Abstract

This paper investigates how subscription pricing affects usage intensity, a key performance driver for firms operating under subscription-based business models. We analyze data from an online news publisher, a setting in which promotional pricing is commonly employed to attract new subscribers, though its broader effects remain ambiguous. Standard economic intuition suggests that lower-paying subscribers derive lower utility and thus consume less. In contrast, we document that promotional subscribers, on average, consume substantially more than those paying regular price, even after accounting for differences in churn behavior. This empirical pattern is inconsistent with simple demand models and points to the importance of taking unobserved heterogeneity into account. We develop and estimate an empirical model of subscription and consumption behavior, showing that, because subscription costs are sunk at the time of consumption, it is possible to recover the correlation between consumption levels and consumers' unobserved willingness to pay. We use the model to recover the underlying consumer parameters and to evaluate the impact of alternative pricing policies on both subscription revenues (via customer acquisition) and advertising revenues (via subsequent consumption). Our findings highlight the economic value of understanding how price shapes not only who subscribes, but also how much they engage with the product.

Abstract

A primary challenge for providers of information goods (e.g., news websites) is to convert visitors into subscribers as well as to retain these subscribers beyond the initial subscription purchase decision. Subscriptions typically grant access to paid content which is otherwise locked behind a paywall. As such, the user's valuation of the subscription is highly influenced by the share of paid compared to free content on offer. However, this share of paid content might matter differently depending on both the user's subscription status and interest in different content categories. In this paper, we assess how much the share of paid content matters for subscription purchase and churn decisions and conduct a comprehensive analysis encompassing both the pre- and post-purchase stages of the customer journey. We use a novel dataset from a major news website which captures the entire individual customer journey for more than thirty thousand visitors and subscribers in July and August 2017. Our results reveal that in the pre-purchase stage, a higher share of paid content in categories that interest the user exhibits a positive relationship with initial purchase probability, but only up to a certain turning point. Meanwhile in the post-purchase stage, more paid content in categories of interest is negatively related to churn probability. We discuss the implications of these findings for uncovering important customer segments and for targeting them effectively.

Abstract

Many online news providers moved to a freemium business model where consumers have access to some free content, while the rest of the content appears behind a paywall. As a result editors need to decide what topics to cover and which articles should appear in the paid and free sections. Understanding how content types affect subscriber demand and long-term revenue is hard because editors make an endogenous decision about the content they solicit and the allocation to the paid and free sections. One type of content, however, shows promise in answering this question - suspenseful and surprising content. Suspenseful events are those with high variance in the uncertainty of their outcome, i.e. a close soccer match between two teams. Surprising events are those with a realized outcome that is very different from the expectation prior to the event, i.e., an upset victory by the underdog team. Other important contexts where suspense and surprise are common include political debates, voting, and elections. The inherent uncertainty in these events allows us to use their realized outcomes for empirical identification when estimating demand and consumer preferences. Although a few theories prescribe a strategy of content creation for information designers such as the editor in this case, these theories have not been tested empirically, and their revenue implications have not been explored. We empirically analyze how content editors should treat surprising and suspenseful events - how much coverage they should allocate to them, and whether the content should be paid or free. 

Abstract

A primary challenge for providers of information goods (e.g., news websites) is to convert visitors into subscribers as well as to retain these subscribers beyond the initial subscription purchase decision. Subscriptions typically grant access to paid content which is otherwise locked behind a paywall. As such, the user's valuation of the subscription is highly influenced by the share of paid compared to free content on offer. However, this share of paid content might matter differently depending on both the user's subscription status and interest in different content categories. In this paper, we assess how much the share of paid content matters for subscription purchase and churn decisions and conduct a comprehensive analysis encompassing both the pre- and post-purchase stages of the customer journey. We use a novel dataset from a major news website which captures the entire individual customer journey for more than thirty thousand visitors and subscribers in July and August 2017. Our results reveal that in the pre-purchase stage, a higher share of paid content in categories that interest the user exhibits a positive relationship with initial purchase probability, but only up to a certain turning point. Meanwhile in the post-purchase stage, more paid content in categories of interest is negatively related to churn probability. We discuss the implications of these findings for uncovering important customer segments and for targeting them effectively.