Newspaper Paywalls and Digital Subscriptions: An executive look into consumer insights from The Economist

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As news consumers expect the news to be freely available on the Internet, the newspaper industry faces the challenges of developing new ways of monetizing its content and communicate the value of its paid product.

To understand what factors motivate news consumers to pay for digital subscriptions, MECLABS Institute conducted a survey of 900 U.S. news consumers, age 25 or older, with household incomes of over $40,000. Through this research, we discovered interesting insights about how consumers perceive paywalls and advertisements and how they would like to access and pay for digital subscriptions, and then published the findings in the MECLABS Institute Executive Series.

As part of our research, we interviewed Michael Brunt, Chief Marketing Officer and Managing Director of Circulation, The Economist. Read on to discover what Michael’s reaction to our survey data, and what he has learned about setting up The Economist’s paywall, the demographics and habits of its readers, and introducing new audiences to its content.

 

Understanding readers’ engagement

MECLABS Institute: In November, we conducted a study, with a YouGov panel of 900 U.S. consumers aged 25 and older, with household incomes $40K or higher, who spent three or more hours in a typical week consuming news in print or digitally.

We asked them, first of all, if they had a paid subscription. Forty-six percent of the sample had at least one paid subscription, while 54% were not paying for news. Almost a 50-50 distribution.

However, when we asked if they had read an article from a publication they subscribe to within the past six months, only 24% said they did. That’s surprising, since six months seems like a long time to not use a subscription that you have. What do you think this number indicates — is this a sign of low engagement?

At some point, you make a decision, ‘I'm going to have to pay for this, because … we want to keep this journalism going. It's high quality, it's better than what I'm able to get for free.’

Michael: I think there are a lot of people who read a lot, and there must be a number of people who really haven't made use of their paid subscriptions, that's for sure.

That kind of statistic doesn't fit well with our experience with readers of The Economist, because we have high levels of engagement. Especially digitally, we can track when subscribers are accessing their content, because you have to be logged in and authenticated as a subscriber to read most of our content. We have only a limited amount in front of our paywall and the rest is available only to subscribers.

But then, readers of The Economist really are readers. When we've researched what else people read as well as The Economist, they would have a broad and quite extensive repertoire of reading material that they're referring to on a very regular basis.

Having said that, we do know that people who read a lot are quite fickle and they do set around their repertoire quite regularly. So the challenge to someone like me is to make sure they keep The Economist in their reading repertoire and that they are happy to renew their subscriptions and keep subscribing.

I guess it also possibly speaks to publishers need to do more to keep engaging with the people who have subscribed, make good use of push notifications, maybe communicate with them regularly, keep reminding their customers of the benefits, the content that they're getting access to. And then maybe introduce other benefits to them as subscribers to keep the engagement level up, whether it could be a regular newsletter or access to another product, something like that.

 

Customer attitudes toward paywalls and advertising

MECLABS Institute: We asked people how much they agree with the statement, "It's very frustrating when I start to read an article and then find out that I need to pay to read the rest," to assess their attitudes toward the paywall mechanism. Perhaps not surprisingly, 62% strongly agree with this statement. An additional 17% agree, and only 2% say they strongly disagree.

Although 2% is a small portion, it still indicates that some people have accepted the use of paywalls.

Michael: Our paywall is an ongoing and an important source of new subscribers. We prefer to have a limited amount of content in front of the paywall and if you want to read more than the quota that we've given you, then you need to register and then we'll give you a few more articles. And then we'll require you to take out a subscription to read the rest of it.

It's not the only source of new subscribers, of course, but it is a way that we recruit. You experience the paywall with some of your favorite publications and at some point, you do make a decision, "I'm going to have to pay for this, because I rate the quality of the content, we want to keep this journalism going. It's high quality; it's better than what I'm able to get for free," and most of our readers will think it's reasonable that at some point you need to pay to continue reading.

