Bundling the Newspapers

Where's the Spotify or Netflix for Newspapers? 

As I either come up against paywalls for, or renew subscriptions at, some renowned bastions of journalism, I keep wondering: why isn't there a Spotify or a Netflix for Newspapers? You know, an all-you-can-eat subscription model where I pay a flat monthly fee and get access to the New York Times, Economist, Washington Post, Wall Street Journal, Financial Times and the New Yorker, just to name a few.

To clarify, we're not talking about news aggregators like Digg, Reddit or Google News, RSS feed readers, or curators that work above the paywall to show you free articles or spinets of otherwise for-fee articles. In that regard, no one beats Facebook; PewResearch Center shows that over 60% of users get their news about government and politics from Facebook. Rather, we're talking about what's referred to as bundling of paid content. 

A Little Background: The term "bundling" was previously used in reference to cable companies selling you a package deal of phone, Internet and cable service. More recently, bundling is referred to those companies selling you a subscription to a panoply of cable channels including ones you'll never watch. The idea is that high revenue generating channels subsidize low revenue generating ones and everyone is happy. But viewers got tired of how expensive those cable bills were and moved to online bundles like Neflix, Hulu, HBO Go and Amazon Prime. The irony is that the bundle was dis-aggregated on TV and re-aggregated online, and can cost up to the same amount.

I bring up this background because newspapers are going through the same thing. Everyone knows that print circulation is down, and the bundle of content that a newspaper used to be is becoming dis-aggregated. You have your "new" news, which is "what is happening right now. That kind of news has become a commodity, thanks to Twitter, Facebook, other social media, and anyone with a smartphone. Then, you have the "think pieces", investigative journalism, and local news, which could demand a monetary value from readers. According to an American Press Institute Study published in February 2016, 78% of US newspapers with circulations over 50,000 are using some kind of a digital subscription model. More specifically, 63% of newspapers are using a metered model, 12% are using a freemium model and 3% are using a hard subscription model. With a panoply of newspapers with the multitude of subscription choices, it's a shame that no one has figured out a simple way to access all the finest journalism for one monthly fee yet. 

To be sure, the idea has been tried and tested, but mainly for magazines. Next Issue Media, now Texture, launched in 2012, and has an all-you-can-eat monthly subscription for magazines, and its competitor, Magzter, is now available for us too.

The Startups: Moving on to newspapers, Blendle and Inkl are the two visionaries trying to solve this problems, but they're still in their early stages. Inkl allows you to read newspaper articles by paying either by the article (10 cents) or by a monthly subscription ($15). Blendle, which is in beta, is a pay-per-article model. The pay-per-article model makes model may make sense for journalism, because unlike music, t.v. shows or movies, it is unlikely that readers will consume an article repeatedly. 

The pay-per-article model doesn't allow for higher cost articles to subsidize lower cost articles, which wouldn't matter as much if, like songs in an album, all articles in a publication were written by one author. With the prevalence of this type of model, for better or worse, we'd eventually lose the articles for which not enough readers wanted to pay. Both models tout ad-free reading zones without click-bait, but if your revenue stream is per article, headlines will have to be flashy enough to ensnare readers. Regardless, neither of these bundlers have been able to get all the good papers, and it may be impossible to make that happen (#analysis).

 

The reason goes back to simple economics (you knew this was coming). The market for a newspaper most closely resembles that of a monopolistic competition, where firms have many competitors, barriers to entry are low, but each firm offers a slightly differentiated product. In this case, newspapers aren't perfect substitutes for one another and can set their own price, albeit taking the industry price as  a guideline. Granted, most newspapers aren't doing super well, but Pulitzer Prize winning papers can typically elicit a higher price than other papers. In the long-run, papers price where Average Revenue = Average Total Costs as shown below.

So as long as news organizations are recovering their average total costs and maybe a little more, they should sign up to be part of he bundling service, correct? Not so fast. In the short-run when differentiation between papers is sharp, some can charge above Average Total Costs Curve and make economic profits, as shown below, lowering their incentives to play well with others.

Comparison to Music: There's a reason that blockbuster artists like Adele, Beyoncé, and Taylor Swift have eschewed Spotify, and perhaps we can draw a parallel to the news world. Ben Thompson writes in Stratechery, "The problem with Spotify is that at a very fundamental level it treats music as a commodity. You can’t choose where your $10/month goes based on the emotional impact of a song."

 

He makes two great points:

1. Money paid to an aggregator is NOT money paid to an artist, and an explicit purchase makes a fan more loyal, not less.
2. Grossing $10 per customer in a single shot is far more lucrative than pennies from the exact same people when they access your songs in a streaming service.



So it comes down to compensation for those who can demand higher price tags, the Adeles of the newspapers, so to say. In a way, the pay-per-article solves the problem #2, and the pennies per article really do go directly to the papers. It doesn't necessarily create loyal customers, however. So there will always be the Adeles who remain independent, unless you can somehow figure out how to solve the loyalty and price problem (some ideas below).

Twists to the Established Model: Here are some ideas about how to make the newspaper model more efficient, both for readers and publishers. 

1. A Facebook add-on that allows you to instantly buy articles when you run up against a paywall.
2. The pay-per-article platform should price discriminate, charging a few pennies more articles coming higher priced newspapers or award winning authors than lower priced newspapers. Click and purchase data will come handy here, and prices can be adjusted as economics change.
3. A choose-your-own newspaper bundle where the marginal cost of adding each new subscription declines. The papers get paid a % of ad fees (I don't mind having ads, and if that's how authors get paid, I'm for them) from the sites, and the bundler gets the rest, and the reader gets a great deal.

Lastly, while there is a case for writing all news stories for Facebook we know there have been plenty of fake stories on the social network. Facebook, not being a newspaper, doesn't have the obligation to take them down, so there has to be branded news to signal quality, whether that comes in a bundled format or not.