Commentary

Digital Subscriptions Critical To Bottom Line Of News Publishers

The recent earnings reports from publicly traded news publishers underscore the idea that their revenue growth increasingly depends on subscriptions. The New York Times Co. and News Corp. last week reported gains in circulation revenue that helped to offset declines in advertising sales.

The NYT's subscription revenue climbed 15% from a year earlier to $316 million in its December quarter. The newspaper ended the year with more than 7.5 million print and digital subscribers. It added a record 2.3 million digital-only subscribers last year as readers spent more time at home during the pandemic.

News Corp.'s circulation and subscription revenue rose 4% a year to $1.03 billion in the final three months of 2020, as The Wall Street Journal, The Times and Sunday Times in the U.K. and its Australian newspapers all added paid readership.

Their subscription growth is consistent with other news publishers that reported results in the past few weeks.

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Gannett Corp., whose titles include USA Today, saw 31% yearly gains in digital subscriptions to 1.03 million in its most recently completed quarter. The company aims to reach 10 million paid digital subscriptions among its hundreds of newspapers in the next five years.

The Washington Post, which is privately held by billionaire Jeff Bezos, added almost 1 million digital subscriptions last year, bringing the total to 3 million. Since buying  WaPo in 2013, Bezos has prioritized digital paywalls as a key driver of profits.

Amid this growth in digital subscriptions, it's easy to overgeneralize that every publisher needs a paywall to drive revenue. However, it's still possible to sell more digital advertising, as Meredith Corp. did last year, amid surging web traffic for titles such as People, Better Homes & Gardens and Allrecipes.

The company's digital ad revenue jumped 22% from a year earlier to $161.2 million in the final three months of 2020, mostly offsetting the 19% slump in print revenue to $120.4 million.

Its licensing revenue, which includes payments from Apple Inc. to distribute Meredith's titles on the Apple News+ digital newsstand, surged 41% to $34.5 million during the period. The company also earns licensing revenue from Walmart Inc., which sells housewares with the Better Homes & Gardens brand.

Meredith's print subscription revenue fell 9.4% to $144.8 million, but that reflects a shift in how its revenue is booked when the company sells subscriptions through third-party agents. The company aims to keep its total rate base at 37 million, while selling more subscriptions directly at a higher margin, a Meredith spokesperson said.

Response rates to its direct-mail solicitations for magazines jumped 50% in the spring, 38% in summer and 35% in the fall, while online sales from the company's Magazine.store website rose 40% from a year earlier, Meredith CEO Tom Harty said in an earnings call with investors.

“These strong response rates form the basis for a long-term relationship with our customers," he said. "Subscribers we source ourselves renew at higher rates than agent sources, allowing us to grow the profit contribution from our subscription activities over the long-term as rates stepped up over time.”

Whether publishers generate revenue from subscriptions or advertising, they must optimize their business models for digital growth as readers consume content among different devices.

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