Thought Leadership: “Monetising digital content”

In our latest Media Playground Thought Leadership piece, Kantar Media looks at paid-for online content, the various pricing models and what research shows consumers are willing to pay.

“If you build it, they will come …”

That well known misquote which, for Kevin Costner in Field of Dreams and Mike Myers in Wayne’s World 2, bears witness to mystical predictions coming to profitable fruition. So, just who has Rupert Murdoch been listening to for inspiration in his latest mission – to monetise digital content – and will it end in a similarly prosperous manner?

It certainly seems like a challenge, given an entire ‘online = free’ mindset needs changing. So will the imminent introduction of new payment schemes for newspaper websites take off?

Two schools of thought have appeared; Newscorp found high profile allies in the shape of the New York Times, who have revealed plans to start charging for access to their website from 2011. On the other side; Arianna Huffington, Google and the Guardian all seek to let their digital audiences grow organically. However, Mr Murdoch remains effusive and has just laid bare his plans to introduce fees for accessing both the Times and its Sunday sibling online.

The paid content school of thought has three core proposals:

• Paywalls. Users pay up front to gain access for core content online. This option is already successfully employed online by both the Wall Street Journal and the Financial Times. Given their niche business markets, doubts remain whether this subscription model is transferable to more mainstream news providers. This is also being trialled by Axel Springer for a selection of their regional titles in Germany and News International has just made its intentions clear.

• Micropayments take a ‘pay as you go’ approach where web users pay for the articles they access on a click by click basis. No-one in the general market is known to be actively implementing this strategy.

• The Hybrid Model is more aligned with where the New York Times is heading. In what the NYT is calling a ‘metered solution’, the hybrid model acts more as a velvet rope than an outright entry fee. Newspaper subscribers gain free VIP access to digital content whereas regular users are restricted to browsing a limited number of articles before having to pay.

These are not the only digital revenue streams. Away from website content we have paid-for news mobile apps. The Guardian achieved over 100,000 downloads of their mobile app within the first two months of launch (at £2.39).

Recent reports suggest plans are in place to further enhance the app so as to introduce a monthly charge. Initial indications suggest this stream may be slightly better equipped for monetisation given the existing (and trusted) payment infrastructure already in place. Despite this, some providers are offering free mobile apps, such as Sky News which has had more than one million downloads.

So they are going to be built, but will people come?

Various research agencies have taken initial steps into the paid content minefield with conflicting findings reported. Kantar Media’s futurePROOF study considered willingness to pay across a variety of different media. Perhaps unsurprisingly, TV emerged as the media most are willing to pay for (23% agree they would pay). Things looked less profitable for paid online newspapers; 3% agreed they ‘would be willing to pay for newspaper content online’ with 2% ‘willing to pay for newspaper content via mobile’.

Additional qualitative research conducted by Kantar Media on news consumption highlighted a mindset issue that needs to be considered when quantitatively addressing respondents’ willingness to pay for digital content. Within the group discussions, respondents struggled to comprehend a world with no ‘free’ option. When pushed via a deliberative exercise, there was greater willingness to pay via the paywall model than by micropayments.

We found the fundamental paywall infrastructure was relatively familiar to respondents. They already pay subscriptions for their Sky/Virgin TV, mobile phone and broadband, so an additional subscription would not necessarily be out of the question.

The paywall offers an element of reassurance for consumers. Our respondents demonstrated a clear preference for a fixed payment where they knew exactly how much would be charged each month (or week, or year).

In contrast, micropayments appear unnecessarily confusing and overly complicated. Respondents expressed fears they’d end up paying more in the long run. Whilst a maximum payment cap would likely be introduced to avoid this very scenario, the confusion around this proposal was apparent.

Although not familiar to everyone, mobile apps were favourably received by key audience segments. Kantar Media’s qualitative sessions found this driven by the more future-facing (younger, tech-savvy) respondents who were more familiar with the concept and how to use and buy them. For the more traditional newspaper reader though, this still seemed somewhat confusing and unnecessary. Again, the preference for a ‘one-off’ payment for mobile news apps over regular ‘pay as you access’ fees was clear.

A key issue driving the success of any paid content strategy is undoubtedly that of the price point. Respondents were unlikely to pay the equivalent of a newspaper cover price for access to digital content despite the Times‘ strategy – charging users access fee of £1 per day or £2 per week. Given this, the potential for publishers to be charging £20-30 per month is not going to be met with any significant level of uptake and web traffic will likely collapse. Within our sessions initial reactions suggest £5 per month would be ‘about right’, and even at that level respondents would still likely require some incentivising. The presence of a ‘free’ BBC (in the UK) makes this sell somewhat harder.

Getting the right price point

Kantar Media has developed a quantitative price optimisation model – called Foresight – to help publishers pinpoint the crucial price point to charge. By applying choice based conjoint analysis, Foresight can identify the optimal price point for subscriptions and also forecast what impact this is likely to have on website usage and new brand audiences.

Alternatively, should publishers consider offering packages where subscribers have access to different content; the model could readily be adapted. In addition to identifying the critical price points it can also pinpoint the best package content to offer different groups of users. This is a sensitive approach which makes it possible for publishers to easily identify the key drivers of change.

Clearly a paid for digital strategy is not without its risks. With this there is a need for publishers to robustly weigh up the risk/return equation. Kantar Media’s Foresight can provide reliable consumer insights to help guide this decision making.

So, we now know they will be built, but whether people will come and scale the paywalls is still to be determined.

Kantar Media will be presenting insights on how consumers view and engage with TV content across multiple platforms at this June’s Media Playground conference.