Local news publishers across the country are asking themselves this existential question: How do I convert subscribers from print to pixels?
Successfully overseeing that transition would allow local news companies to save the cost of manufacturing and distributing a printed newspaper, and it would help readers build a digital habit for the long term.
In early 2018, the Arkansas Democrat-Gazette undertook a bold experiment. In phases over more than two years, it took away subscribers’ daily printed newspaper and replaced it with a tablet and an online replica edition. Did it work?
A new data analysis by the Medill Spiegel Research Center, undertaken as part of the Medill Local News Initiative, shows the switch to iPads won impressive reader loyalty to the Democrat-Gazette, and it has laid a foundation of strong customer lifetime value. The Northwestern study showed that only 1 percent of the Democrat-Gazette’s subscribers cancelled, or “churned,” per month, well below the industry average of about 3 percent.
Spiegel researchers say this is the lowest rate of churn they have seen in their detailed data analyses of more than 20 news outlets in recent years.
The Arkansas Democrat-Gazette’s conversion has worked like this: Daily newspaper delivery ends, and subscribers get a free iPad to read a digital replica edition that is laid out like a traditional newspaper and allows readers to choose what to read by clicking on the story. They can keep the iPad as long as they keep their subscriptions. Most subscribers continue to get a print edition on Sunday, since that day’s print advertising is profitable to the Democrat-Gazette. But Monday through Saturday, it’s digital only.
This radical transformation cost the Democrat-Gazette some customers, with about 75 percent of subscribers agreeing to make the switch from print to digital or to Sunday print, continuing their subscriptions. The Spiegel research shows that those who got the iPad are sticking around, and Democrat-Gazette Publisher Walter Hussman believes he has made a necessary step toward a sustainable future.
I’m real pessimistic about print. I just don’t see how a print model can work seven days a week for a daily newspaper in the United States.Walter Hussman, Publisher, Arkansas Democrat-Gazette
“I’m real pessimistic about print,” said Hussman, who oversaw a print-based Democrat-Gazette for more than four decades. “I just don’t see how a print model can work seven days a week for a daily newspaper in the United States. I don’t care what size you are.”
The Medill Spiegel Research Center is a partner in Northwestern’s Medill Local News Initiative, a project to identify strategies that can help news outlets buffeted by financial disruption. As the news industry shifts from reliance on ad dollars to an emphasis on reader revenue, Spiegel is analyzing how news outlets’ content and presentation correlate with their ability to retain subscribers.
Spiegel’s Research Director, Ed Malthouse, was impressed with the findings from the Democrat-Gazette’s data.
“A churn rate of 1 percent means that you expect your customers to be around for 100 months, which is over eight years, which is phenomenal,” said Malthouse.
The Importance of Onboarding
Hussman, Malthouse and Spiegel Executive Director Jonathan Copulsky see a number of possible reasons for this high retention rate. A key one is the Democrat-Gazette’s onboarding process, in which the news outlet rents hotel space and goes door-to-door to meet with subscribers and give them an iPad tutorial in person.
“I think we generate a tremendous amount of goodwill with our subscribers when we do this because we sit down with them one-on-one and show them how to use the iPad, show them how to use the digital replica,” Hussman said. “People never have a customer experience like that anymore in America. … There’s nothing much simpler and easier than to actually have somebody, another human being, showing you what to do and answering your questions.”
Malthouse said iPad users showed less churn than subscribers who read the Democrat-Gazette’s digital replica on their own device.
“So the question is: Is it because of the iPad or is it because of the training that comes with the iPad? I suspect it’s both, but I think the onboarding may be the secret sauce, because you are helping people to get the most out of this great device and app,” he said.
I think the onboarding may be the secret sauce, because you are helping people to get the most out of this great device and app.Ed Malthouse, Research Director, Medill Spiegel Research Center
The Democrat-Gazette’s monthly churn rate before the conversion was about the same as the industry average, around 3 percent. Hussman believes the significantly lower 1 percent churn rate for tablet users suggests that the special features of the replica edition are a loyalty booster.
“People tell us that they’re actually spending more time reading the digital replica than they did reading the print paper,” Hussman said. “One of the reasons, I think, is because of the videos and the slide shows.”
