The News Industry’s Big Bet on Reader Revenue

Robbie K Baxter
16 min readJan 26, 2021

Talking to the International News Media Association’s Greg Piechota about how to get people to pay for content when there is so much available for free.

stack of newspapers
Photo by Wherda Arsianto on Unsplash

I recently talked with Greg Piechota, Researcher-In-Residence at the International News Media Association, to discuss the increasing importance of subscriptions and reader revenue in a world of declining ad sales. We talked about the value of studying one industry to gain insight for another, new models for advertisers, and the importance of customer-centricity in any subscription business.

Robbie Baxter: What got you back onto the research side after years working in the newsroom? One of your last jobs at the news organization was in innovation. Was that the springboard that had you kind of seeking out these fellowships and looking for this more intellectual research?

Greg Piechota: I was very much interested in digital disruption. Being an editor of a newspaper basically meant that I was dealing personally with digital disruption and transformation for most of my professional life. So I wanted to understand what newspapers or news sites are doing right and what they are doing differently than other types of organizations. The university opened my eyes that there are many industries who are digitally transformed or digitally disrupted. And you can learn a lot by studying a different industry. For example, many news sites are facing a struggle with how to compete with Facebook. It is the most popular newspaper in the world in practice and also one of the biggest advertising-based media houses out there. But the competition between publishers and Facebook is both friendly collaboration and an enemy battle, which is similar to the experience, for example, of retailers who compete with Amazon. So they know, on one hand, if they start selling through Amazon, they could increase their sales. On the other hand, they somewhat lose the direct relationship with customers. This is what I found fascinating. I also found the academics work pretty similar to journalism. Maybe we need to be more careful about the data that you study. Also, the process of academic work is slightly more robust because it’s slower than modern newsrooms. But it is still very similar. I found it fascinating to be able to learn how other industries are doing it, and how we can actually translate this learning into what news sites and news businesses can do to fund journalism.

Robbie Baxter: So we’re kind of two peas in a pod because my focus in subscriptions has always been very broad in terms of working with industries across a wide range of areas, as well as people in different functional areas and organizations at different stages of maturity. It is always so interesting to look for patterns in one place and see how they can be applied in another. So it’s interesting to hear you talk about the similarities between retail and news.

Greg Piechota: If you think about veterans in industries, what happens is that over years you just attend your industry conferences. You are exposed to new ideas and new ways of doing things, but all in the same industry. Sometimes you feel like one of these horses that basically cannot look around because it has blinders on both sides. If you do look actually around, you realize that similar problems and business models are shared by many industries and subscription obviously is one of them. This digital transformation is making businesses more similar to each other. Because, for example, so many businesses are based on data. So in a way, if you are a retailer like CVS and you are either not an Amazon basically collecting data about what people are buying and how, you know, what what kind of products should be promoted. You learn a lot, for example, about people’s overall health. And this can be a basis for a new business model. Data becomes like something that is shared across industries and it makes companies from different industries suddenly compete with each other. For example, you’ve got retail companies like ASOS in England that basically is a clothing retailer. But they found that the way to to sell clothes today is more about inspiring people. They discover needs through content. So basically, ASOS has become a sort of a lifestyle magazine publisher. They do it in order. You can buy everything that they show to you. But basically, they tried to inspire their customers. So how is it different from, like, Vogue magazine and other lifestyle magazines that basically were showcasing people’s clothes and just trying them and just trying to sell advertising for retailers like ASOS in the past. Actually, we see digital transformation is fascinating because we see very different industries, companies from many different industries suddenly competing for the same currencies like, you know, attention, like direct relationship with somebody, you know. Do you have the credit card number of somebody and so on. So this is what makes it very, very interesting. And I think that, you know, I’m glad that as a journalist or as a researcher, I can actually help news publishers to find ways to try to grow their business despite all the all the challenges.

Robbie Baxter: So what’s your advice, let’s say, for ASOS and Vogue? So when a company like ASOS with deep resources and a direct relationship with the customer suddenly says, we want to start creating inspirational fashion content, very much like Vogue. What is Vogue to do? What would be the guidance for organizations that are seeing a competitor come from a totally different space? They are competing for the same resources, the attention of the customer, the credit card, the permission to present new offers.

