Publishing Trends of 2022
Since my last Publishing Trends post in 2020, many of the trends described then continue in spite of the COVID disruption. Digital subscription growth, print decline, publisher struggles with GAFA/platforms, and rapid audio growth are still the main trends in late 2022. While the topics have not changed during these two years, there has been a significant shift in the trends inside each of them. Here is a summary of what is happening.
Digital Subscription Growth Continues
A review of digital subscription portfolios around the world reveals that growth is continuing at a rapid rate:
- The New York Times, which is a model of innovation and growth, has nearly doubled its portfolio since 2019, with nearly 8.5 million subscribers
- The Wall Street Journal has reached over 3 million subscribers
- Gannett, the national newspaper group, made up of local and national papers in the United States, has reached over 1 million subscribers
Various publications from different countries have doubled their sizes in three years, such as Le Monde reaching 400,000 digital subscribers, and the Boston Globe reaching 237,000. China’s Caixin and Japan’s Nikkei are also in the top publishers with high growth in digital subscriptions. This growth is all taking place in the news media world. Magazines are still generally living in a “print world” with notable exceptions such as The Atlantic.
Growth Factors are Changing
The New York Times is transparent about what is enabling its growth. A large part of it is a result of the verticals they’ve developed. Historically, those verticals were crossword puzzles, cooking guides, and consumer recommendations by Wirecutter in recent years. Now, verticals include acquisitions like The Athletic, a worldwide sports and news publication with 1.1 million subscribers, and Wordle, a popular web-based game. This has strengthened the role of these side products. Reviewing the total growth of subscriptions of over 3 million between Q2 2021 and Q2 2022, news media coverage accounts for only 27% of that.
Leverage Growth Through International Readers
The New York Times’ international portfolio is only 12% - around 1 million active subscribers – but they are expecting to increase their share of international English-speaking readers. Other publications like El Pais (25% international) and Le Monde (10% international) have similar ambitions. Le Monde launched an English-language version of their publication reaching 150,000 subscribers. However, all publishers must highly discount their subscription prices as they're often the "second newspaper" for foreign subscribers, meaning the growth in subscription volume will not be reflected in revenue.
Light Readers Leverage Growth
According to Greg Piechota of INMA, having improved conversions through the use of paywalls, there is a need to retarget algorithms and offers to readers with lower reading frequencies. For this to happen, the dynamic paywall needs to be adjusted, and the article/content should be customized to these readers who are less engaged. As growth targets new audience segments, retention becomes more crucial, and churn remains high for many publishers.
Karl Oskar Teien from Aftenposten (Norway) indicated a 50% churn rate at the end of their trial period, and a study from Piano showed a nearly 10% churn rate during the first 24 hours of a subscription. The main challenge is around “sleepers” who subscribe but do not use the content. These are estimated to be 39% of the portfolio with a churn rate of 64% during the first 12 months. An “on-boarding” program and proactive retention efforts have become major action items for publishers today.
When looking at these new growth factors, one can predict two outcomes: future growth will become more fragile as it strays further from the core readers, or revenue will grow more slowly as new subscriptions are offered at lower rates.
Publishing Industry Struggles Despite Digital Growth
A quick look at revenue numbers shows that volume does not equal income. For The New York Times, digital circulation finally grew equal to print subscription revenue in 2020, but the digital portfolio is 10 times bigger. Reviewing Gannett’s Q2 results of 2021, circulation income dropped nearly 10% while digital subscriptions increased by 41%. It doesn’t require much imagination to guess that the prices of those digital subscriptions were much lower than those of print subscriptions.
Other Revenue Streams are Crucial
Several publishers are working on initiatives to get part of their advertising business back using first-party data and technology investments. Another popular revenue stream is eCommerce, through direct sales or affiliate marketing. Sophie Gourmelin from Les Echos in France summarizes the three pillars of their business model: subscriptions, advertising, and content commerce. Content Commerce has become a success story for Marie Claire in the United Kingdom, and The New York Times via Wirecutter.
Having various revenue streams is crucial since inflation has severely affected publishers’ printing activities – core to their business models – through rising costs of distribution and paper. In addition to the impact of inflation on publishers themselves, the potential economic slowdown is affecting readers, who are increasingly canceling their subscriptions, which affects both print and digital.
Subscription Fatigue
Another key factor for diversification is what some are calling “fatigue”. A warning was issued from outside the publishing world: Netflix, and its decrease in subscribers for the first time during the two first quarters of 2022. Netflix has been a reference for businesses for years, but it faces challenges that are similar to what publishers face: increased competition (Disney, Amazon Prime, etc.) access fraud (multiple accounts), price increases, and unexpected events (Russia/Ukraine war).
A more recent warning is from the Washington Post. Jeff Bezos – founder of Amazon – purchased the Post in 2013 and invested in digital and technology to make it profitable. Arc, The Washington Post’s technology platform, has helped to provide some revenue through licensing to other publishers. But recently, it seems that growth has stopped both in subscriptions and advertising, according to an article from the New York Times. And some key players are leaving the company.
An isolated case or a warning for others? It is difficult to say at this stage, but growth is at high risk, with more and more people avoiding news (“News fatigue” is hitting 38% of people in the UK, and 66% of Americans feel overwhelmed by politics and the pandemic), and several legal initiatives (in California, France) that make cancelation easier for the subscriber.
Publishing Industry Struggling for Survival
Therefore, it isn't surprising that the publishing industry is desperately looking for cash and struggling for survival. For the past couple of years, newspapers in the United States have been closing at a rate of two per week and 1/3rd of local newspapers are now owned by hedge funds. In Australia, Rupert Murdoch merged twenty newspapers into one. In France, at least five newspaper groups were saved by millionaires/billionaires in 2021 as they were running out of cash after the pandemic. Restructuring is becoming more common, with Axel Springer purchasing Politico, and Buzzfeed acquiring the Huffington Post. There is concern about the future of freedom of the press, and the European Union has decided to act for the first time in this area.