Malthouse noted that Hussman’s trainers show subscribers “how you can use all of the features, like having a story read to you or searching the archives. So he’s genuinely creating value for a consumer that they’ve never had from the paper before.”
“Another way to think about this is, you’re giving me a Ferrari and maybe you should show me how to drive that so I don’t just drive that the way I’ve been driving my Chevy Nova,” Malthouse said.
Copulsky said it’s possible that the tablet encourages more engagement than print does.
“I’ll get the print version of my newspaper in the morning, I’ll read the paper and then that’s it,” Copulsky said. “But when you’ve got an electronic device like the iPad, I may look two, three, four times a day because it’s with me all the time.”
When the Democrat-Gazette began converting subscribers to the iPad, it didn’t initially give them a Sunday print edition. That came later, and some subscribers still don’t get one. Interestingly, the rate of churn was about the same for the people who didn’t get a Sunday paper as for those who did.
“It looks like offering that Sunday paper will get you more people converted on the front end, but it doesn’t seem to really help on retention,” Hussman said.
Assessing Customer Lifetime Value
Spiegel’s researchers have been urging news publishers to pay more attention to customer lifetime value (CLV), a forecasting tool that allows businesses to calculate how much customers will be worth for the length of their relationship.
Spiegel applied CLV to the Democrat-Gazette’s tablet project.
“They calculated the value of a subscriber,” Hussman said. “If a subscriber is going to be with you with a churn of 1 percent a month, they figured the average life [of a subscriber] was 8-point-something years, and then they figured the average life of a subscriber who churned more often, say 2.5 to 3 percent, and they took the subscription rate and they figured the iPad subscriber was worth about $1,700 a subscriber, and maybe the other subscribers were worth like $600 or $700.”
Based on that math, the iPad switch makes sense.
“You get a whole lot more valuable subscriber with the iPad,” Hussman said. “You spend 300-and-something dollars on an iPad and another 90 bucks on training. You’re spending 400-and-something dollars. Well, look at the difference between a regular subscriber and one with an iPad. It’s far more than $400. Your investment’s a good investment.”
Another potential expense would be replacement of the iPad after a few years, but even with that taken into consideration, the researchers’ calculation of customer lifetime value argues in favor of the switch to iPads.
Rubber Bands, Coupons and Crosswords
The Democrat-Gazette data analysis was part of a summer graduate course for Medill’s Integrated Marketing Communications students, who followed up the data work with a survey of subscribers.
Two people mentioned that they missed a particular aspect of print delivery: the rubber bands that were wound around the papers. Others were sorry to see print coupons go, though coupons are also available online.
“Another big complaint people had was: In the past, we’d get the paper and my wife would take one section and I would take another and we’d sit around the breakfast table together, but now we only have one iPad and we fight over it,” Malthouse said.
And one more subscriber comment, as recounted by Malthouse: “I like to do the crossword puzzle with my pencil.”
“The lesson,” said Malthouse, “is you’d better have a really good crossword app.”
How to Join Subscriber Index
Hussman expressed gratitude for the “excellent” work by Spiegel, which believes that a data-driven approach can boost news outlets’ bottom lines.
“I think it’s another example of the power of using analytics to look at engagement and sustained reader behavior,” Copulsky said. “Years ago, these things tended to be managed very much by feel and intuition.”
By year’s end, Spiegel expects to launch its Medill Subscriber Engagement Index, which will show local news executives whether specific aspects of their online content are helping or hurting subscriber acquisition and retention. It also will allow executives to compare their newsrooms with other participating news outlets on performance metrics. In addition, the index will feature a ‘What-If” tool that allows news executives to forecast how changes in their news outlet’s performance would affect their financial bottom lines.
I think it’s another example of the power of using analytics to look at engagement and sustained reader behavior. Years ago, these things tended to be managed very much by feel and intuition.Jonathan Copulsky, Executive Director, Medill Spiegel Research Center
The index was funded with help from a Google Innovation Challenge award.
“We welcome the opportunity for publishers who want to build the same kind of data-driven understanding of consumer behavior and engagement behavior to contact us to sign up,” Copulsky said. “And not only understand their own but also be able to benchmark it against other publishers.”
News executives wishing to participate should contact Medill Senior Associate Dean Tim Franklin, head of the Medill Local News Initiative, at email@example.com.