Greg Piechota: Basically the business model of publishing is challenged in that way. One of the first questions I would ask myself is, who is your God? Who’s your primary customer? And I bet that in case of Vogue, the primary customer who pays for Vogue to exist, is actually not advertising. This is what makes it very challenging for them to actually respond to disruption by ASOS. Because ASOS no longer needs them to reach individual consumers and show them amazing new things they can have in their wardrobe. I think when we look at the business model of publishing, this is actually what is happening. So traditionally, many news consumers and many magazine consumers were basically subsidized by advertisers. Advertisers were primary customers of those media companies. And consumers were, of course, important because they paid with their attention. But most magazines were almost free. Most newspapers were almost free because they were mostly funded by arts. What is happening right now is that advertisers have many more options to advertise, to show their products. Some of the advertisers become media companies themselves. The biggest sport newsroom in Europe is not run by any news organization. It is actually run by Red Bull from Austria. That is just an energy drink producer. Some advertisers have become basically media. So the media need to redefine their role within the set of customers that they used to serve. Maybe readers, can no longer be subsidized. That’s why many publishers make such a strong push to build a digital subscription business to make readers actually pay for the value they get. There is another set of customers who are newsmakers who traditionally were you know, newspapers were writing about what they do for free. But today you see the trend of native advertising or branded content where actually some newsmakers basically start paying for it to create content that will cover whatever they would do. You’ve got another set of customers like people who are buying cars or selling apartments. This business is gone for newspapers. But in a way, it’s I think it’s reinventing itself into e-commerce. You see now so-called content to commerce kind of models. BuzzFeed is one of those publishers who follows this business model of Dennis Publishing in the United Kingdom. it is a former magazine publisher that made forty percent of revenue last year from selling cars directly to consumers.

Robbie Baxter: How does that work? Can you explain the model?

Greg Piechota: They used to publish many hobbyist magazines, magazines about cars, about motors and motorcycles, lorries. Then when the internet came, of course, and these magazines were partly funded by readers who are buying the single copies, not the advertisers. When the internet came, the company wanted to build the classifieds business, but they were not first to the market. And the market of classified advertising, car sales, is basically a winner takes all market. So, number one is taking eighty percent of the value and everybody else is fighting for the remaining twenty percent. So they thought, OK, we need to make our ads better than on the market. We also need to engage readers very well. We need to tell them a lot about products so we can basically lead them to the decision. Then we can sell not just eyeballs, not just attention of our readers, but basically an intent of a user to buy a car. So they started selling leads, but when they started selling leads, they realized one thing. If I can make somebody want to purchase a car through me, why should I be selling leads? I should be selling the car because the margin I can make on a car is much bigger than I can make on a lead.

Robbie Baxter: They are doing the hard work. They’re doing the heavy lifting of finding the relationship and finding the lead. It’s easy to close the deal once when somebody decides they want the car.

Greg Piechota: Exactly. Then they realized even more that car dealers are not making money on selling cars. Cars are highly discounted, they have a very low margin. You make money with finance. You know how to find the sales. You make money with guarantees, with issuances. So now this company is first. They have all the media that gets the attention of car seekers. Then they can inform them about all different cars that they can choose from. And then they can take their intent into leading to their website where they sell the car to the individual consumer. They can then help them insure it. This is where most of the profit actually comes from, not from the sales of the car, but from the from those financial services. And it’s amazing. A magazine publisher who actually is a car dealer. You know, this is not perhaps what the founders wanted, but this is where they ended up by innovating with the business model.

Robbie Baxter: If I can break down what you’ve what you’ve said or summarize it, you talk about a couple things. The first thing that you brought up, which I think is really important for people to understand, is that whatever business you’re in, you have to know who is your real, forever customer. Who is it that you are in business to serve? And in the case of publishing, which is what we’re talking about today, you really have to decide, are you in the business of supporting the advertisers or the end readers? What is the expectation that they have of you? And then you gave this excellent example of this car enthusiast magazine who I would guess would say, you know, we’re in the business of helping car lovers, and you said motorcycles and trucks and everything else, get the most enjoyment and value out of their passion. Maybe when they started the way that they did that was through articles and pictures. And over time, it’s been helping them understand which cars to buy. Then it became making that car purchase a reality for them. And it reminds me, actually, you know, you talked about analogous businesses and how important that is. One of my clients is Hagerty Insurance, and they’re the largest insurer of classic cars in the world. So, you know, if you have a whatever, a sixty-six Mustang or a Barracuda or one of these cool old cars or even a much older car, they provide you with insurance. They do pallet or flatbed pickup, roadside service, if you have a problem, they know all the, the mechanics who fix old cars and they’ve actually gone the other way. So they did car insurance and then they built a membership model around the ownership because they said once you own the car, there’s all these other things you want to do. You want to meet other car people. You want to drive your car on cool roads. You want to repair your car. You want to rebuild the engine. So they built a membership. They built the community and the content after they sold the insurance.

