Content No Longer Wants to be Free: The Rise of Subscriptions as a Thriving Business Model for Digital Media
When Yahoo, Google and Facebook came of age as tech giants, there was a common understanding: they would offer news and other content “free” to consumers, subsidized by advertising revenue. Consumers paid for content with their eyeballs on advertising, which increasingly grew tailored and personalized to them based on the collection of data about their viewing habits and other online behaviors. As a result of this bargain, consumers became used to the idea that content on the Internet was, or should be, free.
The rise and ubiquity of online content hurt traditional newspapers, luring away an audience with the promise of free and easily accessible content digitally, as well as siphoning ad dollars from print to online. Major newspapers like New York Times in 2011 and The Washington Post in 2013 fought back with paywalls, which essentially required subscription either outright or after viewing a certain number of free articles. However, many smaller newspapers experimented — or feared experimenting with — paywalls only to find out it would further shrink their readership.
All that is changing today. Both for print journalism and for technology platforms.
Subscriptions for News Sites
On the digital media side, more and more publications have, over the past three years, erected paywalls to access their content, including Marketwatch (in 2020),The Atlantic (in 2019), TechCrunch (in 2019), with the launch of Extra Crunch for premium story access, Business Insider (in 2018), Bloomberg (in 2018) and USA Today (in 2021). Something has changed.
What led to the change? It may well be the explosive success of several emerging growth technologies empowering content creators to charge subscriptions for their content.
Subscriptions for Social Media and Self-Publishing Platforms
On the journalism side, Substack burst onto the scene in 2017, popularizing the newsletter model, which allowed journalists to send their stories directly to the reader’s email inbox and charge a subscription price of the writer’s choosing. Using Substack, writers can choose to designate some content as freely available and some reserved for paying subscribers.
Substack quickly absorbed well-known journalists who found they could steady their income and escape the constant layoffs of the news industry by embracing the newsletter approach. By February 2021, Substack reportedly had 500,000 paying subscribers. In March 2021, the company grew to be valued already at $650 million. Their top ten writers earn $15 million per year, according to Substack.
Similarly, Patreon, a company that empowers content creators like YouTubers, podcasters, nonprofits, and musicians, empowers their content creators to use subscriptions to gather monetary support from their fans, called patrons, in exchange for receiving early or exclusive access to content and other perks.Launched in 2013, Patreon has reached a $4 billion valuation as a company. According to its website, the platform has 200,000 creators, who are supported by over 6 million monthly active subscribers
Medium, a blogging and journalism platform launched in 2012, avoided advertising altogether in its first few years, before experimenting with and discarding that model entirely. In its latest iteration, Medium offers a bundled subscription to customers for access to premium content, while rewarding contributing writers a portion of that revenue based on the level of engagement created by their stories.
An early adopter of the subscription-fueled content model, Mighty Networks, recently raised $50 million. The personalized social network, originally called Mightybell, was founded by Gina Bianchini. In a guide to customers in April, Bianchini talks about the virtuous cycle where users value content that they pay for more than free content, which can fuel growth and outreach:
It’s not surprising then, that larger platforms anchored deeply and originally in the advertising model also have shifted. Twitter has evolved to allow users to charge subscriptions for access to certain premium features and also acquired newsletter company Revue, a competitor to Substack, to integrate into the product. In a nod to Substack’s success, Facebook recently released its version of a newsletter feature, which it calls Bulletin.
Quora, a knowledge sharing platform originally founded in 2010 and later powered by advertising, also plans to launch various subscription features. The company began working on a subscription model last July, according to their Head of Communications, William Gunn.
Wildly growing Discord, which offers a freemium model of chat and community building, also relies on subscriptions with its Nitro feature. Discord’s valuation doubled in 2020 to $7 billion and was valued up to $10 billion this spring when it broke off acquisition talks with Microsoft. The freemium model means that the basic service is free to all while certain premium features are available only to paying subscribers. For Discord’s Nitro, those premium features include the ability to use custom emoji’s, live streaming, animated aviators and screen-sharing.
