How Kompas and SCMP are balancing subscriptions and advertising

By Stella Xu Ling'en and Neha Gupta

This dynamic environment brings to the forefront a critical question for media organisations: How to strike the right balance between reader revenue and advertising as the twin pillars of financial sustainability?

Two prominent players, Kompas (Andy Budiman, Chief Executive Officer, KG Media) and the South China Morning Post (Catherine So, Chief Executive Officer, SCMP), provide insights into how media organisations are navigating this everchanging landscape during the Asian Media Leaders Summitin Singapore.

Talking numbers: The shift to digital revenue

Print has seen its relevance wane. Kompas, a leading Indonesian media group, exemplifies this shift. In 2019, print contributed 57 percent of its revenue.

However, as digital consumption soared, its online subscription revenue lagged behind, accounting for less than 1 percent of the total revenue. The COVID-19 pandemic further exacerbated this trend, reducing print revenue by 50 percent.

To bridge the gap, Kompas has embraced digital subscriptions.

"Challenges remain, including low credit card penetration in its primary market and a churn rate of 40 percent among subscribers. To achieve profitability, Kompas must grow its subscriber base substantially, from the breakeven point of 220,000 to an ambitious target of 700,000," said Budiman.

Recognising that this target may be too high, he added, "What we aim to do is optimise key variables to lower the breakeven point to below 220,000."

One critical variable is the churn rate. "Indonesia has a credit card penetration of just 6 percent, making recurring payments challenging. This is reflected in Kompas' payment patterns, where 92 percent of transactions are non-recurring, and only 8 percent of digital subscription payments are made using credit cards," Budiman explained.

Addressing this issue is essential for improving subscriber retention and reducing the churn rate.

The marketing team works tirelessly to prevent churn throughout the entire customer lifecycle, from the onboarding process to renewal reminders. Despite these efforts, the churn rate remains high, with approximately 40 percent of the subscriber base lost annually.

Monthly churn hovers around 13-14 percent, meaning significant effort is required just to maintain growth. For example, to achieve 50 percent year-on-year growth, Kompas must first replace the 40 percent of subscribers lost and then add an additional 50 percent in new subscribers. This makes achieving growth a substantial challenge, requiring the conversion of large numbers of new users.

Ideally, conversions should happen organically on the website through the strength of the product itself. However, Kompas is still an early-stage digital subscription product, and Indonesia remains an early market for digital subscriptions. As a result, many conversions rely on paid advertising channels like social media, increasing costs.

Another challenge is the relatively low ARPU (average revenue per user) in the Indonesian market. "For instance, our trial subscription is priced at around 10,000 rupiah (approximately $0.65 USD)," Budiman explained.

Finally, there are significant fixed costs associated with running a digital subscription product, including technology expenses and digital marketing costs. These factors collectively make achieving profitability a challenging but critical goal for Kompas.

SCMP offers a contrasting success story. Based in Hong Kong, It grew its digital shares from 10 percent to 40 percent, and expanded its global reach eight-fold.

It has witnessed a 130 percent increase in digital subscriptions within three to four years of introducing a paywall.

This success stems from strategic investments in technology, data analytics, and content diversity. SCMP has expanded its offerings to include tailored subscription bundles and premium products, appealing to both global business leaders and younger audiences.

Advertising: Reinventing the revenue stream

While digital subscriptions are gaining traction, advertising remains a cornerstone for many media organisations. Kompas and SCMP demonstrate how innovation can revitalise this traditional revenue source.

SCMP has pivoted to premium programmatic advertising, emphasising brand safety to attract high-value advertisers. Recognising advertisers' concerns about negative associations, SCMP curates content that aligns with brand values. This includes niche publications like Styleand Postmag, which cater to luxury and lifestyle audiences.

Today, 60 percent of SCMP's revenue comes from advertising, 30 percent from subscriptions and 10 percent from events.

Kompas, on the other hand, is exploring ways to maximise advertising revenue through diversification. Events, book publishing, and targeted content are emerging as significant contributors.

By integrating these offerings into its ecosystem, Kompas aims to reduce reliance on traditional ad revenue and create sustainable income streams.

Diversification: The key to sustainability

Diversification is emerging as a central theme in media revenue strategies. Both Kompas and SCMP are leveraging their brand equity to explore non-traditional revenue sources.

SCMP's event business exemplifies this approach. Through initiatives like the Family Business Summit and the China Conference, SCMP brings together influential leaders while generating substantial revenue. By focusing on fewer but higher-quality events, SCMP has doubled its event revenue, underscoring the importance of strategic planning and resource allocation.

"Coming out of COVID, we made the conscious decision to significantly scale back. Because of this, not only did our revenue grow, our profitability also grew 50 percent. Some of our events even doubled in revenue as we really grew by word of mouth," said So.

Similarly, Kompas is delving into exclusive content and digital wallet payments to cater to a broader audience. "By addressing local market challenges, such as low credit card usage, Kompas is tailoring its products to fit its audience's needs while maintaining the quality of journalism," said Budiman.

Audience-centric approaches: The road ahead

A common thread in the strategies of Kompas and SCMP is their commitment to audience-centric approaches. By understanding the preferences and behaviours of their readers, these organisations are crafting products and experiences that resonate deeply.

SCMP, for instance, uses AI to enhance content personalisation and optimise its newsletters, which boast open rates of 40-50 percent. It also invests in SEO and differentiated content to attract a global audience, growing its reach from 4 million to 40 million monthly users.

Kompas is focusing on engagement metrics to measure subscriber activity, emphasising the importance of content relevance and accessibility. By experimenting with new formats and delivery channels, such as newsletters and social media, Kompas is working to stay ahead of the curve.

Balancing act: Reader revenue vs. advertising

The dichotomy between reader revenue and advertising is not a zero-sum game. Successful media organisations recognise the need to balance these streams, leveraging their strengths to support one another. For instance, revenue from digital subscriptions can fund newsroom operations, while advertising helps scale content distribution and innovation.

Both Kompas and SCMP illustrate that a multifaceted approach is essential. Whether through premium content, event-driven engagement, or technological investment, the goal remains the same: to build sustainable revenue models that adapt to a rapidly changing media landscape.

As the media industry evolves, the question is no longer whether to prioritise reader revenue or advertising but how to integrate them effectively. By staying attuned to audience needs, embracing innovation, and diversifying income streams, media organisations can ensure their relevance and resilience in the digital age.

About the writers: Stella Xu Ling'en is a second-year Communication Studies student at the Wee Kim Wee School of Communication and Information, specialising in media analytics or strategic communication.

Neha Gupta is Research Editor at WAN-IFRA.

Neha Gupta

Multimedia Journalist

[email protected]