Greg Piechota: What is really amazing is that you when you connect those two cases, you see that it’s about this being basically customer-centric. If you don’t focus, you don’t get a breakthrough. When you focus and you start to really try to understand what’s the job that these people have, what really they want to achieve and what’s the job they are hiring products to do, like buy a car or a magazine. Then you can really build up on it because then you can imagine. What is actually the service that people want to have? And, you know, let me give you another example of a magazine publisher that went through a similar discovery and ended up somewhere else. This is a company called Essential in United Kingdom. They used to be known as EMAP. They started as a newspaper publisher like a hundred years ago, and then they switch into magazines. They were very active in the magazines for different industries, like Retail Week magazine and a magazine for motorists and so on. At some point, they sold most of the magazines. They just decided to focus on the business of FMCG, fast-moving consumer goods, retail. They still have a magazine retail week, but it’s no longer a magazine publisher because they started to ask questions. OK, so what these guys who are running FMCG businesses and retail businesses want and need is to sell more. They want to understand their customers. They want to understand how the market works. They want to have intelligence and they want to act on this intelligence. So the company started to use the relationship they had to build new services, dashboards about what’s selling currently on major online retailers. What kind of clothes? What’s the color? What’s the popular size? So they get intelligence about what’s going in the shops. It’s not actually journalism. It’s more like data service. But they were asking the right questions. What does my customer really need? Did they really want them to read articles about shops or did they want to sell more clothes in their shops?

Robbie Baxter: Many of these businesses, especially we’re talking in the world of publishing, have been around, as you said, for tens, if not hundreds of years. They not only do they have this mission of helping a particular group of professionals or a particular community, but also they build up a way to deliver that value. So, for example, they have journalists and now, instead of journalists, maybe they need market researchers or they need technologists. You and I went on a tour a few years ago at the Financial Times, and they had more technology people than journalists on their team. That’s a very different kind of business. Some organizations have a kind of a crisis of identity. You know, if we don’t need the same people and the same skills, are we still the same company? Is it more important to keep the same employees and the same jobs? Or is it more important to keep the same mission and promise to the people we serve?

Greg Piechota: You really go to the fundamentals. What’s the purpose of the company? Peter Drucker was always writing that the purpose of the company is to create a customer, meaning solving the problem of the customer. Otherwise, there are no customers. This is especially important when you tried to build the Forever Transaction. Because whatever deficiencies you might have will come out over time. If you think about the newspaper business is about serving the needs of a news consumer. You want to make somebody subscribe to the paper until she dies, or even longer because we want to have a family package. We need to think about the core value that we deliver to those people. The core value is not what you write, as we say, it’s that they read. They define the value. Some people want to be better informed, some people interact with news sites because they want to get entertained. Some other people want to basically be able to speak to other people, interact with others, feel they belong to a group. Some others, you know, they don’t want to learn about anything. They are just stuck in a subway during the rush hours and they don’t want to look at those faces around all in masks. So they turn on the mobile phone and start reading news. So these are different customers and these are different needs they have towards media. And we need to think about how are we serving those needs in such a way that they want to stay forever. So we really need to deliver the value, we can’t cheat it.