The move away from dependence on the advertising by platforms not only reflects the changing appetite of consumers, but also is a helpful adaptation to the increasing regulatory pressures on advertising technology. Advertising targeted to the interests of consumers involves the collection and tracking of personal information and online behavior, all of which have been a special focus of recent regulatory schemes such as Europe’s General Data Privacy Protection (GDPR) and California’s Consumer Privacy Act (CCPA) and subsequent amendments.
Subscriptions for Edtech
Subscriptions not only are having a moment for newspapers and social media, but also for ed tech. Companies like Coursera, which launched in 2012 with a mission to provide free education, was not initially supported by advertising or any business model. Eventually, Coursera experimented with various forms of certifications and on-demand pricing before settling on a subscription model, much like an all-you can-eat-buffet. The Coursera Plus feature currently promises “unlimited access to 3000+ world class courses, hands-on projects and job-ready certificate programs for one all-inclusive subscription price.” The all-you-can-eat buffet model for subscription is also what fast growing Skillshare uses for its educational offerings, which cater to audiences seeking creative skill-building in areas like digital media, graphic design, and writing.
New Motivations among Content Creators and Consumers
For subscriptions to succeed as a business model, users must believe that they are getting high quality content, specially curated to their interests or needs. They must believe that the content is better than all the other free content available on the web.
On the content creator’s side, the creators can find motivation in a variety of ways — monetization just one of them. For the journalists flocking to Substack, the opportunity to monetize indeed serves as a compelling way to replace income previously earned from a news room job. However, writers on Medium or users of Twitter’s newsletter feature may find motivation primarily in the ability to reach a wider audience than they could find on their own, by leveraging the platform’s wider audience and network effects. Substack writers who offer subscriptions for free may be more interested in building a platform and enhancing their personal brand in order to complement other pursuits, such as book publishing, public speaking or coaching, says Loren Edelson, a functional nutritionist and book author who publishes a free newsletter, Given the Givens.
The opportunity for greater control and community building also plays an important role in incentivizing content creators to invest their efforts in many of these emerging growth platforms. Hosts of Mighty Networks appreciate the ability to own and control contact information of their subscriber audience, free from the touch of the largest, and increasingly distrusted social network, Facebook. Similarly, Substack’s CEO, Chris Best, touts the rewards to writers of “being able to control” the relationship with their readers “instead of being mediated by fickle corporations whose algorithms decide what gets the most attention.”
The opportunity to build and find community goes hand-in-hand with subscription models for content. Mighty’s least expensive tier, the “Community Plan,” offers the promise to “Build a website and community that you can charge for.” Mighty’s personalized networks, which can be set to public or private viewing, offer features like polls, ability to offer courses, and integrated Zoom in the creator’s own branded app to support community building.
Skillshare promises the opportunity not just to learn skills, but also to join an “online learning community for creatives.” CEO Matt Cooper credits the craving for community in driving the explosive, 4x growth of Skillshare usage during the stay-at-home orders of the pandemic: “It was fascinating to see how people were engaging with Skillshare. Content is one piece. But when you take a class, you can upload a project and get feedback from teachers, feedback from other students. You can join a workshop or a live session. People were coming to us to find community that they were not getting face-to-face anymore.”
For Substack’s platform, the opportunity to provide comments on a writer’s piece is catalogues under the header “Community”:
While content may be the initial draw for readers, the promise of finding community is the stickiness that keeps consumers, staying longer and coming back for more.
Subscriptions allow for a rich new set of dynamics among content creators, their audience, and the platforms where distribution happens. Subscriptions also serve as the stitching of the newly booming creator economy.
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About the author: Karen is a strategic leader, thought partner, and seasoned legal advisor for media and technology companies of all sizes, from startups to Fortune 500 companies. She has been an employee or advisor to The Washington Post, Coursera, Mighty Networks, and Quora all of which were mentioned in this story. Most recently, she served as General Counsel at Quora. The views expressed here are her own.
