The news experience needs to be relevant to each and every individual
The news feeds needs to be relevant to each and every individual, and also optimized for both our journalistic mission as well as for businesses, ads and user revenue.
This simply can not be done by human labor alone. You need to let technology help you; algorithms, machine learning, automation.
Challenge 3: We must find a way to deal with platforms
The inventors of “pay with your data” are now moving into the user revenue space, both by offering premium subscriptions to their own products (i.e YouTube premium) and by offering publishers to get paid for the content on the platforms (i.e Apple in-app Purchase and Facebook’s Instant Article).
I believe they see what we see, that users are willing to pay for great digital products. For now, at least it is first and foremost Apple causing pain with in-app purchase (IAP) on iOS. Apple forces Schibsted and others to use IAP for all transactions opening up content and functionality within iOS apps.
With a considerable market share in both Norway and Sweden, this causes pain. Consumer business is based on a know-your-customer strategy and with IAP not all customers are known to us. Actually the customers are formally Apple customers and not customers of Aftonbladet, VG or any of the other news brands.
UX research we have conducted tells us that the users of Aftonbladet’s apps with IAP subscriptions through Apple don’t understand that they are Apple customers. They therefore turn to Aftonbladet when they have questions or need help with their IAP subscription to the Aftonbladet product. Research also shows that they prefer being Aftonbladet customers to Apple customers for the news app products.
In addition, IAP is an expensive payment method charging 30/15% of the transaction amounts during the customer’s lifetime, 30% the first year, 15% thereafter. Credit cards by comparison typically charge less than 1%.
I believe the only reason Apple can charge such a high price is due to the monopoly situation they have in AppStore. If Apple allowed for different payment methods for opening up digital content and functions in iOS apps I believe the competition would drive down the price considerably.
To sum it up, Apple simply does not offer a sustainable business model for publishers. It’s not a win-win. It is a win-lose. So now dealing with platforms such as Apple, Facebook, Google, and Amazon, not only in the ads space but also in the user revenue space, becomes utterly important. It is a question of survival of the free and independent press as it limits our ability to have a sustainable business model.
These are the slides used at the Newscamp 2019 presentation
User revenue the ultimate proof of value
I’m a user revenue nerd. Having users paying for your product is to me the ultimate proof that you have created value. You manage to capture some of the value you have created.
To further fuel digital growth we need to have a paid experience superior to the free experience, a news experience relevant to each and every individual and we need to find a way to deal with platforms. With fake news, deep fake, filter bubbles, radicalization and polarisation threatening the democracies we take for granted, news media is needed more than ever.
Our time is now. Embrace technology, love journalism.