A Pivot to Subs Requires Full Company Buy In

We’re seeing some companies rethink whether they want to be subscription businesses. Unfortunately, these businesses are not paying off as expected despite investing a lot of money.

And yet, there are still many other media companies that are finding great success with their subscription business. For example, according to an INMA story:

News Corp Australia has made a decade-long commitment to growing subscription revenue and putting a value on its journalism. This month it cracked the one million digital subscriber barrier across its titles — not bad in a country of 25 million with multiple strong free sites.

Having nearly 4% of the country subscribe to your product is impressive. The entire piece is a good exploration of how they were able to pull it off.

Is there a secret formula for making a subscription business work?

Suppose we subtract great content and smart marketing. In that case, I think the most important thing a company can do to build a legitimately successful subscription business is to get the entire company to go all in on it.

Think about some of the most successful ones out there. First, you have The Information, which is almost exclusively a subscription business. In 2014, The New York Times decided that subscriptions would be the first priority.

Still, there have been some that have struggled. Quartz made the decision earlier this year to get rid of its paywall. In May 2020, it had 17,680 paying subs. By April 2022, it had 25,000. The growth was too slow, and advertising remained the bulk of the revenue. As I wrote then, eliminating the subscription was the right move.

Some media companies have had incredible success compared to others because they went all in. However, fundamentally pivoting to a subscription company means you have to make decisions that might interfere with other parts of the business.

For example, some of your absolute best content might go behind a paywall. That would impact traffic, which hurts an ad business. But for a subscription-first publication, that’s not a problem because you recognize the priority is giving paying subscribers content that ensures they retain.

None of this is to say that advertising isn’t essential. If you ask NYT’s team, they talk very highly of their ad revenue. But that is a nice to have on top of the core focus of convincing people to pay for content. One of the INMA author’s takeaways was this:

Alignment between newsrooms, product, engineering, and the business to eventually get content management systems and tools that allow newsrooms to produce efficiently for many platforms at once — and work with coherent user experiences that meet business goals.

Every team needs to understand what the priority is. Then, when a new opportunity comes up, you have to ask the question: does this impact our subscription business? Product, engineering, the business side, and editorial all know where success is.

I participated in a great conversation hosted by the FT the other night with student journalists. Before I spoke, a gentleman from FT talked about how they quantify engagement at the company, and it comes with stickiness in mind. Essentially, Engagement = Recency + Frequency + Volume. So let’s break that down.

• Recency: When was the last time you came back to the site?
• Frequency: How many times do you come back to the site?
• Volume: How much do you consume when returning to the site?

Why is this such a subscription-first formula? First, you will immediately churn if you are never returning to the site. But more importantly, you will churn if you are not coming back regularly and consuming enough content.

The company now knows what it should be thinking about to ensure that this engagement score continues improving. First, the audience development team is figuring out how to get more people on the newsletter so that recency and frequency remain strong. The product team might spend time on content recommendations, so volume improves. Finally, engineering will work on improving site speed so that people are less likely to bounce.

Everything is connected. If site speed is faster, fewer people bounce; that means they are more likely to see the paywall, which improves conversion.

The newsroom also plays a major part here. You have to understand what type of content will likely get someone to convert and retain. It might be different for conversion and retention.

I don’t think the same is true if you are an advertising business. So long as you are bringing the right people to the site, an ad business can work. It is a more straightforward business. And so I think it is tough for an advertising-first business to try and lean into subscriptions without deciding to pivot and prioritize subscriptions first. In the inverse, I do not think it is tough for a subscription-first business to then try and lean into advertising.

Remember, The New York Times still runs advertising. And it makes a lot of money doing that. It can do this because it has already acquired subscribers. As I’ve said in the past, an engaged paying subscriber is worth a lot more than a random user.

This is why I remain convinced that The Information will introduce a more robust ad offering at some point. At its scale, the ad revenue is unbelievably high margin. And since its audience is such high quality, it’d be crazy not to take that money. But it can do that because it already has the subscription business as the priority.

It takes a lot to make a subscription business successful. First, the entire team needs to be bought in, and you must be comfortable sacrificing other lines of business to make it work. In the short-term, it might suck; however, as The Times has shown, it really can pay off over the long term.

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