Hidden Issue with Journalism
The long-term quality of journalism content is at risk because of the rate at which newsrooms are closing, cost-cutting strategies taken by new financial owners, the decline in the number of journalists, and the younger generation leaving this career behind. As Alan Fisco from The Seattle Times states, “If you are gutting your newsroom and producing less quality content, don’t bother with your retention strategy because you will fail.” Content remains king.
The End of GAFA Supremacy
In reviewing the news over the past two years, it’s incredible how many lawsuits and prosecutions the four GAFA (Google, Apple, Facebook, and Amazon) companies have experienced. Four parties have been aiming at the big tech companies: data regulators, antitrust agencies, publishers, and tax authorities. Google was sued for privacy violations, anti-trust mainly in advertising, and copyright. Meta, the parent company to Facebook, faced lawsuits for privacy breaches and copyright. Apple is in the middle of antitrust lawsuits either for their stores, payment solution, or the latest privacy decision that affects their consumers. Staying behind the trend, Amazon has received lawsuits for privacy violations, antitrust questions, and business practices toward publishers and bookstores. Pressure is being applied not only in the US and Europe, but also Asia.
Battle Among the Big Tech Companies
Besides the external pressure, battles rage between them. Facebook is strangled by new privacy rules introduced by Apple, competition from TikTok, and advertising competition from Amazon. Also, Google is hit with increased competition in advertising, even if its search position provides it with a stronger model. Just like Apple, Google is challenged by Microsoft in their stores and the commission for developers that Microsoft is discounting. Google is striking back through its increasing presence on hardware and OS (Android). Last but not least, Amazon and Apple have a new challenger: Spotify, whose expansion on podcasts and audiobooks is becoming a serious threat.
Meta, an Illustration of the End
An illustration of the end of supremacy is Meta, which has become a lame duck. Early in 2022, its share on the stock exchange dropped when it announced for the first time a decrease in users. This was followed the next quarter by a drop of 1% in income, and the departure of Sheryl Sandberg in June, who pivoted Facebook to its current advertising model. Consequently, new engineer hiring's have been reduced by 30%, and cost cuts (= layoffs), of 10%. Founder Zuckerberg is stopping all its initiatives to counter competition: Facebook podcasts, Novi (cryptocurrency), Facebook news, and Bulletin... he is aiming to do a full pivot to the metaverse, with billions in investments. But for now, there are unconvincing results, and it appears to be the start of a potentially turbulent time.
The Audio Boom, Publishing Trend Confirmed Year after Year
Audio hasn’t stopped growing over the last few years, especially podcasts. Platforms such as Spotify (which has the highest volume) are hosting 3 million of them. There are only 4 million podcasts in the world! 30% of Spotify subscribers listen to podcasts in addition to music, and the phenomenon is in all languages. News is 10% of the podcast production, making it a good opportunity for publishers. Some of the news providers have reached large numbers, such as The Economist podcast with 3 million listeners per month, or BBC Gardener’s World Magazine with 1 million subscribers. 86% of publishers say they are doing podcasts, which can be produced using a real studio recording or “speak to text” technology.
Business Models Improve
Advertising, the first revenue stream, continues to grow even if it’s a small percentage of all advertising spent. Players such as Spotify can apply their $200 million in revenue to their podcast activity. Some paywall models are taking off, such as Zeit Online in Germany, and are making it possible to have paid subscriptions through Spotify or Apple. Audio editions are now lining up beside the print and digital editions. A new product line…
Audio Battlefield
The audio battlefield is unique. Apple has been surpassed by Spotify as the top-performing platform. Many publishers have decided to remain autonomous by developing their own applications, such as The New York Times, NRC in the Netherlands, or PodMe from Schibsted in Norway. They could continue to distribute their podcast on the main platforms, but, for example, Radio France has shown that their native app can outperform listens from Spotify or Apple. Over the past year, a large set of acquisitions have occurred, such as Spotify with Megaphone and Heardle, Amazon with Wondery, and Acast with Podchaser. Audio is currently a touchpoint between different players who didn’t compete in the past: radio, GAFA platforms, music, and publishers.
Signs of Fatigue
Although the growth continues, there are some signs of fatigue in audio. Some audio projects ended as flops, such as the social network “Clubhouse”. Less than 1% of podcasts have large numbers of downloads. This means that a large percentage of podcast productions have nearly zero listeners. When looking at the top ten podcasts in the United States, all the podcasts are series that were created within the past five years. It appears to be difficult for newcomers to get to the top of the charts, and like digital publishing, podcast listeners are also producing churn. Many new listeners drop off after a couple of months, bringing some flatness to the current growth curve.
What Will Be The Future Publishing Trends?
As the big picture shows, we are far away from a stabilized industry. Only those who can create various pillars, based on subscriptions (including print), advertising, and related eCommerce businesses, will survive. The mix will vary between different segments (newspapers, magazines), and even inside of these segments (national or regional). Gray clouds in the sky such as declining journalism, inflation, and regulations make the future an uncertain one. There could be hope, since those that grabbed a large chunk of advertising revenue (the GAFA players) are currently in a defensive position, and publishers are more aware of the threat and are behaving more carefully when they act on new markets such as audio. Will some of the advertising revenue return to the publishing industry in the future? That would help since subscriptions won’t likely save the day.
This article is a write-up of a presentation by Philippe van Mastrigt, Director of European Operations at AdvantageCS on October 13th, 2022, at the European Users Group Meeting in London.