Barriers for local news publishers in growing digital subscriptions and reader revenue

Summary: An in-depth study of 11 regional news publishers in Germany and Austria explored what barriers they are facing in their strategy for reader revenue. Here are the three key conclusions.

This article is part of the INMA conference blog
and was written by Shelley Seale, Editor at INMA.

While local publishers have an online reader revenue strategy, they are not satisfied with the execution, according to an in-depth benchmarking study of Austrian and German publishers by INMA Researcher-In-Residence Grzegorz “Greg” Piechota and Founder of Institute for Media StrategiesDietmar Schantin.

Analysing strategy, organisation, and performance of 10 local and regional news publishers in Germany and Austria, the researchers found roles, responsibilities, and resources often did not follow the success factors as identified by the companies themselves. The organisations were not aligned towards their goals.

They concluded: Local news content is digital already, but the companies are not. Print-rooted culture is still strong.

In a Webinar for INMA members on Wednesday, Schantin presented in detail the findings on what the barriers were for these news publishers in implementing a successful strategy for digital reader revenue.

Schantin and Piechota conducted the study to look in-depth at what is working for smaller, local and regional news publishers. For large national and international publishers, much is known. But outside of Scandinavia, there has not been a deep dive into local publishers until now. This study looked at 10 publishers in Austria and Germany with hopes to expand the study globally in the future.During a workshop, 46 questions were asked of these publishers on themes including strategy, organisation, subscriber initiatives, and performance KPIs.

“The publishers range from very small to very big, from 28,000 to 190,000 subscribers,” Schantin explained. “So it’s a very good mix between big companies and small companies. Interestingly, you would think there would be big differences between their results, but there are not.”

He found all of the companies are at the forefront of digital revenue.

“They really try to work hard to make this business model work,” he said. However, the focus of this Webinar was on what holds them back, so his aim was to explain their challenges, mistakes, and weaknesses and what they are doing about them.

There were three major conclusions from this study as to what those barriers are:

  • Local publishers have a reader revenue strategy, but they are not satisfied with the execution.
  • Roles, responsibilities, and resources don’t follow the success factors, and the organisations are not aligned toward their goals.
  • Local news content is already digital, but the companies are not; print-rooted culture is still strong.

“There is a lot of work still in silos,” Schantin said. “It is still a very traditional structure in most of the publishing houses.”

In most countries, reader revenue has already overtaken advertising revenue. In Germany and Austria, while reader revenue is still low (though a larger share than advertising revenue), it is growing.

Strategic planning

“We asked them, how important do you see a strategy that focuses on growing the reader revenues,” Schantin said, adding that he expected 100% of the participants to respond that this was very important. In fact, 80% said reader revenue strategy was very important, and the other 20% rated it as “somewhat important.”

“In general, the importance is recognised and a lot of energy is put into it. After that, we asked, do you have an agreed, approved, and communicated strategy?” Schantin pointed out the aspect of communication is an important one. “Everyone has a strategy, but if nobody knows about it, then it’s hardly usable for the organisation.”

The responses to this question were:

  • 60% reported having such a strategy in place.
  • 40% were planning the strategy but had not agreed on a final one yet.

For the 60% that have a strategy, only about two-thirds have actually implemented it. For the other one-third, the strategy is still in the process of implementation. Schantin said that was not surprising, because this sort of strategic planning never ends: “Strategies always change and have to adapt to new circumstances.”

Next, the study looked at where these companies stand in terms of the number of active digital subscribers that had developed over the past three years. The companies were also asked what their prices were for a basic digital-only package.

“We tried to see, is there a connection between the price and the development of these subscribers,” Schantin explained. “We didn’t find a direct relationship.”

Not surprisingly, the companies that had reported that a reader revenue strategy was only somewhat important ranked lower in the growth of their digital subscribers over the past three years.

“That could suggest there is a commitment issue,” Schantin said. “If you don’t really believe in it, you don’t put enough attention on it or enough resources into it. We have noticed that there is a relationship between the growth and how committed they are.”

Topics as drivers

Next the study looked at content topics, asking the publishers which top three topics drove the most traffic (subscribers and non-subscribers). The top answers were:

  • Accidents and natural disasters.
  • Crime.
  • Local news and events.
  • Sports.
  • General advice and health.

However, when it came to which topics were actually the best drivers for converting non-subscribing reader traffic to subscribers, local news was the top of the list for every publisher.

“Local news is the conversion driver, No. 1,” Schantin said. “The focus on local news is very important.”

This represents an interesting conundrum because historically in journalism, local news is less prestigious. Journalists would tend to start at small local outlets early in their careers, and if they were successful, they moved on to big national publishers. But that shift is changing now.

“It’s very interesting culturally,” Schantin said. “The money, the future, lies actually with the regional and with the local content. These are the people who basically bring the bacon in.”

Next the study looked at what content people were actually paying for. Schantin referenced the 2017 Digital News Report for the Reuters Institute, which revealed the following — namely, that convenience is the biggest reason people will pay.

  • 32% pay for content that allows them to access news from their tablet or smartphone.
  • 23% were offered a good deal.
  • 17% paid to have access to information non-payers did not.
  • 16% believed that news you pay for is better than free news.
  • 13% paid to fund and support journalism.

Disconnect and misalignment

For the 10 respondents in the Germany/Austria study, Schantin asked what benefits their subscribers receive with a digital subscription. The main answer had to do with features, following by additional content and special deals. He found it interesting that benefits having to do with convenience and user experience rated lower among these respondents.

The contradiction is interesting, Schantin said — especially considering that when asked what success factors were needed to drive a reader revenue digital strategy, the publishers rated user experience the highest.

“This is why we came to the conclusion that their strategies and resources are not aligned,” he said.

This misalignment is seen when looking at the data these publishers collect (or don’t collect) about their user experiences — as well as internal structure. When asked what department was responsible for acquisition and retention, there was a large disconnect among these 10 publishers as to what they rated as most important and where the responsibilities actually lay.

Product, content, and people were rated as the most important factors in acquisition and retention, with marketing all the way at No. 7. However, when it came to the actual responsibility, 80% of it lay with marketing, and only 10% in product or content. And when it came to resource allocation for these departments, the picture flipped again, with low percentages of resources given to the areas that were rated the most highly.

Lastly, the 10 publishers were asked how satisfied they are with the strategy they have in place or are planning. Not one single publisher reported being satisfied, and 25% said they were “very dissatisfied” with their reader revenue strategy.

“This is an indicator that many little things need to be adjusted,” Schantin said. “For example, the culture of thinking in a digital environment and putting the right resources into the right place and bringing everyone together to work on the same goals.”♦︎