August 2019 Digital Pay-Meter Playbook The views expressed in Shorenstein Center Discussion Papers are those of the author(s) and do not necessarily reflect those of Harvard Kennedy School or of Harvard University. Discussion Papers have not undergone formal review and approval. Such papers are included in this series to elicit feedback and to encourage debate on important issues and challenges in media, politics and public policy. Copyright belongs to the author(s). Papers may be downloaded for personal use only. Authors Nicco Mele, Lecturer, Harvard Kennedy School Matthew Skibinski, Reader Revenue Specialist, the Lenfest Institute for Journalism Matthew Spector, Visiting Researcher, Shorenstein Center on Media, Politics and Public Policy, Harvard Kennedy School How Todays News Publishers Can Use Data, Best Practices, and Test-and-Learn Tactics To Build Better Pay-Meters A Shorenstein Center and Lenfest Institute White PaperThe Shorenstein Center on Media, Politics and Public Policy / 2 Digital Pay-Meter Playbook / August 2019 Abstract The past half-decade has seen a digital subscription renaissance in the news publishing industry. Publishers are increasingly recognizing a market de- mand for high-quality, meaningful, trustworthy content, and in turn seek to cultivate premium, high-value brands that engage readers. Our research suggests publishers should invest in capabilities to engage in constant testing and experimentation in digital to build engagement among digital audiences and ultimately convert engaged readers into paying subscribers. For commercial and for-profit models in particular, publishers should become smart across a range of new strategies, including how to configure meters and rules to calibrate a mix of free and paid access. The trends we have observed across the publishers studied suggest pricing models, marketing tactics, and new approaches to audience engagement can help publishers succeed in a news environment increasingly friendly to robust digital programs. Produced through surveys of more than 500 for-profit newsrooms, this re- search suggests new best practices to aid publishers in increasing and sus- taining digital subscriptions. This initiative complements existing research at the Shorenstein Center on Media, Politics and Public policy uncovering sustainable business models for local news and nonprofit publishers. This paper begins with recommendations for publishers to propel shifts to subscriber-focused models, how to define their news organizations market, and how to measure engagement within that market. They are followed by a set of suggested strategies to drive a readers intent to subscribe, and to maintain that digital subscribership once that reader has entered a publish- ers ecosystem.The Shorenstein Center on Media, Politics and Public Policy / 3 Digital Pay-Meter Playbook / August 2019 Summary 2 Introduction: The Reader Revenue Imperative 5 Defining a Market 7 The Market and Digital Audience 7 Digital Audience Frequency 9 Benchmarking Stop Rates 10 Increasing A Publishers Stop Rate 12 Meter Best Practices 12 Driving Subscriptions 15 Conversion Rates 15 Subscriber Engagement and Retention 21 Best Practices for Subscriber Engagement 22 Conclusion 29 Appendices 32 A Shared Vocabulary for Digital Subscription Best Practice 33 Table of ContentsThe Shorenstein Center on Media, Politics and Public Policy / 4 Digital Pay-Meter Playbook / August 2019 Our research suggests a shift from advertising-based models to digital subscriptions enables news organizations to deliver more reader-relevant content, validate operational models that offer more stable business per- formance, and free up resources to plan for longer-term investments in content and news quality. What you need to know from the report: 1. Its time to get more sophisticated. It is the “end of the begin- ning” of the digital subscription era. Across the publications studied, news publishers, especially newspapers, have adopted basic digital subscription models this decade. This moment shows standards of performance and best practice are coalescing around structures for newsrooms and the operational teams that support them, suggesting a longer-term prospect for stabilization of the news marketplace. 2. Industry benchmarks are critical to more sophisticated tactics (see the Shorenstein Centers email benchmark tool). Among the organizations surveyed, digital publishers are well on their way to evolving a standard for success in subscriptions shared metrics, many of which are reviewed in this paper, are vital to understand these standards. Measures of market penetration, audience engage- ment, meter or paywall stops, conversion rates, and retention rates can be used to paint a more comprehensive picture of the health of a publications digital subscription business, and can help to determine key areas of focus for a particular publishers organization. 3. Intelligent access rules enable publishers to fine-tune and im- prove their standing. There are no “hard and fast” rules for paywalls. Instead, “intelligent access” evaluates data continuously to create dif- ferent access control rules for different behaviors. Among publishers studied, targeted intelligent access control rules allow a news organi- zation to optimize its stop rate, or increase the percentage of all users who are stopped monthly by a payment ask. There is no “one-size- fits-all” solution. 4. You must have a sharp focus on your consumers if you hope to increase conversion rates. Once users encounter a payment mes- sage, publishers can serve targeted marketing messages based on the users history on the site, and offer simplified purchase processes to increase conversion. Across the news organizations studied, we found that subscribers who also receive a publishers email news product Summary It is the “end of the beginning” of the digital subscription era.The Shorenstein Center on Media, Politics and Public Policy / 5 Digital Pay-Meter Playbook / August 2019 are 5-10 times more likely to subscribe. Those who follow the pub- lishers brand on social media are 4-6 times more likely to subscribe. 5. Pricing variation, churn analysis, and engagement testing are key tools for publishers to keep subscribers engaged. Our research reinforced that by experimenting with price, understanding sources of churn, and targeting subscribers to improve their engagement, publishers can improve their retention rate. 6. Engagement matters, and publishers must continue to innovate to earn attention. Our research found a relatively strong association between subscriber engagement and retention. This suggests that, relative to a publishers geography, an engaged reader is a valuable reader. Across the publishers studied, news organizations that per- formed ahead of their peers tended to deliver distinctive, high-quality journalism suggesting innovation in quality journalism itself, rather than merely producing a high volume of content, should be a long- term area of focus for publishers. The benchmarks and recommendations in this document are based on data from more than 500 news organizations with digital subscription or mem- bership models between 2011 and 2018. As a survey of a range of large and small news organizations, the recommendations use aggregated data to suggest where publishers perform across their digital