26 | Should you take donations or sell subscriptions/memberships?

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Hi and welcome to episode 26 of the Paywall Podcast. I'm here with Tyler Channel and we are going to talk part two about local news success. And today we're going to answer the question that we get all the time from publishers. Should I sell donations, take donations, or should I sell subscriptions, memberships? That is a very big question. It's been debated for years. It's still debated. They are two different approaches, but they're also very similar in a lot of ways. The answer to that question is really? It depends. We're going to get into that anyway. Welcome, Tyler. Welcome back.

Yeah, thank you. Thank you. I might add to that if you're not sure, do all of them? So spoiler.

Yes, absolutely. Absolutely. I'll just make a point of clarification too. You know that what is, what is the difference between donations versus subscriptions and memberships? And it may seem obvious, but. And donations is fairly obvious, but we should say it. If you're going to take donations, that means your content's going to be free. Free essentially for anyone to view and you will ask for voluntary contributions to support the mission. Subscriptions and memberships, I'm lumping that actually into one bucket. And it's not true in every case, but just for the sake of simplicity, a subscription is when you require somebody to pay for full access to your content and in local news because, because it's so community oriented, the word membership gets put in the place of subscription. And. But it's the same thing. Maybe you get to read a few articles for free up front, but eventually you have to pay for full access and the membership. The word membership feels, I think, more community oriented. And so if you're in local news and you're selling a membership, you know, you're still saying, hey, pay for access. Maybe there are other benefits, perks involved with membership, but those are the two big buckets.

Yeah. And sometimes those distinctions between memberships and subscriptions, memberships could be access to a Facebook group or a Slack channel or, you know, more membership oriented items versus subscriptions is certainly more transactional. You pay for. For access to content.

Absolutely, absolutely. Yeah. There's lots you can do. We will get into that later. I don't know if it's this episode or next. We're trying to keep this one to 20 minutes. We'll see how we do. But so really what it boils down to is do you draw the line in the sand? Are you going to require people to pay for access or not? That's really the question you're asking. And the answer is it depends. We see success on the donation front, we see success on the subscription front. One thing to keep in mind though is you can switch. There's nothing that says that you, that you can't. We had a publisher that essentially was running free registrations for six months with no charge whatsoever. And they built their email list very quickly. They were a local, local publisher in Ohio. They built their list to over 10,000 brand new email addresses within a period of, I think three months, less than three months, something like that. And it started with 5,000. So they essentially gone 200% growth, if my math is right. And then they switched to paid subscriptions. They said, okay, we've given access long enough and now we need you to pay because we need to eat and pay for staff and all that good stuff. So in the world of digital subscriptions, there's absolutely nothing wrong with starting with one model and shifting to another. Okay, so it depends. I have four types of publishers listed here, Tyler. Maybe you have more, but I'll kind of spit them out. And maybe we should talk about each one a little bit.

Sure.

One is your startup. You're starting up a brand new local news site. That's one publisher type and the next one is really audience type. Who's your audience? Because there might be local news for general news, but then it could be local niche news. You could be sports oriented, like high school sports, which we've seen. Or you could be environmental oriented, where you cover environment for, you know, the state, let's say, call that local. So there's sort of variety there. And then, you know, are you mission based? You know, I think all publishers are mission based to a point, some more than others. And then, you know, what kind of community building are you looking to do? Like how, how hard are you leaning into the community that, that you serve? You know, is it more sort of transactional information? I need sports scores or is it more, you know, local, personal, in depth reporting, that kind of thing? So those are factors that, that sort of influence. It depends. Okay, so why don't we just jump into one of them? Startup. We've seen publishers start up with subscriptions. We've seen publishers start up with donations. I think that from my point of view, and many publishers come into a new situation when they start up and they don't really want to charge for access, they want to get their content out. They want, the smart ones want Google to access their content. I guess either way that works, but they want to get people to sign up to their email list and really grow that list and then go for donations. And let's see here. I. Make sure I'm sharing. Am I sharing my screen?

Yep.

Yep. Great. All right, so let's take a look at Daybreak. This is our local news. I've mentioned them before, Rob, who runs this. Lot of success, a lot of email growth over the past year and a half. I'd say they've been up really clean. It's an email only local news publication gathering news from different sources, social media as well as the local paper, colleges, Reddit, YouTube list, local listserv, you name it. Absolutely brilliant strategy, bringing in all the, all the chatter that's happening in the local area. And then if you, you know, there is a sponsored, always a sponsored article, let's call it post right in the middle here, right in the middle of the content, which is good. And then there's always a call to contribute, essentially. So, yes, I count on Daybreak and you go and go there and you can donate. Now, should Daybreak go with paid subscriptions? I'd say at this point, probably not. This is their model. Their donations, as far as I have, as I understand, are actually working quite well. But in this case, Daybreak's next step is to actually get their content in on a website and start offering perks to their readership, which are easy to do. And we can start so they can start. So the other local news example, Tyler, you brought this mall here Enterprise.

