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Why a Membership Model? - Political Wire : Political Wire

as publishing moved to the Internet and digital ads evolved, the incentives grew out of whack. Publishers no longer have a direct relationship with most advertisers. Instead they increasingly use ad networks. These ad networks pool an audience across thousands of different publications and websites. Advertisers tell the networks what audience they want to target and their ads are shown wherever those readers happen to be visiting. What does this mean? Publishers no longer have direct relationships with advertisers so they try to make themselves as attractive to ad networks as they can. This often means sharing personal data about their readers and resorting to other reader unfriendly tactics to show as many ads as they can. Advertisers no longer care about individual publications since their audience may come from thousands of different sites. To make matters worse, the Internet has a virtually unlimited inventory of ad space which drives prices down to ridiculously low prices. This often leads to ads that are in very poor taste. The membership model is much more direct and honest. Publishers are directly accountable to their readers. That’s it.
Simon & Schuster announced Wednesday that some of its titles are now available on Oyster and Scribd, two of the leading e-book subscription services. The move makes Simon & Schuster the second of the Big 5 publishers to experiment with the relatively new e-book subscription market. As part of the agreement, Simon & Schuster will make available its entire backlist of thousands of books, including works by authors ranging from Ernest Hemingway to Stephen King.
Each of the site’s journalists (there are currently about 50) has a page where their content lives, and a discussion forum. When someone subscribes to them for $5 a month, Beacon takes a cut — the amount is in flux, but it is around 60 percent on average — and then the reader gets access to all of the site’s other writers. Some of the proceeds from each subscription also go into a pool that is shared by all of the journalists on the platform.
The Globe and Mail made a couple of key hires from ailing Canadian firm BlackBerry, and the new recruits have "made a tremendous difference" as they have discovered new ways of using data and pulling it all into one database. The news outlet is targeting "a high-end market", Crawley said. "We are really only interested in readers who earn more than $100,000." There is a great deal of "wasted money", he explained, as 40 per cent of content produced by Globe and Mail is read by fewer than 1,000 people. "Predictive analytics helps," he said, but compelling content is the key to the success.
It is not hard to see the appeal of recurring revenue, but some of the benefits may be less obvious. “This is the best business model you can ever have because we can place inventory purchases against future sales,” Mr. Zhardanovsky said. “I will be shipping out 24,000 products next month whether I land a new customer or not. I already know how many bags of Blue Buffalo brand chicken-flavored dog food I have sold in the next 60 days.” That predictability allows PetFlow to maintain lower inventory levels and to negotiate better deals with suppliers, who appreciate that PetFlow does not discount its sales and that its customers are much less likely than others to switch to a different brand. “We have 60 percent of our customers telling us that they used to shop at Petco or PetSmart,” Mr. Zhardanovsky said. “Which means we’re taking a lot of people out of the traditional retail channel.”