Declining print circulation and advertising sales have pushed embattled local newspapers to rely more heavily on reader revenue to support the operations. A recent study found newspapers may not be charging enough for subscriptions, potentially missing out on an important source of revenue.
A newspaper charging $0.99 a week for a digital subscription can bump that up to $3.99 to maximize revenue, according to the study by Mather Economics, which also warned that optimal prices may vary by market. A similar study of a newspaper that charged $2.99 a week was able to increase the price to $5.49 for optimal results.
The key to maximizing subscription revenue is identifying target customers who are most loyal, in line with the "80/20 rule." It says 80% of a company's revenue comes from 20% of its customers, Matt Lindsay, president of consulting firm Mather Economics, said in an interview with Publishing Insider.
The most engaged subscribers, as measured by their reading activity on a newspaper website, were less sensitive to price changes than non-engaged readers. Lindsay posted his findings in a blog on the International News Media Association's website.
“Digital-only subscribers engaged with the product are observed to be less sensitive to renewal price changes than print subscribers in the same market," Lindsay writes. "We believe this insight will help publishers grow digital reader revenue through higher price points for digital-only products.”
The study also found that subscribers with above-average incomes, as determined by ZIP code demographics, had lower paywall stop rates than subscribers with below-average incomes. A stop rate measures when a paywall blocks a reader from seeing free articles.
Newspapers can capture greater revenue from lower-income readers by extending discounts to them after raising subscription prices.
"This tactic often reduces churn following a price increase by 50% or more," Lindsay writes.