That's it, yeah.

This is a subscription based local news site, right?

That's right, yeah. It's a small town in eastern Oregon. It's ran by a Pulitzer Prize winner journalist in the Oregon area. So he's well known, well known person. Someone once told me I'm new to this, this Oregon local news world with paywall project, but someone told me that, oh, that's like this particular publisher is like the New York Times of local news. And they've made a lot of strides with digital subscriptions early on and like 2016, 2017, when subscriptions for local news were just kind of taking off and yeah, I mean they do, they have subscriptions, they do offer the option to donate, even though to my knowledge they are not a 501. But you can still accept donations, contributions. Right. And to my knowledge, the vast majority are our subscribers. People subscribe for access to local news, to local content that they want to read and check out.

They're producing original content, right?

That's right, yep. So local school information, local government, economy related stuff. And yeah, that's, that's where their focus is.

And that's an important distinction. And if you're paying attention, you're probably thinking, wait a second, which one do I do? Donations or subscriptions? But the Daybreak model is very light, original content, mostly curated content. And so it's the, the service of bringing information together and then there's original writing to, to sort of editorialize the content. Whereas Mal. Mal here, if I'm saying it correctly.

Yeah, I think that's it. I'm also not familiar with the pronunciation, but I think that's, I think that's the way it goes.

Yeah, but they're, they're producing, you know, almost all original content.

Yeah.

And so there's a, there's a sense of overhead too, that needs to be covered.

That's right.

When you're, when you're producing content that way. So there, that's, that's a differentiator right there in my book for sure.

Yeah. And just to talk about donations, I mean, I typically work with publishers who are subscription oriented and you know, more of a transactional type thing. Donations can be recurring and they don't have to be as sporadic. A lot of publishers who do donations probably find that they'll get random stuff. They might get $100 this week or all of a sudden you get $500 from someone. You can make that more consistent with recurring donations. You can offer that as an option for your readers.

I almost feel like that should be a requirement.

Yeah, yeah.

I was just looking at another example. I'll bring it up just for fun.

Yeah, I can send you one too. Here.

This is a Narwhal in Canada. This is an environmental mission based, heavily mission based environmental group that focuses on the environment in Canada. And they, they have a donation model. All their content is free and they require a monthly. I mean, they don't require anything since a voluntary donation, but they only offer monthly support plans.

Yeah, yeah, that's good.

They're doing well with it. So if you don't, you know, if you give. I think the lesson here is if you do go donations, if you give your readership the option of a One time payment, you're going to have a good percentage of people that say, oh, I guess one time is good, and then I can feel good for a long time. But the reality is they need the recurring income to obviously pay for staff and things. If you require a monthly payment, then when you're ready to donate, that's your only choice. So you, you know, you might lose some people, but still, you know, it's, it's all timing, right? When, when I'm ready to donate and I'm looking at this page and I think, well, monthly, yearly, recurring. Okay, I see. You know, well, I really love these guys. I can, you know, I can do 15amonth or whatever. Right. And then they, and that's, and that, that's just a long, that's just a survival tactic, really, in my book. Yeah. Okay, so you made a. We were talking about, we were talking yesterday about millennials.

Oh, yeah.

And I kind of want to revisit that a little bit there. And this sort of falls into Depends number two, which is, you know, who's your audience? You know, is it, are you a, you know, are you a print publisher, which we work with, plenty of that are serving an older audience. Are you serving everyone from millennials to retirees in your local news coverage, or are you focused on a niche for local news? And so you brought up something interesting about Millennials yesterday.

Yeah, yeah. So when I was teaching at West Virginia University, I was working on a class centered around, I believe it was revenue and local news. And I don't remember the exact study, whether it was Niemann or Pew or one of those foundations, but I remember reading something about millennials are more likely to donate, essentially support the cause of a publication, whereas perhaps the boomer generation is more likely to subscribe and pay for it as a transactional type service. So depending on your target, if you're targeting millennials, perhaps a more mission oriented message around, you know, what we're, what we're trying to achieve, what we're trying to do. We're trying to, you know, kind of speaking that language for, for that demographic versus the boomer generation, you know, speaking the language of access to content, access to, to. Right, to stories, essentially.

So, so recurring donations would be the approach there?

I think so. I think so, yeah. And in general, I think I've seen with publishers, the publishers who have a larger target audience, I feel like, do better with donations than the teeny tiny 2,000 people in the town publishers. And that could just be based on the fact that people in those Communities are older. West Virginia has an older population. And so that would make sense that more people are likely to subscribe here versus a younger place, perhaps like New York City, where you have a lot of young people who would donate. Right.

