Simple paid model for media
The author of the article, Frédéric Filloux, is the general manager of the French ePresse e-press consortium.
Advertising is still the main source of income for a printed newspaper. Depending on the country, the majority of daily print publications from 70% to 80% of income are received from the sale of advertising on their pages. At the dawn of the digital era, when business plans were measuring everything, the editors hoped to transfer this proven model to the future. Now the general delusion has disappeared. A more down-to-earth viewpoint prevails in the market: publishers want to preserve a high-quality (read expensive) product, being aware that they have no choice but to make the user pay for it one way or another.
Chicken and egg problem. Make the user pay you can only if offer him exclusive, unique content. To do this, you will have to hire a team of professionals who can produce something different from the product of the army of bloggers who will never pay for their goods. Then there are questions. How much to charge for access? ten? 20? More? Dollars? Euro? Pounds? What is the ratio of paid and free orientation? What percentage of your current audience will pay? 5-10%? What does the whole procedure look like?
')
Let's estimate the numbers.
First, we make an assessment. Below I give figures based on data from the European market (France, United Kingdom, Scandinavia) and the USA. The numbers may vary slightly, but I am sure that the deviations are minor. So, in the print world, the cost structure is as follows:
Revision content ....................... 25%
Production costs, printing .... 25%
Distribution ..................................... 20%
Marketing, advertising .......................... 20%
Management ...................................... 10%
Total ............................................... 100%
Now imagine that we are completely moving to electronic format, while maintaining traditional journalistic standards and quality.
We will recruit 200 specialists for editing : writers, editors, analysts, graphic designers, video designers, etc. Anyone who was previously tied up on paper was fired. When you have 200 people working on an online product, you can fly into space. This alignment will cost you 25-30 million dollars a year, including all expenses. Take the middle - 27 million.
With the rejection of paper production costs fall sharply. The old 45% of paper and production costs now turn into 15% for website and application maintenance. The remaining expenses (marketing, advertising, management) will remain at the same level.
The cost structure now looks like this:
Contents of the editors ................................ $ 27 million ....... 40%
Production costs, technical services ...... $ 10 million ........ 15%
Marketing, advertising ................................... $ 20 million ....... 30%
Governance ................................................ 10 million $ ....... 15%
Total ................................................. ............................100%
Now look at the revenue side.
Revenues from advertising. Suppose we have a real audience of 5 million unique visitors per month. By real, I mean the absence of markups, exchange networks, traffic surge, reasonable SEM and excellent SEO. People come to the site, read materials, come back. Each user views at least 20 pages per month. This is at best. By comparison, Google Ad Planner provides the following statistics for unique visitors:
NYT ............ 15 pages per user per month (adjustable paid access filter)
WSJ ............ 14 (some sections of the site are paid)
FT.com ........ 11 (paid access only)
Guardian ..... 14 (free access)
So 20 pages per user is a very ambitious plan. I am convinced that such an indicator can be achieved through the use of a quality recommendations engine (see what Amazon does in this direction).
We multiply 5 million unique visitors by 20 pages, which gives us 100 million pages viewed. Now let's estimate that each page contains several banners and gives us a CPM of $ 20. This is an average. Since not all pages contain the same amount of advertising. In addition, not all banner places will be sold. But carefully made pages with valuable content will bring twice as much. Thus, we will receive an annual income of 24 million dollars, that is, each site visitor will bring us about 5 dollars of income per year.
Again, I repeat: the numbers may be at odds, but they are adequate, in line with what we see on the market for high-quality, proprietary content. (For comparison, the best blogs can boast an indicator of 1-2 dollars per visitor per year.)
Subscription income. Since our audience is constant and loyal, we will assume that we will agree to pay 10% of its content for access to the content. Make no mistake! The New-York Times is counting on such a conversion. Now they have 1%, so there is still a lot of work ahead. I assume that the news is a commodity of elastic demand, that is, if you assign a price of $ 9.99 per month, your conversion will be significantly higher than at a price of $ 15 or $ 20 per month. However, I draw your attention that specialized content is less price sensitive, it can be made more expensive.
In my model, I focus on materials for a wide audience and set the price at $ 10 per month. This makes a one-to-ten conversion more realistic. Then I consider two factors:
- 15% tax (the figure varies from 8% in the US to 20% in France)
- 13% platform cost, including transactions, databases, etc. (Google OnePass alone takes 10%). This line does not include the cost of technological infrastructure.
Based on the foregoing, a digital subscriber paying $ 10 per month will generate an annual ARPU of $ 89 for me. Multiply by half a million paid subscribers (10% of the global audience) and get an income of 44 million dollars.
The revenue structure will look like this :
Advertising ............... $ 24 million .......... 35%
Subscription ............. $ 44 million .......... 65%
Total .................. $ 68 million ........... 100%
68 million revenue with 67 million expenses (all figures are rounded) means only 2% of the operating margin. Hmm, nothing to envy. It is easy to turn such a margin into operational losses, especially considering that you have to work hard to achieve the stated indicators - 10% of the conversion of freebies to payers, a large number of pages viewed per user. Some years it is necessary to work at a loss. But this is only the tip of the iceberg. In fact, if you raise the fee from $ 10 (this is only 50 cents per day for access on weekdays) to $ 12, then your operating margin rises to 13%.
And I am silent about many other possibilities. For example, about the paper weekly, which the editorial staff of 200 people will easily do, related products like e-books, etc.
