The more media companies ask consumers to pay for digital content, the more brands are stepping in to foot the bill. And while consumers and marketers seem to love the arrangement, it could cut into the pool of advertising dollars and does nothing to wean consumers off the idea that content is always free.
Why More Marketers Are Underwriting Access to Paid Content
Last week, Volvo began offering free streamed baseball games to the millions of Americans who own Apple devices through a partnership with Major League Baseball's advanced media division. For one month, the automaker is covering MLB fans' $25 subscription fee for live game video, marking the first time MLB has offered free access to all its games.
The move comes just weeks after Ford Motor Co.'s Lincoln brand stepped in to offer free passes to 200,000 of the people most likely to encounter The New York Times' new digital paywall, opening up $150 worth of paid content. More recently, Microsoft has begun underwriting a month of Hulu Plus's $7.99-a-month video service for people who downloaded the latest version of Internet Explorer.
While the moves may not be training consumers to open up wallets, they are encouraging sampling, bringing bigger ad dollars to publishers and, for brands, generating buzz and goodwill.
"Advertisers have been underwriting media for a very long time; this is just another way to engage with consumers," said Connie Fontaine, manager of U.S. Lincoln marketing communications, who brokered the Times deal.
While commercial breaks have long brought us free broadcast TV, and ploys to increase magazine circulation to capture advertiser interest have lowered some subscription rates close to zero, recent examples of brands bankrolling paywalls makes that relationship between advertising and free content more obvious and overt -- and that's generating enormous goodwill. In Lincoln's case, consumers have written to the automaker, expressing appreciation for the free subscriptions.
One woman went as far as to say she was now considering buying a Lincoln.
The gratitude comes at higher costs than standard ad buys. These deals are forcing advertisers to spend way more than they would have for just media -- paywalls give digital content a high and hard cost that wasn't previously reflected in measly cost-per-thousand calculations. With each user worth $25 or $150 in revenue, publishers can ask premiums to cover lost subscription revenue and branding. These deals aren't done on a CPM basis, but as lump sums that exceed the usual digital media buy.
For Ken Doctor, media analyst for Outsell, it's a return to a model prevalent in the 1950s and '60s. "Those weren't CPM buys; it was one sponsor responsible for one program. If sponsorship now is paying enough money to support journalism and creation, that'd be OK."
Marketers believe the payoff is higher than the average ad buy.
Giving consumers something they want was a big motivation for Volvo, too, said Jared Hopfer, associate director of Havas Digital's Mobext, the mobile agency behind the MLB promotion.
The offers generated a significant amount of PR as well. The Lincoln ad garnered dozens of press hits and tons of love on Twitter. "Muchas Gracias Lincoln for the free online @nytimes subscription for the rest of 2011," one winner tweeted. Volvo and MLB saw a similar trend.
These offers are still novel, but that will change, Mr. Hopfer predicted, adding that his agency is on the lookout for similar partnerships for his clients.
While MLB has always required a subscription for its streaming service -- as much as $120 for a year of video -- The New York Times and The Dallas Morning News have recently put website content behind paywalls. Meanwhile, magazines have been trying to sell digital content on the iPad and other tablets, in hopes that new digital formats may actually help them charge more than they can in print.
There's a nagging question. The point of paywalls and digital subscriptions is to generate end-user revenue, in many cases to supplement advertising revenue -- a relatively fixed pool of dollars. From 2010 to 2014, U.S. consumer spending on newspapers is expected to slide, but not as dramatically as the 3% drop in ad revenue, according to PriceWaterhouseCoopers. Consumer magazines will also see fractional declines in both consumer and ad spending, while internet and mobile advertising is expected to jump 7.7% to $33.4 billion.
Letting brands underwrite free access does little to shift consumer behavior and psychology around paying for content. But it does help to lure customers into new pay environments. "For MLB, it's great lead-generation," said Mr. Doctor. "A consumer may get $25 for free, but baseball fans are going to use it and then there's still months left in the season."
Put another way, could these sponsored free passes train potential subscribers to expect advertisers to swoop in and foot the bill?
"We don't think so," said a Times spokeswoman via email. "This program is a unique way to reward loyal users of NYTimes.com, and we believe this will engender long-term retention benefits."