Mar24
Online subscription is the new business model

Is the Age of the Online Freebee Over?

Posted by Guest Blogger

It’s been a long-held tenet of the digital era that people—especially digital natives and millennials—are not willing to pay for things online that they can otherwise get for free. Online, this has affected everything from newspapers and music to films and television shows. These things cost money to make, and creative content industries have been at a loss to figure out how to raise enough funds.

The industry response to this freebie atmosphere has thus far largely been centered on ads. In other words, if website visitors don’t want to pay for the content they’re consuming, then publishers are forced to rent out their visitors’ attention to advertisers who will pay to place ads next to that content. There are two big problems with that method, though: consumers hate ads, and ads on the internet simply don’t pay the bills.

In fact, the former of these  problems is the biggest indicator that the ad-based internet model’s days are numbered. According to an Adweek report, 26% of mobile users had ad-blocking browsers in 2016, and other estimates indicate that more than 80 million Americans will use ad-blockers this year. Without eyeballs on ads, publications can’t offer the same impressions rates and page views to advertisers that they’re actually garnering with their content, resulting in a decline in revenue.

The second sign is that the conventional wisdom that people aren’t willing to pay is changing. Streaming service Spotify just reached 50 million paid users, which is nearly half of its user base. Meanwhile, newspapers are seeing higher subscriber numbers than ever before. According to TechCrunch, “The New York Times picked up 130,000 new subscribers last November — 10 times their average monthly growth rate. Subscriptions at The Wall Street Journal spiked 300 percent, the LA Times went up 61 percent and Vanity Fair picked up 13,000 new subscriptions in one day. The now-profitable Washington Post is hiring 60 new writers. NPR recently said that ‘Big Newspapers Are Booming.’”

Many people have pointed to the divisive and shocking US presidential election as the catalyst for this spike in subscriptions. While that may account for some of it—as people are more eager than ever for reported, rather than opinionated, news—it doesn’t account for the growth of other networks like Spotify, Netflix, and other media forms that podcasts and newsletters that are increasingly garnering monetary support from their users. It seems that something much more meta is at play in the content industry.

As Tien Tzuo, CEO of Quora, wrote in TechCrunch, “Why are readers and publishers alike embracing paid subscriptions for content services over ad-based business models? There are several reasons, but the dismal state of online advertising is a big one … At the same time that publishers are giving the broken ad system a hard look, there’s a whole new generation of consumers who are comfortable subscribing for services — Spotify, Netflix, food boxes, productivity apps — as long as they stay timely, relevant and focused. A quarter of millennials now read newspapers on a regular basis.”

So overall, it appears that the assumption that younger demographics who grew up with the internet would never pay for anything they consumed on it was not true. The problem was more focused on the mechanisms with which they were being asked to pay (i.e. ads in the form of their attention). Now that more and more publishers, content creators and services are aware that they can ask their users for financial support, things are changing. What remains key, as always, is content. In other words, if you produce high quality, unique content that your consumer can’t find elsewhere, it’s becoming increasingly likely that they’ll be willing to pay for it.

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