Robbie Baxter: So one of the challenges that we’ve seen in the news world, and I’m interested in your take on this, we’ve talked about the kind of transformation around the customer. One of the big challenges, structurally, is this move from ad revenue to subscription revenue and a change effectively in who the master is or who the primary customer is. When I have talked to news organizations, I’ve often told them, it’s really hard to do a good job if your customer is the advertiser and your customer is the reader. It’s hard to find where those goals align. And I’m interested in your point of view with all of these organizations that are saying, well, we need the reader, we see that reader revenue. We see that subscriptions are the future for our industry. We know we have to get there, but we’re dependent on the ad revenue right now and we don’t want to cannibalize that revenue. And yet, do we balance our investments? What is your advice to organizations that understand they need to move to subscription but are concerned about the cannibalization risk and leaving money on the table in the interim as they move from one model to the next?

Greg Piechota: This is a very good question. Many publishers struggled with balancing the business models and, balancing where we should invest, how quickly we can get there, can we afford to lose some businesses? It is becoming clear that advertising and subscription business models are very much connected. It seems that because of the what publishers have learned by building their subscription businesses, they are now reinventing what and how advertising works. Today’s advertisers, they do not want to buy just ad impressions. They want to buy ad impressions to the right people at the right time. So they require targeting. They require sophistication from the media. And they get it from Google today and from Facebook and from Amazon. And this is why these companies dominated digital advertising all over the world except China, where three other Chinese guys dominated the advertising. So publishers now realize that because they focus on subscriptions, the focus is basically on making people read more, making them register on the sites and log them in. Otherwise, you know, if you’re not logged in, you cannot get, for example, the premium content that you paid for. Because people are logged in, they leave much more data, like footprints, about what they were doing on the website. The publishers collect data about their reading habits. Publishers have data about their past transactions. Publishers ask them questions in surveys so they get information about other things, their plans, and their lives. All this data is today used mostly to sell subscriptions, like to predict who is going to buy, who is going to churn. But actually the same data, the same technologies can be used to build advertising business based on first party data publishers. And we are now seeing that the biggest publishers like The Wall Street Journal, The New York Times, the NewsCorp and the others. They are focused on translating these skills that they learned, building a subscription business and taking the data that they collect about their subscribers to actually be able to reinvent advertising for the future. As of today, it’s very difficult to think that you will be successful in advertising in the long term if you don’t build a successful subscription business.

Robbie Baxter: This is such an important point for anybody who is building a subscription business right now to consider this kind of interconnectedness. I think what Greg is talking about in terms of there needing to be a new way of advertising, that is much more based on the customer’s goals and their need states. So another really important kernel here is to think about the role that subscription plays in your broader business model and be willing to refocus your entire model around your kind of current market conditions.

Greg Piechota: I would very much encourage people to think about subscriptions as something that can stabilize the business model. So because it’s a forever revenue, because it’s long term and you aim at having these relationships with customers long term, it helps you to, after some time, predict the revenue in the future. You can predict based on your churn rates, based on your pricing, you can predict the lifetime value of each customer. This is what makes subscription very good to build a fundament of the business, to be able to understand how to cover the most important costs in the business. Because, for example, for publishers readership revenue is stable. The difference with advertising, advertising is cyclical, it’s going great when it’s great. But when the economy is down, advertising is down first. Like right now. So this is why I think it’s interesting to think about the benefits of a subscription business model and predictability of revenue and stability of revenue is one of them. It is even more important than just a profit driver for some producers. It helps you to do many things like for Facebook, you know, because they know the lifetime value, they can better plan their marketing spend. The acquisitions. So why they are able to invest so much money in your movies? Because they spend not today’s money in a way, not today’s revenue. They spend future revenue. They know how much revenue they’re going to make next year. And they are spending it today to outgrow everybody. This is what is the beauty of this business model.

Robbie Baxter: Yeah, the predictability of the cash flow is so important. I want to I want to just finish by asking you what advice you have for entrepreneurs and executives, maybe not in the news world, not in the publishing world, but who are trying to build robust subscription businesses. As someone who’s been both an operator and a scholar in this field, what would be your advice for them?

Greg Piechota: If there is one big thing that publishers have learned over the past more than 10 years of building subscription business models is that data is everything. If there’s one person you should hire first it’s your head of analytics. You need to understand your customers before you try selling to them, because you need to define the product that is right. You need to define the delivery. You need to define the pricing. And then you need to track the performance to be able to improve on it. So data, I think data. This is the one thing that I would say.

Robbie K Baxter

Author of THE FOREVER TRANSACTION & THE MEMBERSHIP ECONOMY; Leading expert on membership models and subscription pricing.