Monday, January 11, 2016

Paywalls and micropayments start to gain traction

The loss of advertising and the complications of public funding are forcing digital publishers to look for ways to persuade the public to pay.

Surveys and actual market behavior show that a small percentage of digital users will pay, depending on the country, the media brand, payment systems, and technology platforms. For some publishers, that could be the difference between thriving and merely surviving.

(Versión en español)

The amounts some would be willing to pay are in the chart below, from Reuters Institute’s 2015 online survey of 24,000 users in 12 countries.

From Newman et al., Reuters Institute Digital News Report 2015 (p. 65). 
Click on chart to enlarge.

On the discouraging side, the survey found that only about 10 percent of respondents had paid for news in the previous year. And a great majority said they would not pay for online news at any price.

On the positive side, improvements in payment technologies are making it easier and more attractive for users to pay. Digital subscription services have been signing up users and publishers rapidly.

Blendle shows promise

Holland’s Blendle is a growing micropayment service that in one year signed up 450,000 users and more than 100 publishers in Holland and Germany, as described by Frederic Filloux, the media business analyst of Monday Note. Two-thirds of the users were under 35, an audience coveted by advertisers and publishers.

With Blendle, users pay for the news they consume, but on a per-article basis. Blendle’s founders have called it an iTunes for news. Users can click articles to read and automatically debit their account by 22 cents to $1.10, with the publisher keeping 70 percent and Blendle 30 percent. At the end of each article is a button that the user can push to get a refund if they are not satisfied.

The New York Times and German publisher Axel Springer have invested €3 million ($3.3 million) in the startup, which announced plans to expand into the U.S. market in 2016.
Update: 20 January 2015. Blendle just reported that the most popular articles on its micropayment service in Germany have been long-form investigative and enterprise stories. The leading sources of requests for refunds have come from clickbait stories.  
Competitors merge

Meanwhile, in a matter of a few years, more than half of the newspapers in the U.S. and Canada have now established paywalls, and one company, Piano, has begun to dominate the industry after a series of acquisitions and mergers.

In 2014,  Piano Media, which operated paywalls mainly in Europe, acquired U.S.-based Press Plus, which had established paywalls at more than 570 North American newspapers and whose clients included NBC Universal, Time Inc., McClatchy Company, EW Scripps Company, Postmedia Network Inc., News Corp. and IBT Media.

In August 2015, Piano merged with Tinypass, another competitor, to form an organization whose combined clientele includes 1,200 news and media providers on four continents. In an interview with Subscription Insider, Piano’s CEO, Trevor Kaufman, estimated revenues of the combined companies at $40 million for 2015.

One of the main reasons for the merger, Kaufman said, was to combine Piano Media’s sales force with Tinypass’s technology, which made it easier for publishers to identify their loyal users and offer individualized pricing options more likely to result in paid subscriptions. Kaufman anticipated growth in digital subscriptions as journalism moves away from support by advertising:
“CPMs have been basically flat for years as has the concentration of media dollars on the desktop. Meanwhile, users are switching to mobile devices, where CPMs are much lower, there's much more concentration of ad revenue among major players like Facebook, and ad-blocking is becoming such a major factor that the writing is on the wall for publishers that are trying to run a business based on display advertising alone. It's a losing proposition”.
The old guard's paywalls

Digital publishers from the print industry have been using new technology to establish paywalls with varying levels of pricing, accessibility, and permeability. Rupert Murdoch’s News Corp papers, such as the Times, Sunday Times, and Sun, have had the hardest paywalls.

However, the company relented in November 2015 and made its Sun, the U.K.’s highest circulation tabloid, free online in order to compete for digital advertising globally.

Financial publications such as the Financial Times (sold to Japan's Nikkei in 2015) and the Wall Street Journal (owned by News Corp) have long been among the most successful at paywalls, given the exclusivity of their content, the market-moving value of the news they produce, and the fact that many subscribers’ companies pay for the subscriptions rather than the individuals themselves.

The Financial Times’s subscription model, in which users could access three articles a month free before being asked to subscribe, had often been held out as an example of the viability of paywalls. But in 2015, in an attempt to increase subscriptions and revenue, the publisher decided to move to a model closer to the Wall Street Journal’s, in which a limited amount of content is free but most is behind the paywall.

Media economics scholar Robert G. Picard, writing in the Reuters report, sounded an optimistic note on the question of getting the public to pay for news online. He pointed out that 24 percent of those surveyed already were paying for digital news or said they would be willing to do so, which he called “a significant proportion” (p. 92).


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