“Netflix for News”. That’s a phrase I’ve started hearing in the last month.
It refers to an idea about how to save the news industry. I think most people who say it are suggesting a single subscription which users would pay, but which would give them access a wide range of news sites – a kind of super-subscription.
If we take a business model which has had recent success elsewhere in the media, the idea goes, we would solve everything.
Spotify has done it for music, Netflix have done it for TV and movies, why not do it for news? Subscribers would be paying, news organisations would have a new revenue source, and online media would be saved. Hurrah.
It’s easy to see why this idea has surfaced. Spotify has been at the forefront of transforming an industry ravaged by piracy into one that has returned to growth, with streaming increasingly driving it. Netflix is putting unprecedented amounts of money into amazing new commissions.
The news industry most definitely needs to drive direct consumer revenues, and so dreams of similar things happening.
Seems simple. Will it work?
Well… there are a few reasons why it might not be the ideal model.
Firstly, to state the obvious, music and TV are quite different from news. Music persists in a way that news does not. One person might listen to the same piece of music tens – or even hundreds – of times and still enjoy it.
People spend hours bingeing on box sets, sometimes years old. The ‘value-creating life’ of music, especially popular music, can be as long as decades, with TV and movies not far behind.
News, in comparison, tends to be short-lived. Its value-creating life can be as short as minutes or hours. Very few news stories hold significant economic value (or attention) for longer than a few days or weeks.
This means the model for getting payback has to be different. News requires constant re-investment by news companies to continue to have value, which needs be realised immediately. The investment and payback cycle for other media is typically a lot slower.
Is all news equally valuable?
In addition, news products tend to have more variable pricing. Unlike music, which broadly costs the same regardless of what it is, newspapers have always had highly differentiated pricing and products.
How do you equate the value of The Sun and The Times? Are they worth the same? Does someone reading one long article in The Times account for the same amount of value as someone else reading a short one in The Sun?
This is the challenge faced in a super-subscription environment, where the user pays the same regardless of what they read or how much they read.
How do you divide it fairly? Who should get what? And how do you ensure that making more investment in content, and getting it more widely read, delivers more revenue? Without that promise, why would anyone invest in expensive content instead of cheaper commodified stuff? You only have to look at today’s internet to see the answer to that question.
A super-subscription business model means that an algorithm decides how much individual news products are worth. It’s impossible to make an algorithm for this without producing perverse outcomes – I speak from experience.
If your algorithm pays publishers based on how many articles get read, publishers with long reads get punished. If it rewards “dwell time”, publishers who are good at producing very pithy articles get punished. If it tries to identify a user’s favourite publication and give it a bigger share, other unfairly lose out.
Algorithms like this, however sophisticated, create winners and losers and limit the ability of publishers to diversify their products and business models. On the contrary, they incentivise publishers to adjust their product in order to game the algorithm, rather than to please their reader.
That quickly becomes messy, so to minimise it, the provider needs to keep the algorithm opaque and ever-changing. The whole business model becomes shrouded in mystery. Nobody can ever know quite how the amount they are being paid has been calculated.
If you want to see that problem come to life, just look at how the Google search algorithm and advertising algorithms work. Key to the way they function, and acquire power in the market, is that almost nothing is disclosed about the way they function. Nobody is allowed to know quite how they operate. Those who control the algorithm are totally in control.
Not quite as simple as it looks
So “Spotifying” or “Netflixiating” news has a few challenges, even at a glance.
Perhaps they might be reduced by ensuring there are a number of competing services out there. This, though, raises its own issues.
For example, if services try to compete by doing exclusive deals with publishers, consumers will be left with a choice of incomplete services and might end up having to subscribe to several of them in order to get access to everything they want. Sound familiar to any Netflix and Amazon Prime fans? But if all the competing services have essentially the same offer, how many of them will survive? A competitive market for this sort of thing can be hard to sustain in reality and the consumer offer will be damaged.
So what’s the upside?
