4 Reasons Why ‘Netflix for News’ Fails
Consumers do not like ads, but are not willing to pay for News content on a subscription-based model. Here are 4 reasons explaining why this is the case.
As a person who worked in advertising, I find the consumer relationship with advertising to be complex. I even wrote about my mixed feelings and my ambivalence towards advertising as a concept.
In the online arena, readers are after content while ads stand in between. Professor Scott Galloway defined advertising as a ”tax on the poor”, stating that the ones who are willing to pay for online content are also entitled to an ad-free service. Spotify & Hulu are building their premium offering on an ad-free experience. The same applies also for YouTube Red.
In the context of News publishers, however, even subscription does not guarantee an ad-free environment. The popular business models of News publishers are based on pay-walls that either provide partial access (metered) or deny non-subscribers from an exclusive content.
News publishers are cornered, as they need to provide highly interesting content on the one hand, but do not generate enough paying readers on the other. This gap is filled with more revenue coming from advertising.
In March 2019, Apple has followed Netflix and Apple Music’s business model, and applied it on News & Magazines content. The Apple News Plus service is offering a wide access to leading magazines and news, including partial access to Wall Street Journal.
Despite Apple’s efforts, what has worked for Netflix and Apple Music will not necessarily work in the News & Magazines arena for 4 main reasons.
1 | News is Not Television or Music
According to Reuters Institute, only 8% of US readers pay for Online News in an ongoing subscription model.
This is only third of the percentage of people that pay for streaming services like Netflix (24%) and only half of Music Streaming (16%). In other words, 9 out of 10 people are factually not paying for News content, whereas the numbers for other media services are much higher.
2 | Readers Prefer to Tolerate Ads over Paying for Content
The future does not seem so bright for News publishers, as the inclination to pay for News is also not encouraging. 62% in the U.S. say they are unlikely to pay for News content in the future. These numbers even soar to 70% in European countries such as the UK and Germany.
Asked about a theoretical reality where you either pay for everything online but do not see ads or see ads everywhere, 5 out of 6 people (85%) have responded they prefer to see ads and get access to free content. This indicates that while ads may not be liked, they are still not a determining factor for readers to pay for content. Such approach is even easier to adopt when numbers for Ad-block users are constantly growing and already reached 27% in the US.
3 | It’s Not Cheap
The third factor is also the most interesting one, as it highlights the mismatch between what a reader may be willing to pay for online News in comparison to other services online.
According to the American Press Institute, the median monthly digital subscription price for 100 leading newspapers is $10. These numbers are equal or higher than the base price for ad-free services for Netflix and Spotify.
Given the fact prices online are distributed normally, there are also much higher subscription rates. For example, Wall Street Journal charges almost $20 a month after providing a 50% discount.
When prices are higher relative to other subscription services, but inclination and current rates are significantly lower, price is set as a major barrier for subscription.
4 | It’s Not Highly Profitable for Publishers
in March 2018, Apple has acquired the online magazine service company Texture. A year after, following a thorough rebranding and tweaking, Apple has launched Apple News Plus.
By offering access to more than 300 magazines along with a great user experience, Apple hopes readers will be willing to pay $9.99 per month.
Apple’s deal sets a new ball game for publishers in terms of revenue share. According to Recode, apple splits revenue equally with News & Magazines publishers. For every subscriber, A group of publisher corporations including Meredith, Condé Nast and News Corp share $5.
Apple News Plus activity will become highly profitable once it reaches critical mass of millions of users. With that said, the ability to consume all magazines in one place sure poses some cannibalization concerns from publishers, along with low revenue indications at first. This also explains why Wall Street Journal only offers partial access to its content via Apple’s service.
Consumers Want High Quality Content, but Few Are Willing to Pay for It
There are multiple reasons for consumers to avoid paying for News & Magazines content. Apple has dealt with some of the barriers by combining multiple services together, reducing the price and offering great ad-free experience.
However, it seems that readers are more inclined to consume this type of content online for free despite their overall dissatisfaction with ads. Most readers do not consider paying for News & Magazines the same amount they pay for other streaming services.
As it seems, readers demand the impossible from publishers — high quality content, for free in an ad-free environment. The question that rises thereafter is how this demand could be fulfilled and still be utilized from both publishers and brands’ perspectives.
