If you’re wondering whether the newspaper industry can avoid colliding with irrelevance, there may be a way to change course, according to two University of Missouri researchers.
Murali Mantrala, the Sam M. Walton Distinguished Professor of Marketing and chair of the Department of Marketing at MU, and Vamsi Kanuri, a former doctoral student at MU’s Trulaske College of Business, surveyed more than 1,000 readers of a West Coast daily paper to determine not what news they read, but how they got the paper in the first place. The researchers presented the survey participants with a range of purchase options much wider than what the newspaper already offered.
These options ranged from print-only subscriptions to combinations of print, online and mobile subscriptions. The options also varied in price based on the mix of channels, the frequency of distribution, and whether or not they were advertisement-free.
Mantrala and Kanuri combined that information with data on advertiser spending across the variety of channels to create an algorithm that determines what precise menu of subscription options a newspaper should offer to maximize total revenues from subscriptions and advertising.
Given the customizable options for readers and advertisers, the potential benefit of a subscription menu to the West Coast newspaper equaled a 17 percent increase in the publication’s profits.
“Newspapers are in a quandary; they need to find ways to increase revenues without raising prices or creating barriers that will cause them to lose readers,” Kanuri said in an MU news release. “In developing this algorithm, it was important to determine readers’ preferences for how they wanted to receive their news, as well as to determine readers’ willingness to pay for different types of subscription plans. Once we gathered that data, we were able to streamline a process for making decisions about which subscription and advertising plans to offer in order to maximize profits without losing readers.”
And readers will buy news as long as they know the content they receive is unique, convenient, and relevant to their needs. For proof, look at the way members of the Millennial Generation – ages 18 to 34 – consume content. As a group, almost 90 percent of them purchase music, movies, television, and video games. Other research has determined that people willing to pay for entertainment are also willing to pay for news.
Mantrala and Kanuri said their model works for any newspaper or subscription service, including Hulu, Pandora, or Spotify. Publishers and broadcasters must first conduct audience and advertiser surveys, then organize the collected data by audience segment to determine the optimal subscription menu algorithm.
“Any subscription-based service can use this model if they do the requisite research to determine subscriber interest and willingness to pay for various tiers of service,” Mantrala said. “Using this model, as opposed to years of costly trial and error, can help newspapers and other online businesses greatly improve their profits.”
The study by Mantrala and Kanuri is titled, “Optimizing a Menu of Multi-format Subscription Plans for Ad-Supported Media Platforms,” and is scheduled for publication in the Journal of Marketing.
Kanuri is now an assistant professor at the University of Miami. Esther Thorson, a former professor at the MU School of Journalism now at Michigan State University, also coauthored the study.