Do (online) newspaper paywalls boost (offline) print subscription revenue and retention?
“As the amount of print advertising dollars continues to decrease, many newspapers have added paywalls and restricted access to their online premium content in an attempt to boost subscription revenue,” explains Georgia Tech Professor Dr. Adithya Pattabhiramaiah. “Paywalls can increase subscription revenue by helping newspapers not only acquire new subscribers but also retain existing ones. Their strategy is to offer print edition subscribers free access to paywalled content, hoping to retain subscribers by making their subscriptions more valuable.”
Pattabhiramaiah and Georgia Tech Co-Authors Dr. Eric Overby and Dr. Lizhen Xu examine the value of access to premium paywalled information for newspaper subscribers in their paper, Spillovers from Online Engagement: How a Newspaper Subscriber’s Activation of Digital Paywall Access Affects Her Retention and Subscription Revenue, (forthcoming in Management Science).
“Ultimately, we found that this strategy DOES improve subscriber retention and therefore, subscription revenue, provided that subscribers activate their paywall access,” states Overby. “This suggests a cross-channel spillover in which the online product increases customers’ valuation for the offline product.”
To show the benefits of digital paywall activation, the researchers studied individual-level weekly subscription records from February 2013 to March 2017 for a major North American daily newspaper that ranks within the top 30 by circulation. The newspaper adopted a digital paywall within the initial months of their analysis window and offered its existing subscribers free unlimited access, as long as they activated this access by linking their login/email addresses with their subscriber accounts.
By comparing subscribers who activate digital access to those who don’t, the researchers found that those who activate are more likely to maintain their subscriptions, thereby continuing to generate subscription revenue for the newspaper. Additionally, they found that a subscriber’s activation of digital access decreases the risk of her canceling her subscription by about 31% and increases her subscription revenue by 7%–12%.
Research ramifications extend beyond the newspaper industry.
“Giving subscribers enhanced benefits in the form of articles not available to nonsubscribers, is essentially a form of bundling, much like Amazon gives Amazon Prime subscribers in-store discounts at Whole Foods and free access to premium content on its Prime Video service,” concludes Xu. “These bundles can help firms capture positive crossproduct/crosschannel spillovers, which are especially important for firms operating in distressed industries such as print news and cable TV.”
Editor’s Note--Dr. Pattabhiramaiah published an earlier article on a similar topic, which can also be accessed on the Business Analytic Center’s website: Paywalls: Monetizing Online Content.