How many people really pay for digital news?
Although digital-only subscribers make up 37.6% of the total circulation of the Wall Street Journal and 34.4% of the total readership of the New York Times, the number of digital-only subscribers at Gannett, the largest publisher of general-interest newspapers in the land, is 2.2% of its average aggregate weekday circulation of 3 million subscribers.
Notwithstanding the relative productivity of their paywalls, the paid penetration at the Journal and the Times pales in comparison to the success that Netflix, Spotify, Major League Baseball and other ventures have had in selling entertainment-oriented digital content. As illustrated in the table below, Netflix, the most popular digital pay service of our time, has 40 times more monthly subscribers than the New York Times.
The disparity in the demand for news and entertainment subscriptions suggests that the market for digital news may be less robust than newspaper publishers want it to be. But there is no doubt that publishers are counting heavily on it.
After more than a decade of giving away their valuable content in an introductory offer of epic duration, newspapers in the last few years suddenly began erecting paywalls to try to make up for some of the revenues lost as the industry’s collective advertising volume slid from a record $49.4 billion in 2005 to $22.3 billion in 2012.
As of July, paywalls had been erected at more than 400 of the nation’s 1,382 daily newspapers, according to a running list maintained by News & Tech, the trade journal.
No publisher has been more vigorous in vowing to push paywall programs than Gannett, where chief executive Gracia Martore told investors in a conference call that the company had “around” 65,000 digital-only subscribers at the end of June.
Publishing 81 dailies from coast to coast, Gannett represents an excellent proxy for the performance of paywalls at U.S. newspapers, because it operates in a broad array of small, medium and metro markets. (Gannett also publishes USA Today, whose 1.8-million circulation is excluded from this analysis because the paper does not have a paywall.)
The largest Gannett paper, the Arizona Republic, accounts for 10.8% of the company’s paid digital circulation, with 7,048 digital subscribers. The subscriptions represent 2.4% of the Republic’s over-all print and digital readership, according to the latest circulation reports from the Alliance for Audited Media, an industry-funded organization. While Gannett’s smallest daily, the Port Clinton (OH) New-Herald, has just 147 digital-only subscribers, the sum represents 6% of its total print and digital readership.
The single-digit pay penetration at the Gannett papers is dwarfed by the Wall Street Journal and New York Times, which have the luxury of marketing to global audiences of business people, government officials, academics and others who have not only a need to know what’s in the papers but also can comfortably afford to subscribe to their digital editions.
The latest report from the Alliance for Audited Media shows that the Journal draws 37.6% of its total circulation from its 890,105 digital-only subscribers. The Times pulls 34.4% of its total circulation from 725,334 digital-only subscribers, according to the audited figures for the six-month period ended on March 31.
As impressive as these numbers may be, it should be noted that the Journal and the Times are reaching only small fractions of the total global addressable market of 2.4 billion Internet subscribers. Their global penetration are respectively 0.04% and 0.03%.
Given their importance and power, you have to wonder why the Journal and Times aren’t doing better. But the simple answer may be that most consumers would rather pay for movies and music than for news, which is widely available for free at any number of sites ranging from Yahoo and Google News to Huffington Post and the Drudge Report.
As you can see in the chart below, Netflix has come to dominate the paid content space with more than 29 million subscribers since launching its streaming video service in 2007. As noted above, this means Netflix has 40 times more customers than the New York Times.
While no other digital subscription service comes close to matching Netflix, the available evidence suggests that publishers counting on an enthusiastic reception for paid digital news may want to recalibrate their expectations.