Tag Archives: subscription content

Why Publishers and Broadcasters need to change

It’s been absolutely crazy busy at work for the last few weeks, mainly on the new business front. I’d like to add this is a report, not a criticism. Anyway, when it gets this busy at work I often remember Bill Gates’ book The Road Ahead where he discusses how future business will all be conducted by electronic systems exchanging data with each other.

The truth has turned out to be quite the opposite – customers want ever increasing levels of detail before signing up to a product or service.

I did get a chance last week to go to an interesting technology event run by Vizrt. The event was aimed at their large publisher and broadcaster customers – many of the broadsheets and tabloids use their system (or similar competitors) for creating content for their newspapers or TV news snippets. We were there because we work with some large publishers, integrating their systems together.

One of the speakers at the event was Morten Holst who is a Product Strategy Manager for Vizrt, and raised some interesting points which are paraphrased below.

Morten’s first point was to wake up the audience with the following video:

His point was that whilst the video is amusing – a baby who knows the iPad interface so well that she can’t use a paper magazine, and even checks her finger to see if it’s her finger that’s broken – this baby is going to be a consumer in ten years. Publishers and broadcasters need to wake up and realise their consumers are changing very quickly.

His next demonstration was a comparison of a web site 10 years ago and nowadays. I’ve used the BBC News website as an example below.

Bbc_news_2001

Bbc_news_2011

Look at the two homepages for a few seconds, and you can see many similarities. In fairness, over the ten years, not a huge amount has changed.

I’m not particularly targeting the BBC (it’s still my favourite news site). The point here is that publishing hasn’t actually changed very much in 10 years.

Now look at another entertainment industry over the last ten years. Look at the video below – if you can, try to watch it in HD.

Morten’s point here is that 10 years ago these kinds of graphics and sound effects were considered motion picture quality. Now they are considered the acceptable standard of computer games – this year’s Battlefield 3 (the video above), FIFA 12 and Call of Duty Modern Warfare 3 are good examples.

The video games industry has recognised a number of times that it needs to push the boundaries of user interfaces, presentation and design – think of an Xbox 360, the revolutionary Wii controller, then the revolutionary Kinect controller. To put that into perspective, the Xbox and Wii were launched within the last 6 years.

His final point was about comparing printed content to digital content. If you read paper magazines, the photography is usually outstanding – full, double page and high quality. That same image will be shown as a 2 inch square on the web, and won’t get a second glance.

The iPad is encouraging publisher’s to think more creatively, by designing beautiful interfaces. In truth there’s no reason the iPad can encourage creativity and a web browser can’t. However the iPad has been disruptive enough in digital terms to make editors want to push the boundaries.

So, on to the future, Morten encouraged the audience to start pushing the boundaries, to stop doing things the same way because that’s how they’d always been done. The functionality has moved on enormously, yet the editors aren’t using the new features, yet.

A look at New York Times digital revenues

capture-scaled1000

Digital

Digital businesses include NYTimes.com, BostonGlobe.com, Boston.com, About.com, other Company Web sites and related digital products. In the third quarter of 2011, total digital advertising revenues decreased 4.5 percent to $74.8 million from $78.3 million. Digital advertising revenues at the News Media Group increased 6.2 percent to $50.3 million from $47.4 million due to growth in retail and national display advertising. Digital advertising revenues as a percentage of total Company advertising revenues were 28.6 percent for the third quarter of 2011 compared with 27.3 percent in the third quarter of 2010.

In the first nine months of 2011, the Company’s total digital advertising revenues increased 0.9 percent to $242.9 million from $240.7 million. Digital advertising revenues at the News Media Group increased 12.2 percent to $162.4 million from $144.7 million. Digital advertising revenues as a percentage of total Company advertising revenues were 28.2 percent for the first nine months of 2011 compared with 26.3 percent in the first nine months of 2010.

Paid digital subscribers to The Times digital subscription packages, e-readers and replica editions totaled approximately 324,000 as of the end of the third quarter of 2011. In addition to these paid digital subscribers, as of the end of the third quarter of 2011, The Times had more than 100,000 highly engaged users sponsored by Ford Motor Company’s luxury brand, Lincoln, who have free access to NYTimes.com and smartphone apps until the end of the year, and approximately 800,000 home-delivery subscribers with linked digital accounts, who receive free digital access. In total, The Times had paid and sponsored relationships with over 1.2 million digital users as of the end of the third quarter of 2011.

Source: The New York Times Company

My interpretation

  • In the last quarter, there were 1.2 million registered users, of whom 324,000 paid something, and 100,000 were paid for by Ford (a great subscription model as long as there are no catches for either party) and 800,000 were covered by their print subscription. In other words, they have a churn of about 25%.
  • The site has 45 million unique visitors per month as of January 2011 – it’s interesting that they use comScore to quote that 45 million. ComScore use an estimated data model, as opposed to NYT using their own actual data.
  • Anyway, 45 million unique users and 324,000 have paid something – that’s a conversion rate of less than one percent, however paid for content is still very much in its infancy.
  • Those 45 million users probably don’t include Smartphone users or e-readers (hats off to ComScore if that can get that data, however I suspect they can’t).
  • Doing some extremely rough sums, subscriptions are 99 cents for the first 4 weeks and then $3.75 per week thereafter. Let’s ignore the special offer price and let’s assume Ford pay a full $3.75 per user. Ignoring the print subscribers who get the digital edition for free, that’s a total revenue of $1.59 million per week. Let’s assume NYT earned this revenue throughout the entire quarter (12 weeks), that’s a total of $19 million for the quarter.
  • Digital advertising across the group (and this includes a number of other websites and newspapers) generated $74.8 million.

Lessons to take away from this quarterly statement

  • The premium digital content model still has a way to go – advertising still generated four times the revenue as subscribers.
  • ‘Wholesale’ or ‘sponsored’ user bases are key drivers for the number of paid for subscribers – Ford pay for 100,000 users and NYT have 324,000 paying individual subscribers. Think of the effort that goes into the Ford deal compared to the direct to consumer sales effort.