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Why Online Subscription Models Are Risky Generational Plays

While the debate over whether media companies should charge for online content isn’t new, there have been a few interesting new developments in the past couple of weeks that have caused us to want to jump back in the ring on this.

We’re going to invoke an odd example for this post, but it’s a familiar one for us. One of the first entertainment industries which had a lot of media coverage online was the gaming industry, and that coverage reached its maturation point both editorially and technologically well before other industries since its independent media publishers established themselves early. In fact, the two largest sites covering gaming online, GameSpot and IGN, were founded in 1996.

Those two sites grappled with the issue of paid versus free content very early and have provided a retrospective look at the debate. GameSpot and IGN both had intensive subscription models in the late 90’s and early 2000’s, and while they both still have subscription services, the amount of content that has been hidden behind those walls has been peeled back since their introduction. In fact, they’ve been peeled back so much that they merely allow access to HD versions of some videos and private subscription-only message boards that, in and of themselves, don’t warrant the monthly fee.

We’ll revisit them in a moment, but it brings us to the recent news that sparked this post. First, it started with Exhibit A from AdAge: Why Charging for Online Content (Mostly) Won’t Work – a somewhat interesting article, but a bit vague in the details.

Then came Exhibit B, which seemed to contradict A: Newspapers Grapple With How — or Even Whether — to Erect a Pay Wall. has 1.6 million registered users and more than 121,000 paying subscribers — up 22% from a year earlier. Unique visitors and page views are growing at the same time.

Then came the nail in the coffin for all those “Internet loonies” claiming that media companies can’t charge for content in Exhibit C: Out of 25 Biggest Newspapers, Only Wall Street Journal Gains Circulation

As permitted by Audit Bureau of Circulations rules, The Journal’s paid circulation report includes subscriptions to its paid website. Excluding 407,002 such electronic subscriptions, up 14.4% from a year earlier, the core print paper actually saw paid circulation decline 2.4%.

Well, there you go, game over. See, subscription models can work, are working, and will work in the future, right?

Well, not so fast. Sure, on the surface the current data seems to suggest that possibility, but here’s where things get tricky. The Wall Street Journal and Financial Times demographics are not representative of the general population and the audience of most media companies. According to a 2007 report on the WSJ’s demographics by Scott Mayerowitz of ABC News:

More than three-fourths of them have a college degree, and their average household income is $234,909. The readers of USA Today and The New York Times tend to earn less.

The Financial Times attracts a similar, if not even more affluent audience.

Nest eggs for FT Wealth readers average £1,251,035 ($2 million USD), over twice that of the more common variety.

Growth in paid online subscriptions from those publications is not indicative of what, say, the USA Today would see if they put a wall around their content. The FT and WSJ attract older audiences who don’t see such subscriptions as burdensome.

And even if the New York Times were to put its paid model back in place and saw paid online circulation go up, the most important stat lies in who those subscribers are. We can only speculate, but odds are they would be older readers who fit a similar demographic profile.

Fact is, “Gen Y,” the twenty-somethings, do not like to pay for content. They have blogs which facilitate such information. They have web sites like BugMeNot, dedicated to fake logins so they can access content to which they shouldn’t otherwise have access. Hell, they could even use the near prehistoric (for their generation) Google Cache to check out those AdAge articles (Exhibit A, Exhibit B, Exhibit C) after AdAge gates them up behind their pseudo-subscriber wall.

And here’s the relevance of the aforementioned IGN and GameSpot subscription programs. They both started out during a time when the age of blogging hadn’t hit its full potential, and both were pulled back even before blogs exploded. Now they have to contend with blogs whose readerships are rivaling their own, and who PR people must respect and provide access to, limiting the amount of content those “mainstream” sites can put behind lock and key. They have to contend with Youtube, Facebook, Twitter, and old school message boards, where all it takes is one guy with a subscription to post that locked content for the world to see.

Sure, subscriptions might work in the short term for older, affluent audiences, and the GameSpot/IGN examples provide an isolated look at the complete opposite demographic, thus giving only a very polarized view of The Great Debate. But time’s a-tickin, and Gen Y still poses the threat to subscription models, no matter what you think, Mr. Greg Harmon, CEO of Beldin Interactive:

Your most avid readers are the ones who are going to pay and they’re the ones responsible for the most page views,” he said. Papers should also be able to charge higher ad rates to reach those paying readers, he said.

The downside is that pay models can constrain growth in traffic, ad inventory and newspapers’ voice on the web. “Our voice is our greatest asset in many ways,” said Greg Harmon, CEO-managing director at Belden Interactive, part of ITZBelden. “Going paid involves thinking really hard about conserving and preserving and advancing voice.”

There is always a younger, cheaper, and voluntary voice willing to trump your paid reporters, even for nothing in return. And going back to what we do at Conversation – igniting discussions about your brands – free content is freely indexed by Google, more inherently shareable on Facebook, Twitter, AIM, and good old-fashioned e-mail, and thus far more practical in today’s web culture.

So for all those now boarding The Subscription Express: welcome aboard, mind the gap between the train and the platform, and we’ll be reaching our final destination in just a few stops.


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