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Alternative models to monetize digital content

Alternative models to monetize digital content

Magazines will fare better than newspapers in the struggle to monetize digital content, according to a report released by Pricewaterhouse Coopers. The annual outlook on entertainment and media predicts that newspapers' digital subscriptions will not compensate for decreasing circulation revenues.

On Forbes.com, Jeff Bercovici breaks down the numbers. The report forecasts that initially, digital subscriptions will grow quickly. For the next five years, both magazines and newspapers will see their largest revenue gains in selling digital subscriptions. By 2015, PwC expects magazines to take in $611 million from digital editions (they took in about $4 million last year). Newspapers have a much stronger starting point, already racking in $150 million from digital subscriptions last year. However, PwC predicts their growth to reach only about $331 million in 2015, which would not cover the expected print sales decline.

With the news that digital subscriptions may not be enough to save the newspaper industry, finding alternative revenue streams seems to be the next step forward for the industry. Some interesting models already exist, and span everything from sponsorship, pay-per-use, and partnering with online deal services.

AOL's local news network Patch's current revenue model is still uncertain, but its new partnership with American Express may provide some clarification. The alliance utilizes Serve, a digital payment platform developed by the credit-card company that allows local merchants to post offers online more easily. Rather than having to print online offers, a feature that generates complaints among Groupon users, Serve streamlines the process. Consumers can redeem deals at the point of sale using a Serve Am-Ex credit card. The Huffington Post speculates that connecting online commerce and off-line deals could be the best way for Patch to dramatically expand consumer reach.

Another option for newspapers looking for a cash influx is sponsorship. Association with an established newspaper is a good opportunity for a company looking to refurbish its image. For example, CNN's financial website has a content section called "The Business of Green" sponsored by the Indian engineering conglomerate Kirloskar Group. As the site is opened, a video ad pops up depicting the conglomerate's environmentally friendly projects. Readers can skip the ad, although some might be interested as the section is designed for a niche audience.

Hearst's online magazines have partnered with Pixazza, a company that makes images interactive, to create a stronger link between the magazines and their advertisers. The model makes it easy for users to buy the products they see in print. Users can scroll through pictures and click on items. Kristine Welker, chief revenue officer for Hearst Digital, said the publication seeks to make its magazines "a shoppable experience" for users.

This approach is not as relevant for newspapers, as their job is to inform rather than sell products. However, it could be an interesting addition to weekend supplements and style or travel sections. Newspapers can strike a balance between maintaining an unbiased stance and increasing revenue stream with interactive ads as long as ads are kept in entertainment sections.

Beyond innovative advertising, subscriptions can increase revenue by adopting pay-per-use paywall models. Autosport.com implemented a pay-per-use model that streamlined the purchasing process and offered an alternative to long-term subscription commitments. Users appreciated having the freedom to pay for only the content they consumed, and Autosport.com saw a 75% jump in first time purchasers. Paypal Blog likens this option to be the digital equivalent of newsstand sales. By allowing readers to either subscribe or pay according to how much content was read, Autosport.com found that more readers were willing to pay to read.

Putting up paywalls is the first step, but newspapers will need to be more innovative to compensate for print losses. Perhaps PwC's predictions are exaggerated, but they offer a sober reminder that digital content must have a financial strategy to survive. Hopefully, charging for digital content will have the same effect as the New York Times' paywall did - print subscription increase while digital sales provide a new revenue stream. Even if news circulation decreases, newspapers' will to adapt and build partnerships with other organizations will ease the digital transition.

Sources: Pricewaterhouse Coopers, Gigoam, Forbes.com, The Huffington Post, CNN, PayPal Blog, NYTimes Media Decoder

Picture Source: Fotolia



Florence Pichon


2011-06-16 16:22

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