Subscriptions work, especially for the NYT

Last week, The New York Times disclosed in the fourth-quarter earnings report it had broken a record of its own—its subscription numbers. The paper has added over one million digital-only subscribers in 2019, in what Mark Thompson, the Times’ CEO, described as “a record-setting year for The New York Times’s digital subscription business, the best since the Company launched digital subscriptions almost nine years ago.”

On Feb. 6, The New York Times announced it has over five million subscribers, both print and digital, getting closer to its 2025 goal of 10 million. The effects were felt immediately—the price of its shares rose 13% on that day, as reported by the paper itself. However, the counterpart is that advertising revenues declined around 10% compared to 2018’s final quarter. As published by the Nieman Lab, Thompson said on the earnings call that “the single biggest reason” behind the outlet’s success was the decision to give more independence to their digital products. Besides this strategy, the Times has also invested in a variety of media formats like podcasts, with The Daily, shows, with The Weekly, and events. But the trends the paper has noted are not in a vacuum; they are impacting the industry as a whole.

Photo by dan carlson on Unsplash.

Subscription dollars are rising and ad revenues decrease: a trend that is unlikely to change. Still, we should be wary when assuming the rest of the media industry could thrive on subscriptions as the Times has. It’s true that The Gray Lady’s success is not unique and is good news for a strained market. However, it could also have a negative consequence for other smaller newspapers: readers could decide to pay for just one outlet, like the Times, and avoid paying for less powerful brands. The Times’ success represents trends underlying the market, but it also says something about the ones left behind.

The advertising business model sustained the media industry throughout the 20th century—along with kiosk sales and print subscriptions. So, when media outlets went online, the same logic prevailed. Brands would want to advertise their product on outlets to reach specific sectors of the population, as they do today. But while back in the 50s, news outlets were one of the few options available, the whole dynamic changed with the advent of the Internet. Platforms like Craigslist and eBay with their richer advertisements and lower transaction costs stole classified listings from newspapers and forced the latter to work on their catchy headlines and their viral content to get more eyeballs on their ads. Then, search engines and social media platforms, which had sworn to help the news industry, started to get a larger share of the ad returns further damaging the newspaper ad revenue.

According to a Pew Research Center report, the estimated ad revenue for the newspaper market in 2018 was $14.3 billion, 13% less than in 2017. That number will keep decreasing as Google and Facebook take around 60% of the advertising pie. The tech giants’ bites changed the industry. In January of last year, over 1,000 jobs were cut nationwide in news outlets (read Digital advertising is not enough to keep news outlets afloat). Digital natives suffered the hardest, with Buzzfeed firing around 250 employees. Online outlets thought they could win at the ad-game, but they forgot that their search hits were based on algorithms controlled by a third party, and their content was distributed through means they could not control—Google and Facebook. If brands were going to news outlets to reach potential buyers, tech platforms offered them a much better solution than newspapers. They could target their content, gather precise data on prospective clients, and, generally, go bigger. That’s not going to change, and the forecasts are grim for media outlets.

While the ad stream is drying up, other sources of income are opening for media outlets. The 2019 Reuters Digital News Report revealed that the number of people paying for online news has increased, specifically for ‘ongoing’ payments (subscriptions and memberships). Free information is still out there, and many readers are not willing to pay for information if they can access the same content without paying. However, that information tends to be repetitive and non-exclusive, while subscription-based outlets are stepping up their game and offering quality-content, and a non-replicable offer. As ads dwindle, more outlets are turning to subscriptions, for example the Spanish daily El Mundo (read The news subscription model has reached Spain). That’s good news for the content itself, as newspapers will have to compete on content. Subscribers will choose one or other paper mostly for the stories they offer—besides their ideology and personal affinity.

However, the increase in the number of news subscriptions has a second consequence: ‘subscription fatigue’ (read No more subscriptions, please). We have subscriptions for outlets like the Times, streaming services like Netflix, HBO and Disney, and audio platforms like Spotify. But we cannot pay for all, and usually, we have one or two of each, tops. Despite subscription services crowding the market, many will not have a chance at survival. Readers will pick one or two, and the rest might die off, creating a less competitive industry. The subscription model in a globalized world concentrates customers around a few companies. The rest disappears.

Here is where the Times’ success comes in. The Times has become the most significant national newspaper, with its 5 million subscribers, both in the US and abroad. The paper is also offering other services, such as the Cooking section and the famous Crosswords. However, its growth means the diminishment of other journals that users will stop paying. Moreover, the Times increased its monthly digital-only subscription fee from $15 to $17 last week, its first raise since The Times put up a paywall for online content in 2011. “Since then, we’ve not only seen nine years of rising prices, but also unprecedented investment by The Times in its journalism and digital offerings and we believe that our loyal subscribers know that their financial contribution plays an essential role in maintaining the quality, breadth and depth of the report they value so much,” said Mark Thompson.

At the moment, we have to congratulate the Times on this milestone. Good journalism pays off, and subscriptions work. But we must still be cautious, as its success could have a ripple effect on the rest of the industry. The Times predicts that in its first quarter of 2020, the same rise in subscriptions and decline in advertising dollars trends will continue. And, honestly, we have to agree.

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