So I understand people's irritation, but it is a lucrative and important source for new subscribers for lots of publications. I think what you're seeing here is that publications recognize the value of creating a layer of content that is in front of the paywall so that people know. For instance, we sample a lot of our content to social media, and we'll place some of that content, including all sorts of content from some of our newsletters, in front of our paywall. And we'll make a decision in Editorial to include that content in the weekly quota or not.

The quota we have at the moment is you're allowed to read one article a week. If you want to read more, then you have to register and then you're allowed to read three articles a week. And if you want to read more than that, at that point, you would need to subscribe.

We've tried lots of different combinations and we've found that to be about the right level of frequency to get people to sample The Economist but also to then go on and subscribe to The Economist. And we've got two sources of revenue, really, the revenue from advertising and the revenue from readers. We've got to keep in business and that is one way to do that. I understand people's irritation, but it is a way of keeping a publication like The Economist going.

MECLABS Institute: On the other hand, on the advertising side, 35.5% of news consumers said they strongly agree that the ads on news site are incredibly intrusive.

Michael: It can be, and I think publications have to be super careful with that. You have to get the right balance. For many years, people have accepted a level of advertising in print publications and some publications. Some of the glossy magazines that cover fashion, they will be packed full of ads. And that's part of the experience, people actually like those.

When it comes to reading content digitally, you've got to be very careful as a publisher not to overload the reading experience with ads. But if a publisher doesn't have a healthy source of revenue from readers paying, then their other option is to focus on advertising, of course. But that can disrupt and degrade the reading experience, and it's something you've got to really watch out for.

 

Customer journeys to finding articles online

MECLABS Institute: We already mentioned that 46% of our participants said they have at least one paid subscription, while only 24% said they actually read an article from a publication that they paid to subscribe to. However, the overwhelming majority, 71%, 70% and 69%, said they had done one of the following in the past six months — gone directly to the homepage or website of a news source, searched for a news story or topic on a search engine, or watched video content on a news website or app.

Michael: It may be that that content was behind the paywall but the site or the app recognized them as a paying subscriber and gave them direct access to that content. And they may not have realized that that was premium content that only subscribers could access.

But we all work incredibly hard to make sure our websites are optimized for search engines, so that our content can be referenced when people search by subjects. And there are lots of rules to follow to make sure that your content is searchable and will score well in a search engine ranking. The biggest, most important factor being the relevance of that article to that search subject, of course.

And there are other things, there are a lot of other techniques, the publishers use to make sure that they've formatted the site in such a way that it will be easy for search engines to call them and get access to that content in order to provide good search results.

For those people reading what's going on in the news who want to know more about that subject, they want to know what the back-story was, what the buildup was, and what we think the implications are going to be.

So for us, someone searching on one of the big topics, the most topical events that week, if we've published an article on that, is an incredibly good way to get our content in front of those people.

 

New ways of paying for articles

MECLABS Institute: We also asked consumers about a relatively new way of paying for news articles, the micro-payment model. We asked, "How likely would you be to consider to use a single app to access all your preferred news sources, register with your credit card and pay small amounts for individual articles as needed?" Probably not that surprisingly, 59% of the people say, no, "not at all likely.” However, 11% say they are quite likely to consider doing that.

Basically, the number of consumers considering micropayments is not that different from the number of consumers who say they are likely to consider paying a subscription fee to access every article from a publication — the more common or traditional way.

Michael: We believe that the trick is to allow people who are prepared to pay for good quality content to access it in the way that they want to access it, whether that's on our platform or on a platform that distributes content from lots of other publications. So we're one of the first publications that partnered with Blendle.

The Economist is on Blendle, and it's not a huge revenue source for us but there is a growing number of people who want to access good quality content, are prepared to pay for it, and prefer that platform.

For me, providing our content on those sorts of distribution platforms and allowing people to make micro-payments to read high-quality content is really interesting and is not in any way cannibalizing our traditional revenue stream from subscribers.

