Digital subscriptions raised via platforms

Abstract

This exploratory study examines digital subscription services offered to news publishers by prominent platform companies. The paper explores to what extent platform subscriptions may empower news companies and aid their revenue building. Additionally, in the context of platform capitalism and platform power, the paper debates whether the reliance on platform subscriptions increases news companies dependency on them, adding to their problems with digital revenue building.
The paper examines digital subscription models offered by Google, Facebook, Apple and Amazon, and attempts to assess what kind of monetary benefits these models deliver for news publishers. The paper is based on a document analysis method and utilises corporate documents, academic articles, industry and media reports to map the field and to investigate the issue. The paper aims to identify core issues related to platform subscriptions and to offer some findings related to news publishers revenues from platform subscription acquisition. The author notes that research in this field is challenging as the platform subscriptions are currently being developed and tested. Additionally, news companies don’t disclose any specific data about their digital subscriptions from platforms and related revenue. These are limiting the scope of the study affecting its findings.
Earlier academic studies have warned about news publishers increasing dependency on platform companies as well as of their monopolistic powers (Bell & Owen, 2017; Pickard, 2017; Nielsen & Ganter, 2018; Author, 2018a). Srnicek suggests that in the platform capitalism the companies such as Facebook hold all the power over audience, data and monetisation making subscription acquisitions from the platforms problematic (Srnicek, 2017). In his book The Internet Trap, Matthew Hindman cautions that news companies have not been able to move to ‘post-industrial era’ because they depend “critically on the industrial plants” of platform companies for their audience attention (Hindman, 2018, p.179). He also argues that Facebook’s and Apple’s subscription platforms “are particularly damaging to the autonomy of news outlets” because they only work within these platforms, making monetising outside the platforms problematic (Hindman, 2018, p.179). Some of the news companies have abandoned distribution on social media platforms to avoid this problem and because of poor monetisation opportunities. To exemplify, in 2017 the Guardian pulled out of Facebook’s Instant Articles and Apple News stating its desire to build deeper relations with its readers to grow its memberships (Davies, 2017).
Platform companies are increasingly pressured by governments, politicians, news industry and regulators to share their revenue with news media. To compact this increasing pressure from the regulators in the US, Australia and Europe, they have launched digital subscription services which are aimed to aid publishers content monetisation. Google’s head of partnerships, Luca Forlin, comments that “the context behind our subscription initiative is that we do care… we care about news” (“Google, Facebook: different platforms, different acquisition and retention strategies”, 2018). He says that its digital subscription service helps publishers to convert users attention into subscription and works as a retention tool as well. Facebook has stated that it will “continue investing in new ways to enable publishers’ subscriptions business, and improving our marketing tools to make them better suited for publishers needs” (Brown et al., 2017).
Based on the preliminary analysis of platform subscription models offered by Facebook, Google, Apple and Amazon, the paper finds that the monetary benefits of digital subscription services offered via platforms are still unproven, and there is not enough empirical evidence to draw any far-reaching conclusions about these benefits. Platforms have promised to share 70-100 percent of the subscription revenue news publishers make via their platforms, but there is currently no data to assess how much revenue news companies make from platform subscriptions.
Some of the earlier industry and academic reports offer some guidance related to platform revenue. A 2017 report by the World Association of Newspapers and News Publishers suggests that Facebook made only seven percent of the news publishers digital revenue with most of the revenue coming from advertising (WAN-IFRA, 2017, p.48). Recent academic studies suggest that news publishers rely heavily on Facebook for traffic and user attention as they attempt to turn ‘eyeballs’ into subscription revenue (Author, 2018a; Cornia et al., 2018). A 2018 study found that Facebook offers news publishers insignificant revenue: for the companies studies, less than one percent of their total revenue came from Facebook traffic and social shares (Author, 2018b). Additionally, a report by Cornia et al. (2018) observed that news organisations continue to invest in social media distribution despite the fact that monetisation on these platforms remains challenging.
Preliminary investigations for this paper suggest that Facebook drives news publishers traffic, brings more people to their ‘conversation tunnel’, and in some cases converts audiences to subscribers. Additionally, Google subscriptions have been found beneficial because it “simplifies subscription processes” (McClatchy, 2018). However, converting users’ attention from platforms may come with an additional cost. Polish Gazeta Wyborcza, for example, has admitted that it using paid campaigns on Facebook for acquisitions, denting its revenue from platform subscriptions (Cornia et al., 2018). Other problems reported by news companies include lower conversion rates.

Full text

Digital subscriptions
raised via platforms
To what extent they empower news
companies and their revenue?

Dr Merja
Myllylahti
AUT
January 24, 2019
Gothenburg, Sweden

Critical platform dependency
Author Matthew Hindman:
“Digital newspapers depend
critically on the industrial plants of
Google, Facebook, or Apple in order
to attract an audience”.
Facebook’s and Apple’s subscription
services are “particularly damaging
to the autonomy of news outlets”
because they only work within their
platforms, making monetising
outside problematic.

Dependency on
traffic and
audience
attention
Multiple researchers have
warned about ‘platform power’
(Bell & Owen, 2017; Pickard,
2017; Nielsen & Ganter, 2018).
News companies dangerously
dependent on platform
attention & traffic (Cornia et al.,
2018; Myllylahti, 2018).
ACCC’s digital platform inquiry
ruled that Facebook and Google
have too much ‘market power’.