Advertising is still the main source of income for a printed newspaper. Depending on the country, the majority of daily print publications from 70% to 80% of income are received from the sale of advertising on their pages. At the dawn of the digital era, when business plans were measuring everything, the editors hoped to transfer this proven model to the future. Now the general delusion has disappeared. A more down-to-earth viewpoint prevails in the market: publishers want to preserve a high-quality (read expensive) product, being aware that they have no choice but to make the user pay for it one way or another.
Chicken and egg problem. Make the user pay you can only if offer him exclusive, unique content. To do this, you will have to hire a team of professionals who can produce something different from the product of the army of bloggers who will never pay for their goods. Then there are questions. How much to charge for access? ten? 20? More? Dollars? Euro? Pounds? What is the ratio of paid and free orientation? What percentage of your current audience will pay? 5-10%? What does the whole procedure look like?
')
Let's estimate the numbers.
First, we make an assessment. Below I give figures based on data from the European market (France, United Kingdom, Scandinavia) and the USA. The numbers may vary slightly, but I am sure that the deviations are minor. So, in the print world, the cost structure is as follows:
Revision content ....................... 25%
Production costs, printing .... 25%
Distribution ..................................... 20%
Marketing, advertising .......................... 20%
Management ...................................... 10%
Total ............................................... 100%
Now imagine that we are completely moving to electronic format, while maintaining traditional journalistic standards and quality.
We will recruit 200 specialists for editing : writers, editors, analysts, graphic designers, video designers, etc. Anyone who was previously tied up on paper was fired. When you have 200 people working on an online product, you can fly into space. This alignment will cost you 25-30 million dollars a year, including all expenses. Take the middle - 27 million.
With the rejection of paper production costs fall sharply. The old 45% of paper and production costs now turn into 15% for website and application maintenance. The remaining expenses (marketing, advertising, management) will remain at the same level.
The cost structure now looks like this:
Contents of the editors ................................ $ 27 million ....... 40%
Production costs, technical services ...... $ 10 million ........ 15%
Marketing, advertising ................................... $ 20 million ....... 30%
Governance ................................................ 10 million $ ....... 15%
Total ................................................. ............................100%
Now look at the revenue side.
Revenues from advertising. Suppose we have a real audience of 5 million unique visitors per month. By real, I mean the absence of markups, exchange networks, traffic surge, reasonable SEM and excellent SEO. People come to the site, read materials, come back. Each user views at least 20 pages per month. This is at best. By comparison, Google Ad Planner provides the following statistics for unique visitors:
NYT ............ 15 pages per user per month (adjustable paid access filter)
WSJ ............ 14 (some sections of the site are paid)
FT.com ........ 11 (paid access only)
Guardian ..... 14 (free access)
So 20 pages per user is a very ambitious plan. I am convinced that such an indicator can be achieved through the use of a quality recommendations engine (see what Amazon does in this direction).
We multiply 5 million unique visitors by 20 pages, which gives us 100 million pages viewed. Now let's estimate that each page contains several banners and gives us a CPM of $ 20. This is an average. Since not all pages contain the same amount of advertising. In addition, not all banner places will be sold. But carefully made pages with valuable content will bring twice as much. Thus, we will receive an annual income of 24 million dollars, that is, each site visitor will bring us about 5 dollars of income per year.
Again, I repeat: the numbers may be at odds, but they are adequate, in line with what we see on the market for high-quality, proprietary content. (For comparison, the best blogs can boast an indicator of 1-2 dollars per visitor per year.)
Subscription income. Since our audience is constant and loyal, we will assume that we will agree to pay 10% of its content for access to the content. Make no mistake! The New-York Times is counting on such a conversion. Now they have 1%, so there is still a lot of work ahead. I assume that the news is a commodity of elastic demand, that is, if you assign a price of $ 9.99 per month, your conversion will be significantly higher than at a price of $ 15 or $ 20 per month. However, I draw your attention that specialized content is less price sensitive, it can be made more expensive.
In my model, I focus on materials for a wide audience and set the price at $ 10 per month. This makes a one-to-ten conversion more realistic. Then I consider two factors:
- 15% tax (the figure varies from 8% in the US to 20% in France)
- 13% platform cost, including transactions, databases, etc. (Google OnePass alone takes 10%). This line does not include the cost of technological infrastructure.
Based on the foregoing, a digital subscriber paying $ 10 per month will generate an annual ARPU of $ 89 for me. Multiply by half a million paid subscribers (10% of the global audience) and get an income of 44 million dollars.
The revenue structure will look like this :
Advertising ............... $ 24 million .......... 35%
Subscription ............. $ 44 million .......... 65%
Total .................. $ 68 million ........... 100%
68 million revenue with 67 million expenses (all figures are rounded) means only 2% of the operating margin. Hmm, nothing to envy. It is easy to turn such a margin into operational losses, especially considering that you have to work hard to achieve the stated indicators - 10% of the conversion of freebies to payers, a large number of pages viewed per user. Some years it is necessary to work at a loss. But this is only the tip of the iceberg. In fact, if you raise the fee from $ 10 (this is only 50 cents per day for access on weekdays) to $ 12, then your operating margin rises to 13%.
And I am silent about many other possibilities. For example, about the paper weekly, which the editorial staff of 200 people will easily do, related products like e-books, etc.
Source: https://habr.com/ru/post/288264/
All Articles