Right. Now, this gets a little into membership too. You know, when you can, you can sell membership, subscriptions and be very mission oriented and say, look, you know, we need to get paid. We, this is what we do for the community. You are supporting us. And as a, as a member, you get access to additional perks as well as access to the content. It all boils back to that line in the sand. You know, are you going to require people to pay to read all your content? I mean, that's the question. Membership. You think membership would appeal to millennials? I mean, I guess that's really what I'm asking.

Oh, for sure, yeah. Yeah, no doubt. People want to be a part of a community. They want to, to feel like they're making a difference. And I think that really speaks to millennials. I'm a millennial, so that certainly speaks to me. So it's certainly a good path for that demographic.

I'm a little bit in the middle. I'm Gen X. Yep. So for me, it's, you know, if I see something that I really like that of course I'm interested in and is being done well and helps me, yeah, I'm all in. I'm happy to pay. Is it mission based? And I'm interested. Yeah, I'm happy to donate and I do. So it's a, it's, you know, it's, it's, I think it's a mix of personal interest and need, really.

Yeah.

So, you know, everyone's different, but drawing that line, it all goes back to drawing that line in the sand. And again, you, you know, if you're a startup, back to the depend, number one. If you're a startup, you can start with donations and you can absolutely switch to drawing the line and saying, hey, you know, donations have been okay for us, but we really need.

We need.

More revenue to survive. Please help us. We're setting up a membership model and kind of easing into that. Can you go from membership to donations? I think that's a little harder. You're coming in with subscriptions and then you're going to lift subscriptions and go to donations. Maybe nothing's impossible, but it seems like more, more natural to start with donations and move yourself into paid subscriptions or, you know, if you're, if you're, if you're starting out and you're, you're producing great content. Start with subscriptions. You know, people will pay if it's, if your content is good and you're really servicing a need, especially with local news, you know, you are the monopoly, you know, you are, you have a good chance of being the content monopoly in the area that your readers absolutely want. Yep.

And it's, you know, it can be more nuanced too. I don't want people to think that subscriptions means I have to pay all the time and donations means it's always free all the time. You can meter access, you can make it so that people can read for free. There is the ability to do that for a limited number of articles, perhaps. So it's, if you decide to go down the subscription route, don't think that everything is locked off and there's no new access unless you pay because that will certainly set you up for failure.

Right, right. And mission, you know, the depends number three, mission based. If you take a member, if you draw that line in the sand and you take a membership approach, just keep in mind that you can do a lot of things to cushion that as far as leaning into the community. You can offer a free registration and you can be as generous as you want with that. Free registration. Before you require somebody to pay, you can offer free memberships. Just go with our local camp. Make a parallel here, our local camp Coniston in Grantham, here, the YMCA summer camp for kids and they just changed their pricing this year. They're very reasonably priced summer camp in New Hampshire and they realized that they weren't really meeting their costs. Of course inflation is happening and all that. But they needed to make a significant bump in their cost structure. So we haven't seen the rates yet, but we got this notice this week because our kids go there and what they actually decided to do is, and they've told us now that they're going to have three pricing tiers. They're going to have the price that actually covers their costs and then they're going to have a low pricing tier which is going to be funded through grants and donations. That is going to be a voluntary opt in. So in other words, anyone can just choose. Okay, I can. We can afford to pay. And we're just going to pay the retail rate because we are going to support constant or yeah, you know, that's a lot of money. We're going to have trouble making that happen. So we're going to go in at the lower level. No, no application required. Right. You just go in and you're going to pay the lower amount and no questions asked, right? Yeah, that's the third level is financial aid. So that's where you get in touch and say, look, we'd like to send our kid. We don't have, we don't have the ability to pay, et cetera. But isn't that interesting?

Yeah, yeah, yeah.

You're literally just telling, look, here's what we need to survive. If you can afford it, pay it. And here's our discounted rate. If you need help, I think publishers can apply that. And I personally have always had success in business when customers can't afford things, they say, well, what can you afford? You know, and pick a number that's. Honestly, I do that a lot. Pick a number and they'll pick, they'll make, they'll think about it because people are generally very thoughtful about what they're going to do next. And then they'll pick a fair number and then the transaction happens and off you go. So in publishing, I really haven't thought about it until just about now, but you could really do the same thing, offer your retail price. It's very important to tell people what you need and why you need support. And people that can pay, they will pay. People that need the discounted rate will pay that.

Yeah, that sounds like the best of both worlds, honestly. I mean, you're telling people our mission is or not our mission, but this is what will help us continue our mission, cover our costs and stuff. But if you can't afford that, then that's okay. You can, you know, here's another option that fits with that. So I think that almost kind of serves every, you know, every, every audience there, both millennials and.

