Subscription Models: Price Elasticity

Paywalls, subscriptions…they’re on the rise for the digital versions of magazines and newspapers. And consumers seem to be willing to pay. Our research indicates that the sweet spot sits somewhere between $4.99 to $9.99 per month. For those offering annual they seem to sit between $3.99 to $7.99 when a year is purchased up front. That’s the quick summary.
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We looked at 20 publications (newspapers and magazines) in the U.S., Canada and UK that have gone to subscription models over the past two years. The low end was $4.99 (price adjusted for currency, expressed here in CAD) while at the top end $14.99 but more common was $9.99 with a median price of $7.99.
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The average number of free articles before a subscription is pushed is 3 with 7 at the top end none at the bottom end. All display most of their content lineup or use teasers of the initial one to two paragraphs of an article before promoting a subscription. Some use a mixture of data collection to access an article (answering 1-3 questions in a survey) and allowing this for four to five articles before hitting a paywall, while others require registration (usually Single Sign On – SSO) and then allow between three and seven articles before hitting a paywall.
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What we find is that consumers do seem willing to pay for publications which they feel deliver content value. We did not look at consumer opinion on this aspect.
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One of our take-aways is that savvier news media services, mostly newspapers, understand the value of collecting reader data and leveraging it for use with advertisers. By using a combination of SSO and and asking survey questions, valuable insights can be collected and anonymized aggregate data used to sell advertising at a higher price or build better personas and profiles of readers.
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For the most part, such pricing is in alignment with Software-as-a-Service (SaaS) business models. Magazines and newspapers can take a lot from the SaaS business model and metrics with a Monthly Recurring Revenue (MRR) approach that can combine cohort analysis with MRR.
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We don’t see a one size fits all solution when it comes to subscription prices and how and when to mix the models. Experimentation will be the rule over the next few years. But what is clear is that more news media companies are edging towards some form of subscription model and leveraging analytics.
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We’re doing more research and will share our insights as we go along.