I think it may be small now, so your numbers don't entirely surprise me. But I think this will grow, and I think our strategy as a publisher is effectively, to say, let's put our content on those platforms, let's see how that accelerates. We'll obviously monitor the risk of any cannibalization, but for a small publication like ours … I'm not saying that a 1.6 million a week circulation is small but it's spread across the world and the penetration of The Economist into our potential target market is very small. So for us, it's a great way of getting our content in front of people who want to pay for content in that method. And we are very happy to support those distribution platforms.

In the same way, we are one of the launch partners of Apple News, and we're on Facebook Instant Articles. We have a level of content every week that we decide can sit on a platform that can be accessed by distributors of content and aggregators of content.

And for us, where we have low penetration in a very large target market, it's an amazing way of sampling our content and we, at the moment certainly, see it as a big opportunity to gain reach, rather than a risk to the revenue models that we currently have. We're going to monitor it, of course, but I think at the moment, those distribution platforms and allowing our content to be on platforms such as Blendle are really good for us.

MECLABS Institute: Interestingly, the same number of consumers, 11%, say they are very likely to consider using points or miles from a loyalty program to pay for a subscription.

Michael: We allow people to do that as well. We have programs where we let people cash in air miles to subscribe, and that can work really well for publishers.

It's a good way for the airlines to get their members to use up some of their air miles, of course. But in return, what you get is an opportunity for readers to sample your content, and we have a relatively high volume of people who've, in that first time, taken that, have paid for their subscription with air miles. And of course, behind the scenes, revenue changes hands with the airlines, not with the individual, and then the end of that time, there's a good volume that convert into subscribers that pay more directly.

So that can work well for subscribers, and I think that can actually be a good way for publications to reach a new readership or reach a new audience that might be challenging for them to reach with other marketing methods.

 

There is more of a willingness of people to share their print subscriptions than passing around a device and sharing their digital subscription. … A print title is something that people leave around and let other people sample.

Demographic and personality characteristics of subscribers

MECLABS Institute: Lastly, we ran a logistic regression analysis to see which demographic and other personal factors predict being a subscriber versus non-subscriber to news sources. One of the significant predictors was age — older people were more likely to be in the subscriber group. However, our sample consisted of participants 25 years and older.

Michael: We have found that the distribution of choices that subscribers make based on their age can be quite surprising. One would assume that digital subscriptions would be more likely to be bought by younger people and an older demographic would be more comfortable and familiar with print formats, but we haven't found that to be the case. Our age range is broader than 25, plus we've got a lot of students reading it. A lot of our students are more likely to choose a print-only subscription than they are to choose a digital-only subscription.

Which is really interesting. And when we dug into that a bit more and asked some of our students why — there's an element because it's easier to share. So there might be a bunch of students studying similar courses and they're living in proximity to each other, and a print subscription is something that can be shared and circulated more readily.

And there is more of a willingness of people to share their print subscriptions than passing around a device and sharing their digital subscription. A digital subscription tends to be much more of a personal choice in that respect, or considered more as an individual experience; whereas, a print title is something that people leave around and let other people sample.

There is a bit of a badge element to reading The Economist as well. I think, sometimes, people like to see other people reading The Economist out in the public and Economist readers will talk to each other, which is an experience they can't really get when they're reading content on their devices.

MECLABS Institute: Interestingly, we found that the personality trait Conscientiousness has a negative effect on being a subscriber to a news source. If you are a highly conscientious person who tends to do a thorough job, very orderly and achievement-oriented, then you are actually less likely to have a paid subscription to a news source than somebody who is more relaxed, more spontaneous and less planned in his or her behavior. I expected this to be the other way around.

Michael: That's interesting. It certainly is very much a personal choice, so if you decide to subscribe to something, you're effectively saying, "Okay, I'm going to give this publication a go and include it in my life.” And maybe a more relaxed person would be, I'm speculating, more relaxed about making that decision, I don't know. I've not seen that sort of study before, so that's certainly interesting. We haven't cut our prospective audience in that way so that's certainly interesting.

 

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