Right. Yeah. You could offer, you know, for the sake of simplicity, you'd offer those two options as the paid options. You know, do the monthly recurring or annual recurring. Pick one, you pay the, pay the full retail, pay the discounted rate. And then you could have something subtle beneath those two options with get in touch if you need assistance or whatever. But you still can absolutely build a lean in community supported, membership driven local news publication with that approach and offer lots of cool perks as well as content access which will. I think we're going to talk about another podcast episode.

Yeah.

On how to actually structure added value, you know, perks to get folks to, to convert and support financially.

Yeah. So if you were starting a digital publication and, and a small market and you're thinking about subscriptions and donations, which would you choose?

Pete, I like the membership model, I think the realities of finance means you need to collect dollars. And with the membership model, there are a lot of perks which we'll get into. It sort of forces. It sort of forces me, the publisher, to be transparent, explain why we need support, and really appeal emotionally to the community. And then as a member, you know that you're contributing, you know, you're engaged, and that's the next topic, you know, really getting that engagement going. I think donations are good and they do work. I mean, the Guardian we were talking about earlier, they're a big, big publisher and they've had success with donations. But drawing a Line in the sand tips more people over. As long as you're handling your messaging from a real sort of community, supporting the community, a necessary contributor to the community with reporting. I think people understand that and we talked about this yesterday. I think that there's room for, at least in. As far as I can see, you know, we have a lot of subscriptions in our world, in our life. You know, Netflix is, was the original curse, right. I think. And, but as far as news goes, as far as consuming content, I think people have room for a local news subscription and a global, national or global news subscription. I think those are two needs, whether they pay for them or not. I think the need is there for most citizens wherever you live. So if you have the ability to be that local, you know, news publisher, you have a monopoly on your local news. You can charge for it, you should charge for it. But of course, you know, you're, you're, you're speak softly and carry a big stick. I think that expression, right? It's like, you know, be, be really lean in and the stick is your line in the sand. Oh, there, I just made an analogy. In the sand. And he's saying, look, we need your support. And I kind of like the idea of offering those two levels, like the full retail. Here's what we really, really need. But if you can't just come in at this level and if you really, really can't, just get in touch. I kind of like that approach. So, yeah. Yeah. What would you do? Ask that question right back to you?

Oh, for sure. I would definitely do something in the subscription membership world.

The whole.

And put us behind paywall project. When I started it was to prove that there is value to local news, that people are willing to pay for it and to show that that digital side of things can contribute to the bottom line and help local publishers maintain and stay alive in their local communities. And it's hard. I mean publishers, the early days of the Internet, this open source mentality, which is a great thing, I love that. But with local news, it's tough when most of the ad dollars are drying up and there's a monopoly with Google and Facebook. So you're left with really one thing and that is your local content. And that's something that Google and Facebook and no one else has, that New York Times doesn't have, that the Guardian doesn't really have. No one has that except you, the local publishers. So focus on what you do best and like we've been talking about, messaging is important. Let people know that you need their support and grow your digital audience around that membership and subscription model. Whether you do, you know, both or you know, it's. It's certainly possible.

Yeah, yep. Do membership and donate. Yep.

You can, yeah, certainly add that option on there because the publishers that I have that do that, you know, randomly. Someone will donate, you know, they'll, they'll hear about that publisher going digital for the first time and someone will want to contribute to, to the cause, essentially. So it certainly happens. And I was just thinking earlier not to sidetrack, but do you know of any publisher who is strictly donations only? They don't receive grants, they don't receive outside funding. It's just donations. Would the Guardian fit that bill, you think?

I don't know what they do on the grant side. I know donations is a big part of their revenue stream. Daybreak is all donations. No grants. Yeah. Sponsorship revenue for the sponsored posts in the middle of this email. Yeah, but they're new year and a half maybe.

Yeah, yeah. I'll just say that with subscriptions, you're beholden to your subscribers. Each individual subscriber is essentially your boss in a lot of ways.

That's true.

Versus when you think about donation models and grant funded operations, which are great, they're needed, but there is someone sort of beholden to you and that would be your grant funder. So grants can run out and that is something to think about when you're, when you're starting a publication because you're, you can only sustain as long as the grant allows you to.

Right, yeah, that makes sense.

Yeah.

All right. Memberships, slash subscriptions and take donations. It is.

It's even more unclear than it was when we started.

Well, you know, hopefully this was helpful to you guys who are listening. We're going to do another episode on tactics both for donations and subscriptions. We're going to get into the weeds a little bit about the perks that you can offer to actually get these casual readers to contribute to the organization, spend money with you and support. All right, Tyler, Thanks. We'll buy 20 minutes, I'm sure. Till next time. Thanks for listening and please get in touch with us if you have questions. We love to answer them. We'll answer them right here. In fact, we'll send an email to infoen101z e n101.com and we'll chat about it for sure.

Thanks for listening to the Paywall podcast. If you'd like to get in touch to discuss subscription Strategy, go to LeakyPaywall.com See you next time.

SA.