subscription busi- nesses. These benchmarks are meant as broad recommendations for pub- lishers to contextualize and estimate performance and subscriber growth associated with a particular strategy or set of related tactics, relative to their peers. A substantial portion of the data was collected directly from the Press+ digital subscription system, a technology platform used by several hundred news organizations between 2011 and 2016 before the company merged with Piano Media. Publishers using Press+ opted into sharing data about their digital subscription performance on the condition that be shared only in an aggregated, anonymized format. This data was extracted directly from the back-end subscription system, rather than via publisher surveys, and only covers the time period up to 2015. Data added to the data set since that time has been collected using pub- lisher surveys in a number of contexts, such as individual consulting Methodology and Limitations News organizations that performed ahead of their peers tended to deliver distinctive, high-quality jour- nalism suggest- ing innovation in quality journalism itself.should be a long-term area of focusThe Shorenstein Center on Media, Politics and Public Policy / 6 Digital Pay-Meter Playbook / August 2019 engagements, industry collaborations such as the Facebook Local News Subscription Accelerator, and the Knight-Lenfest Table Stakes program. In all cases, data was provided on the condition that it be shared only in an anonymized and aggregated manner. The surveys captured simpler, base metrics such as total subscribers or total unique visitors to remain consis- tent with the style of data extracted from the back-end subscription system. The authors then applied those raw data to formulas to generate more ad- vanced metrics, such as conversion rates or retention rates, where possible. An example of that extraction matrix is available here. This benchmark data was derived from a variety of organizations, in- cluding national and leading metro publications, local publications, and digital-only brands. The vast majority of data more than two thirds of publishers in the data set comes from local, regional and metro-area newspapers in the United States. Some metrics, such as market penetration rate, were compiled from publicly-available data. Certain private data were provided on the condition that metrics and benchmarks are anonymized. Not every publication that provided data did so for every KPI or bench- mark. The Shorenstein Center on Media, Politics and Public Policy / 7 Digital Pay-Meter Playbook / August 2019 Communities and the news publishers that serve them increasingly need for new business models that can sustainably support the produc- tion of quality journalism. The University of North Carolinas School of Media and Journalism reports that more than 1,300 communities in the United States have lost local news coverage entirely since 2004. 1As tra- ditional news outlets continue to reduce staff and streamline operations, that figure may increase as both for-profit and nonprofit newsrooms face pressure from readers, investors, and stakeholders to stabilize, grow, and, ideally, innovate new ways of bringing news to the communities that need them. Across our research, many for-profit news organizations faced the chal- lenge we call the revenue trap of the digital advertising business model. Digital advertising models require large volumes of pageviews, which can incentivize sensationalism, virality, or “copycat” editorial efforts rather than encourage quality, independent journalism. Across the publishers analyzed, we found volume-driven digital advertising engenders a race-to- the-bottom to produce the lowest-cost, highest-volume content. 234Publish- ers reliant on digital advertising generally see business goals as increasing- ly distant from editorial priorities. Conversely, digital subscriptions require growing the number of users who are highly engaged in a publishers content. Across the news organizations surveyed, when users pay for access to news content, the business goals of a news organization more closely meet editorial goals. This shift in the key underlying unit of growth from page views to engaged readership incentivizes publishers to invest in content that is valuable to readers. We found this holds at for-profit news organizations, where reader revenue models align business goals with editorial goals, as well as nonprofit news- rooms, where membership models ask readers to support journalism they find most valuable. Our findings suggest digital news consumers will indeed pay for access to high-quality content, particularly when they are presented with compel- ling, relevant information and marketing messages that inspire deep and ongoing engagement. Publishers succeeding in growing digital subscrip- tions are outperforming the median by a factor of 10. 5The alignment of editorial intent and business performance comes with a better understanding of growing and sustaining engaged subscribership. Comparing performance across markets and operations to distil key in- sights, the compiled benchmarks offer suggestions for publishers to under- It did not seem possible that classified ads were more important to the reader than serious news articles. Introduction: The Reader Revenue ImperativeThe Shorenstein Center on Media, Politics and Public Policy / 8 Digital Pay-Meter Playbook / August 2019 Under digital subscription model, a news organizations audience can be understood through the publishers funnel with the broader addressable market represented atop the funnel; engaged users represented as the fun- nel narrows; and paying, loyal subscribers at the narrow bottom. The publishers studied had largely coalesced around this model, moving readers from discovery and engagement, to subscribing and sustaining subscribership while ultimately aiming to broaden the funnel to increase their share of engaged subscribers. The below benchmarks correspond to these stages of the audience funnel. stand where they fall relative to a cross-section of news organizations. The 99th percentile among publishers in the datasets studied suggests most effective strategies and are supported by recommendations for how they might deploy these strategies in their organizations. Defining a MarketThe Shorenstein Center on Media, Politics and Public Policy / 9 Digital Pay-Meter Playbook / August 2019 Key Finding: A well-defined market target leads to larger and more en- gaged digital audiences, among the publishers studied. Publishers that performed above their peers across the news organizations and market dynamics studied tended to base their digital strategies on a well-defined market, and scoped their editorial objectives to best serve that market. Anecdotally, some publishers studied that have successfully deployed digital subscription strategies have derived a clear market defini- tions from their legacy print audiences. In digital subscriptions, the publishers studied measured their market by the digital audiences within that geography and region, and unique visitors relative to that the market penetration. While a news organizations over- all market penetration is not the most reliable indicator of a publishers success, it provides a useful signal of a publishers strength in its geogra- phy. The publishers s