Spillovers from Online Engagement: How a Newspaper Subscriber’s Activation of Digital Paywall Access Affects Her Retention and Subscription Revenue

• Published in: Management science Vol. 68; no. 5; pp. 3528 - 3548
• Main Authors: Pattabhiramaiah, Adithya, Overby, Eric, Xu, Lizhen
• Format: Journal Article
• Language: English
• Published: Linthicum INFORMS 01-05-2022; Institute for Operations Research and the Management Sciences
• Subjects: Access; Advertising; causal forest; customer retention; Customers; digital monetization; matching; Newspaper industry; newspaper paywalls; Retention; Revenue; Selfselection; Subscribers; Subscriptions; synthetic control; Valuation; North America
• ISSN: 0025-1909; 1526-5501
• DOI: 10.1287/mnsc.2021.4092

Newspapers are increasingly reliant on subscription revenue as advertising spend shifts to online platforms. Many newspapers have implemented paywalls in an attempt to boost subscription revenue. We study whether and how paywalls can help newspapers boost subscription revenue by retaining existing subscribers. Most major newspapers offer free access to paywalled content to subscribers to the print edition, which may help the newspaper retain subscribers by making their subscriptions more valuable. We leverage variation in whether and when existing subscribers activated access to the paywall of a top 30 North American newspaper. Our identification strategy accounts for self-selection in subscribers’ decisions to activate paywall access. We find that a subscriber’s activation of digital access decreases the risk of her canceling her subscription by about 31% and increases her subscription revenue by 7%–12%. In other words, digital activation improves subscriber retention and the associated subscription revenue. This suggests a crosschannel spillover in which the online product (the paywalled website) increases customers’ valuation for the offline product (the printed newspaper). Our results have implications not only for the newspaper industry but also for firms in other industries that offer subscribers to one product free or subsidized access to a complementary product.
This paper was accepted by Kartik Hosanagar, information systems.