There is one outstandingly good thing, though, about these super-subscription models.
They are good at signing up large numbers of subscribers. If you want a subscription product to get to millions of customers, keep the price low – £10 per month or less is what you’re aiming for – give consumers a big choice of content, all included, and try to be the one subscription everyone needs. You’ll find loads of takers.
By comparison, it’s much harder to get people to commit to a relatively restricted product (like a single newspaper, for example) than a massive offering. That’s why subscription success tends to be limited to an exclusive group of high value publishers with affluent audiences.
The largest barrier to making subscription models work is getting that commitment from readers, so giving an immense amount of content in return is a good way to get them to pay.
Even if you could make it work, you shouldn’t want to
But there’s still a huge, massive problem with the whole idea of super-subscriptions.
Once you’ve persuaded all the publishers to take part, and you have the subscribers signed up, and you’ve developed a really compelling product and user proposition, and you have written an algorithm which divides the money up fairly, and you have managed to find a way to put high-priced, low volume products alongside low-priced, high volume products in the same service without any of them crying foul – none of which is easy – you still have to face the fact that you – and the publishers – have a terrible business.
Because you have set an upper limit on how big it can be. That limit is your subscription price. £10 per month, multiplied by the number of users you can sign up. You have to divide that £10 between all the publishers, and try to have some money left over for yourself.
That money will all be spoken for the day you go on sale. And there won’t be much left over to pay to new publishers who want to come and join in the fun. For them to get anything, you have to take it away from someone else, or try to increase price (and prevent the existing publishers from claiming the increase for themselves). Or the late joining publishers have to rely on advertising revenue – and we all know the issues with that.
It’s revenue, but it’s not a thriving market
So, this model produces some new revenue for the industry. Which is a good thing.
However, the revenue doesn’t increase in response to more content being consumed. It just gets shared more thinly between publishers, just as ad revenue does now. Not such a great thing if you want to see a bigger and more competitive market. More importantly, it reduces the rationale for investing more in content.
In a future “Spotified” world where total income is fixed, the incentive will still be to do exactly the same thing as now – minimise cost, maximise consumption, depend on advertising to drive revenue increases. It will just have an underlying, new, base layer of customer revenue which will only grow as long as new customers are acquired and retained.
It will not lead to a greater incentive to invest in product and content, because the market and opportunity will not grow any bigger in response to that investment. Not only is revenue limited by subscription rates in a “Spotified” world; so is market growth.
Super-subscriptions would be first aid for dying news brands, but not a cure
So, in my view, this model will solve little. It will give the existing players a temporary reprieve, but leaves an internet still far from the vibrant, thriving market it could be. The door is closed to new entrants, because the fixed revenue – the subscription price – means publishers who are involved will defend their share.
Be more ambitious, create a market which can thrive
There is a much more exciting, compelling and tantalising opportunity which publishers and regulators should focus on instead.
Imagine, if you dare, an internet in which every time a consumer reads something (or listens, or watches, or plays) the publisher makes some money. The more people consume their product, the more money they make.
What would happen?
Well… the best content, well produced, well marketed and wisely priced, would make the most money.
Which means the incentive to invest would change radically. We would see a lot more competition for users’ attention (and money). More products would be launched, and creative innovators incentivised to make their content compelling because they’re offered a direct reward.
Consumers would, in turn, increase their consumption because they’ve been given an ever more exciting choice of content to choose from. The market would grow every time someone decided to read more content. The job of the creators would be to get ever more creative about how to get them to engage more. And there are no limits set on the potential revenue for online content.
Publishers win big, consumers win bigger
But what about the poor old consumer, suddenly facing all this in place of what used to be free?
They’re actually the biggest winner of all. Being the source of the money places consumers in control – they become the masters of the algorithm. Nobody is going to part with their cash – or their data – unless what they get in return is worth it. Disappoint your customer and your business will suffer; please them and you win a huge prize.
This is happening right now
If you want to know how this can be achieved, I have spent the last year building the answer to that.