Business Matters: Digital Subscriptions Actually Kind of Working...At The New York Times
Business Matters: Digital Subscriptions Actually Kind of Working...At The New York Times

Paywalls Paying Off
-- Some of the most encouraging news on digital subscription models is coming from the world of journalism. The New York Times had 281,000 digital subscriptions at the end of June, the company announced Thursday in its second-quarter earnings release. That's up sharply from the 100,000-plus the company announced back in April. Around 57,000 subscriptions are coming from digital replica and e-reader subscriptions. Another 100,000 subscriptions are being sponsored by the Ford Motor Company's Lincoln brand through the end of the year. The balance is print subscribers who get free digital access.

Drops in traffic to NYTimes.com, widely reported since the paywall debuted, may not be a cause for concern. One Citi analyst has estimated the Times could offset a 20% decline in traffic with the addition of 107,000 subscriptions (at full price, one can assume). Online traffic reached 33 million unique visitors during the quarter, which the Times described as "generally in line with the 11-month average for the site leading up to the launch of subscriptions."

Just how much revenue those 281,000 digital subscriptions generated is not publically available information, however. The e-reader subscription costs $19.99 a month. But its digital subscriptions are probably bringing in less than the standard rates (which range from $15 per month to $35 for four weeks). The $1-for-four-weeks trial offers launched when the pay wall debuted in late March are still being offered today.

Digital subscriptions may also have a positive impact by reducing print subscription churn. The company said declines in home delivery circulation decreased last quarter and believes total circulation revenues will rise in low-single digits in the third quarter, according to the Wall Street Journal's report.

Bandcamp's Benefactors, Listeners and Curious
-- From ticket sales to recorded music, today's music business increasingly requires companies to segment their customers according to their level of interest. This can be seen in the way a venue can house both dynamically priced front-row seats and Groupon-sourced nosebleed seats, for example.

Recorded music has the same dynamic between high-value and low-value customers. The goal is the encourage listeners to progress from a state of curiosity to engagement and ultimately to fandom. In past years, the way to convert interest into sales was to sell a CD. Now there's YouTube, MySpace, P2P and a host of other options between curiosity and commerce. The consumer who's on the fence - not a super-fan, not a hater - needs to be engaged and prompted to move up to a higher-value group. At the very least, an artist should try not to turn higher-value customers into lower-value customers.

After analyzing his traffic to his Bandcamp page, musician Chris Randall categories visitors into three categories: Benefactors, Listeners, and The Curious. Benefactors can be counted on to spend $10 and they "drive the commercial side of the process." Listeners are an "extra source of income, but they're more fickle." They're an important swing voter. Benefactors will buy anything short of an experimental album (Randall name-checked Lou Reed's "Metal Machine Music" for context) but Listeners won't buy something they don't like. People in the Curious group find his music through YouTube or Twitter or a sync placement on an MTV show. "I don't attempt to please these people. It's nice if they turn in to a Listener or a Benefactor, but they don't figure in to the equation except tangentially," he writers.

It's the middle group, the Listeners, that determines the success of a project, he writes. "A commercial success for me is a release I didn't have to spend any of my own money to make. That's the 2011 version of the music industry. Even if I did, it's not that big a deal, because I make music I like, and am beholden to anybody only inasmuch as the more Listeners I alienate with any given release, the less income I'll see from that release."
( Analog Industries)


Electronic Frontier Foundation's Dusts Off Archaic Complaints For Spotify

-- Copyhype makes some good points about the Electronic Frontier Foundation's post titled " Spotify's US Launch Highlights the Good, the Bad, and the Promise of Subscription-Based Music Services." The EFF posted this on July 14, the day Spotify launched, and although I'm catching this a week late it's worth a few comments. Copyhype's Terry Hart calls the post "an excuse to dust off archaic complaints against the entire recording industry," and he's right.

This line in particular is utterly confusing: "Instead of being forced to buy full-length CDs at $15.99, fans can now make their own decision about how much they value music and how much of it they want."

What year is it, EFF? As Hart notes, iTunes Music Store launched in 2003 and gave consumers the ability to choose between an album and individual tracks - neither of which costs as much as a $15.99 CD. In fact, subscription services are now quite abundant: Rhapsody launched in 2002, Napster in 2003, MOG in 2009 Rdio in 2010. They had difficulty gaining traction in the past, but their prospects are looking better because of smartphone apps and consumers' improved comfort with cloud-based services.

Hart points out another oddball quote: "Of course, the record labels could have launched a service like this years ago," the EFF claims. Record labels did indeed launch a few services in the early days - namely Pressplay and MusicNet -- but for the most part have wisely left the consumer-facing retail and technology plays to companies and entrepreneurs better suited for the task.

Perhaps the EFF sees Spotify's free service as the thing that labels approved years too late. The post does point out that Spotify's competitors lack an offering similar to Spotify Free. But why ignore YouTube, the most popular free music service? And should labels not be congratulated for creating Vevo, a free, ad-supported music streaming service? What about ad-supported download site Guvera, which has a broad catalog of licensed music?

The truth is it's getting difficult to swing a dead cat without hitting some type of free music service that operates with rights holders' blessings. And if you add services that operate under a statutory license (webcasters like Pandora) and online locker services that do not require a license (Amazon Cloud Drive, Google Music Beta, MP3Tunes et al), consumers have an incredible number of ways to experience music without paying $15.99 for a CD.
(Copyhype)

Questions? Comments? Let us know: @billboardbiz

Print