Money from attention?
•My study Attention
economy trap? of 4 news
companies revenue from
Facebook traffic and
social shares shows that
revenue from both was
under 1% of the news
companies total revenue
•Study did not include
potential revenue from
subscriptions

Still, news companies
continue to invest in social
media distribution
•Cornia et al. (2018) found that despite
platform risks news companies
“continue to invest in social media
distribution, especially on Facebook.”
•Companies believe that platforms are
“generating a short-term return on
their investment.”
•What about long-term benefits?

While facing
regulatory pressures,
platforms launch new
subscription services
for newspapers.
Apple to relaunch
Texture next Spring.

Aim of the paper
to explore
To which extent platform
subscriptions
increase/decrease news
companies platform
dependency.
To scope different platform
subscription models and
revenues their may offer.
To explore benefits and
pitfalls of platform
subscriptions.

What was researched?
Subscription services offered by platforms
•Platform subscription services of Apple, Amazon, Facebook and Google
•Statements made by companies including The Baltimore Sun, Bild, FT,
Gazeta Wyborcza, McClatchy, The Economist
Benefits of platform subscriptions
Pitfalls of platform subscriptions

Publishers involved
Model
Revenue
share for
publishers
Google
The NYT, Le Figaro, Fairfax Media, McClatchy,
Les Echos, FT, Gatehouse Media, Grupo
Globo, The Telegraph, The Washington Post,
USA TODAY
Subscribe with Google
-users can pay
digital subscription while on Google
platform
85
-95% of
revenue
Facebook
Bild, The Boston Globe, The Economist, The
Houston Chronicle, The San Francisco
Chronicle, La Repubblica, Le Parisien, Spiegel,
The Telegraph, Tronc, The Washington Post
Facebook subscription/Instant Articles
-
users can subscribe directly to news
services within Facebook platform
100% of
revenue &
user data
Apple
In talks with The NYT, WSJ, The Washington
Post
Apple Texture/Apple News
–in
development
Not known
-
30%?
Amazon
News Corp, The Washington Post, Chicago
Tribune, The New Yorker
Subscribe with Amazon
–publishers can
sell digital subscriptions directly inside
Amazon’s site
70
-85% of
revenue

Company
Benefits
Problems
The Baltimore Sun
Facebook subscriptions increased
conversion 50%
Bild
No substantial uplift through
Facebook Instant Articles
Financial Times
Facebook drives more people in
conversion tunnel
Lower conversions
Gazeta Wyborcza
Facebook biggest driver of new
subscribers, 40% of all new subscribers
from Facebook
Boosted by paid campaigns
–
acquisitions become costly
McClatchy
Google subscriptions
–simplifies
subscription process
The Economist
Converting through Facebook is cost
-
effective and scalable
–has halved
acquisitions costs

What do we know about the revenue?
Not much….
•Facebook says that with its
paywall, news publishers
“own the process, they own
the relationship with their
audience and can build their
audience out from there.
Facebook does not take a
cut.”
http://www.niemanlab.org/2019/01/faceboo
k-is-committing-300-million-to-support-news-
with-an-emphasis-on-local/

But we have an idea about the cost of
acquisition
•To exemplify, in 2018 the NYT announced
that its third quarter marketing expenses
increased to $40.4 from $26.6 million in
the same period in 2017.
•Increase in marketing expenses was
largely due a spike in subscription
acquisition and brand marketing costs.

To summarise –potential
pitfalls and benefits?
•In some cases platform subscriptions
drive conversion –contested
•In some cases platform acquisition
lowers costs –contested
•Google subscriptions simplify
subscription process
•Facebook drives new subscriptions –
contested
•Revenue from platform subscriptions
and services - unknown

Digital news project 2019
•Nic Newman’s survey of 200 editors, CEOs, and
digital leaders:
➢Publishers are looking to diversify away from
Facebook and towards other platforms this year.
➢“Google remains the key priority for most, with
more than eight in ten (87%) saying it will be
‘very’ or ‘extremely important’, but publishers
are also looking again at YouTube, Instagram and
Twitter as they look to reach new audiences.”
➢Apple News (43%) is considered as important as
Facebook, with some publishers reporting sharp
increases in traffic.

Becoming even
more
dependent?
Newspaper executive about
platform subscriptions:
“I’d be careful if I were a
newspaper because I’d really
want to have a feel for how
much revenue I might be
giving up.”

How and what to research next?
•Two separate issues:
➢News companies own
subscription acquisitions via
social media and from
aggregation services
➢Specific platform services
offered by Google,
Facebook, Apple and
Amazon
•Concrete empirical evidence
needed about benefits and
pitfalls
•Suitable
theoretical/conceptual
frameworks?

Myllylahti, M. (2018). An attention economy trap? An empirical
investigation into four news companies’ Facebook traffic and
social media revenue. Journal of Media Business Studies.
https://www.tandfonline.com/doi/full/10.1080/16522354.2018
.1527521

Myllylahti, M. (2018). Paywalls
and payment systems. Oxford
Research Encyclopedia of
Communication. Oxford
University Press.
http://oxfordre.com/communicati
on/view/10.1093/acrefore/97801
90228613.001.0001/acrefore-
9780190228613-e-855