Making free pay: seven lessons from media businesses that stopped charging

A wise man once said: “If you’re not paying for it, you’re the product.” That’s what is happening in the magazine world, as NME abandons its cover price after 63 years, to go free.

In doing so, the title is turning its readers from customers in to advertiser targets. But NME is far from the first property to try this trick. The Village Voice, the Shrewsbury Chronicle, the Standard of Hong Kong, Friends Reunited, the Evening Standard, the Fulham and Hammersmith Chronicle, Time Out in London and New York, and now parts of the Sun’s website are all among those to have dropped their fees in favour of frees.

But what has become of the converts? And what do their fortunes since tell us, NME and other operators about the key ingredients for a successful switch?

1. Know your predicament

It would be nice to say the switch to free comes either out of benevolence or out of a market opportunity. The reality is, operators invariably flick the switch under external pressure of a poor business outlook – no amount of dressing up as a “bold relaunch” can change that.

NME’s circulation was falling by around a fifth annually. The Evening Standard was frustrated to find itself far behind national dailies on ad planners’ schedules, locking it out of big brand bucks, according to someone familiar with the strategy to switch.

The Village Voice dropped its cover charge in 1996 after being eaten into by rival New York Press being given away in green sidewalk boxes, while Hong Kong’s Standard newspaper was forced to act when the government removed a decree that listed companies must buy classified ads in newspapers. But the key – as anyone who has heard the “boiling frog” allegory will know – is to recognise when it is your time to change tack.

2. Scale is essential – go large or go home

Removing existing paywalls is an opportunity to inflate audience numbers, giving advertisers the exposure they crave. That can be transformational. The Evening Standard bumped its circulation from 250,000 to 600,000, something which returned it to profit after more than a decade of losses. But its success is likely a product of the highly metropolitan, professional audience that only cities like London can deliver to advertisers.

“There is a critical mass that gets clients and agencies interested,” according to ZenithOptimedia head of media investment Dave Mulrenen, whose team plans ads in some of the titles discussed here. “You’ve got to get a certain level to get leverage in the marketplace.”

For some, that threshold settles around the 300,000 mark. In 2012, Time Out London dropped its £3.25 price and bumped circulation to 305,000, growing revenue by 80% within the first year of the change. This April, its sibling in New York adopted the same strategy, aiming for the same number. And NME aims to circulate 300,000 copies to a mostly student audience something Mulrenen posits is a reflection that any fewer than Time Out would be perceived by advertisers as lacking sufficient scale.

3. Narrow may be better than broad

But the compulsion to go for scale is not something every proprietor can live up to. Sites such as Mail Online and BuzzFeed cast a long shadow on the rest of the market – the more these titles lock up the at-scale mass audience, the less likely and more cash-intensive it becomes for others to pull off the same trick. There are only so many premium brand dollars.

Matthew Yeomans was senior editor at The Village Voice at the time it went free in Manhattan and devised the title’s marketing slogan for the relaunch: “The paper that can’t be bought”. But he doesn’t think scale is all it’s cracked up to be: “In today’s digitally-led media world, nichification is the way to go. The more passionate people are about something, the more likely they are to pay for it. It’s incredibly difficult to get the amount of scale necessary to attract advertisers in a broad general field. There are more opportunities in streamlined verticals.”

This may be particularly pertinent advice for latter-day converts like NME. Arguably displaced in its core indie music segment by online titles like Pitchfork, it now plans to target “a wider conversation around film, fashion, television, politics, gaming and technology” – but each of these verticals now already has a scaled segment leader of its own.

4. Try before you fly

Online, proprietors have become used to beta testing features and business models. But testing can be carried out in any medium – and something as significant as a business model turnaround should be approached softly and evidentially.

Before it went free in London, Time Out carried out research on consumer attitudes to other free publications, finding them highly valued. In New York, the title tested partial free distribution in autumn 2014, finding a pick-up rate, at 93%, high enough to convince it to make the switch wholesale.

Likewise, it was the response to the Evening Standard’s decision to give away 100,000 free copies, following a recent relaunch, that convinced it to go all-in. Arguably, the paper had already road-tested the model, by routinely giving away around half of its copies through bulk distribution.

The common denominator is, successes happen when uncertainty is eliminated by forming strategy around known outcomes.

5. Transition requires deep pockets

Upscaling print circulation to more than make up for the loss of cover prices doesn’t come cheap. To go free, the Evening Standard had to quadruple newsprint costs, and employ new distribution staff, for example.

Strategic change can involve sudden cost inflation of this sort – costs that proprietors must be able to cover if they are to get the new model off the ground at all. For a publisher whose back is already against the wall, this can make it difficult to finance their dreams of resurgence. So it is vital that proprietors first figure out the real costs of reaching new audiences.

6. Multiple revenue streams build resilience

It is often said that the historic strength of newspapers is their reliance on the twin sources of advertising and cover sales. The banking collapse of 2009 showed how prevailing economic winds can hurt advertising spend. So, to avoid future pain, it is prudent for publishers to establish a diversified mix of income beside advertising alone.

The expanded audience publishers find in going free creates a much greater pool of people to convert into customers of some other product. The Daily Mail does a nice line in cruise holiday sales, for example. NME’s new circulation will give it 20 times more people to whom it can attempt to up-sell other relevant products. Not to do so would be to miss an opportunity. In a world where you can no longer sell your media product, can you sell what that product was conceived to cover in the first place?

7. Keep the troops happy

In transformation, a publishers’ priority is its business bottom line. But, if proprietors lose the newsroom, they will lose the product, at a time when quality becomes more important than ever.

What staff want, of course, is evolving over time. Today, ZenithOptimedia’s Mulrenen says of the Sun’s decision to make more of its online content free: “I can’t imagine journalists were thrilled about being stuck behind a paywall.”

But, in 1996, when it went free, the Village Voice had the opposite problem. According to Yeomans, who is now proprietor of sustainable communications insight service Sustainly: “It felt like a body blow to journalists. It meant a lot more in those days, to be paid for – being on the newsstand meant something. The publication always had the esteem of being paid for. The minute it was in boxes, that lowered how it was perceived. Whether that matters today – or the readership makes the distinction – is unclear.”