The debate over whether to charge for content is sometimes portrayed as an “either-or” discussion. Either you provide your content for free or you charge for it.
Others talk of a “freemium” model in which 90-95 percent of users consume what you provide without paying for the privilege, but the most avid 5-10 percent pay for a premium level of access or service. But even those discussions leave off some important ways charging for content can affect the bottom line.
It’s a given, for example, that any content you charge for will have far fewer page views than if you provide it openly for free and make sure search engines can index it. But on the pages for which you charge for access, you can also charge more for advertising than on the free pages.
Awhile back, I did a calculation that roughly jibed with one by industry analyst Doug Anmuth, then of Lehman Brothers. The calculation figured The Wall Street Journal, were it to go free, would see its ad rates drop 60 percent. By charging, the Journal (and other publications) can say to an advertiser that the audience is committed, consistent and not comprised of fleeting visitors who come to the site just through search engines.
Gordon Crovitz, former publisher of the Journal, told me about other benefits in a recent conversation. One is obvious: because the cost of production and distribution for each additional digital subscription is next to nothing, you can afford to charge a relatively small amount for digital subscriptions and still make a handsome profit.
Another, much less intuitive benefit is that charging for subscriptions online can help the print side as well. Here’s how Crovitz laid it out:
- Charging for online subscriptions can help increase the perceived value of the print subscriptions, spurring more sales. Presumably, the psychology of saying “this is worth money” works across media.
- Bundling print subscriptions with online can help sell both. Crovitz found after data analysis that WSJ readers preferred buying online and print as a package over buying one or the other separately for less.
- Selling print subscriptions online greatly decreases the cost of acquiring new subscribers. This makes perfect sense. When someone uses an online form and payments system, he or she doesn’t require phone agents or mailings or other costly infrastructure to handle it.
- The cost of sales goes down, too. You don’t have to pay as much for advertising if people reading your material online then click to subscribe.
Crovitz said that over time the Journal decreased acquisition costs and increased the value of subscriptions to the point where it was able to do away with some less profitable bulk sales. These kinds of sales are often done to help keep up circulation rates that can be reported for advertisers and others.
Crovitz also alluded to a research and development benefit: by working with online subscription and delivery models, a publisher can learn how they work and build the institutional knowledge that will help deliver content to users in whatever way they want it. Digital is an effective research and development operation that makes money instead of being a purely cost center.
True, getting the pay mix right is difficult and challenging. There’s always the risk of alienating a core audience, driving traffic into the dumps and losing valuable page views and ad inventory.
I wouldn’t recommend simply plunging into payment systems in the hope that ad prices will rise and print acquisition costs go down. But it is worth incremental experiments and continual improvement over time. Though difficult, it’s possible to build a new business based on digital media while bolstering the print side as well.
