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Spotlight on ‘Freemium Subscription Models’

November 16, 2015 | Lucy Penn

Spotlight on ‘Freemium Subscription Models’

Freemium subscriptions are rapidly becoming the dominant business model within the digital publishing industry.

As its name suggests, the freemium model offers a combination of ‘free’ and ‘premium’ content. Websites and apps that adopt this format typically offer a smaller proportion of free content, users who want to access the rest of the content will have to pay.

With the predominant goal to attract new users, the theory behind freemium subscriptions is that users will be so compelled by the quality of the free content that they will then want to subscribe to see the rest of the articles. Publishers must ensure they get the correct balance of quality between their paid and free content. If publishers are failing to attract new users, it probably means that the free offerings are not captivating enough – why would users then want to pay for more of the same? In this case, you’d probably need to provide richer features for free. If you’re producing lots of traffic but people are failing to upgrade – your free content is toorich.[1] It’s all about getting the balance right.

When implemented correctly, freemium subscriptions are effective in enticing new users and converting them to subscribers.  However, it is also important to recognise the value of free users, as not only do they potentially become subscribers, they also attract other new members who become subscribers. Reports from the Harvard Business Review show that a free user is worth around 15% to 25% as much as a premium subscriber, with significant value as result of referrals.[2] Publishers can increase the value of referrals by introducing incentives for users.

A key example of a successful freemium model in practice is BILD, Germany’s biggest newspaper. Its parent company, Axel Springer, introduced the freemium model two years ago and at present, about 20% of the articles are paid and 80% are free[3]. BILD’s paid subscriptions rose by 25% to more than 392,000 in the third quarter of 2014.[4] Despite increasing their digital focus, BILD also manages to support their print circulation by giving their print readers a special code whereby they can read the digital version for free on the day they buy the paper!

The freemium model is clearly beneficial for publishers, consumers and even the print industry. Publishers have the opportunity to use their content to convert users and also increase their circulation. Consumers are able to have free access to content and have the choice to pay for the rest.