Smaller Publishers Need to Be More Proactive With Their Subscriptions
If you take a smaller media publication and put it up against The New York Times, things are going to look very different when it comes to subscriptions. The reality is, big media companies have the resources and scale to operate far more complex subscription businesses compared to smaller publications.
Take Bloomberg Media, for example. A number of years ago, I interviewed Julia Beizer, the Chief Product Officer at the company. I come back to this quote often because it’s so pertinent to building subscription businesses:
Furthermore, I think what got really interesting in the part that I’m most proud of after we made sure we were clear on the product, we started thinking more holistically about what it means to launch a paywall. As I said when I got there, we’re not launching a paywall. We’re launching a subscription business. A paywall is the toll booth, please pay us some money. Great. Can you transact? Amazing. Transaction done. A subscription business means can you actively continue to recruit and attract new members every month, acquire them. Can you retain the ones you have?
Do you have the right email programs set up and push notification programs set up to make sure subscribers are getting value out of their subscription? We have spent a lot of time and effort in building out what I would call a 360-degree marketing apparatus in support of these efforts. How can we use data and propensity modeling and other machine learning tools to help us find on the 50 million people on our site every month find likely subscribers and make sure we market to them with the right offer, with the right language, with the right price? We’ve done a ton of testing in that space, and I think that’s where we’ve seen the biggest rewards.
Think about all of the things that she mentions here: transacting, active recruitment, retention, email and push notifications, smart targeting of readers, the right offer with the right language and the right price… and the list goes on. Each of these things is so complicated.
Compare that to what I do here. I’m a one-man band. I threw up a page that talks about what an AMO Pro membership entails and promote it in every piece I write. I have a small email onboarding that tries to promote AMO Pro. But for small publishers, including mine, it is impossible to do the amount of work that a Bloomberg Media does. This is why so many publishers get caught up focusing on tools to build paywalls versus thinking about the subscription business holistically.
But there are three things that publishers can and should do to give their subscription business a boost.
Increase prices
Recurring revenue is one of the biggest reasons that people argue subscription businesses are better than advertising ones. People say that with ads, you sell a campaign, run it, and then have to go back to ask for more money. You’re always starting over. With subscriptions, so long as someone is retained, you’re getting paid. There’s a bit of a “set it and forget it” kind of attitude.
The problem is that while you are receiving the subscription revenue monthly and yearly, your costs are continuing to go up. The rate of inflation is, fortunately, coming down, but there is no denying that the past few years have seen costs increase.
I was speaking with an operator the other day that has a print component to their business and he said that print costs have certainly increased over the past couple of years. And even if you’re not printing, health insurance costs, salaries, and all sorts of other costs continue to rise.
Without realizing, you are generating less revenue per subscriber as time goes on. One of the reasons people don’t pay attention to this is that revenue might be growing overall due to more people signing up. However, if a subscription costs $100 per year and three years later, you’re still charging $100, you’re making less profit per subscriber. It’s just a fact.
And so, publishers should absolute look to increase their prices. However, doing it can be scary, so there are a number of different ways to try it.
The first approach is to raise prices automatically. That’s what Bloomberg does with its terminal. Every two years, there is a price increase. In 2022, that price increased by about 9%. Bloomberg links its price increases to the rise in inflation. And so, customers have grown accustomed to it and know to expect it.
Publishers could also introduce something like this. For readers that have been around for a set period of time, alert them in their renewal notice that the price is increasing by a certain percentage. You can use inflation as the percent increase; others might use what competitors are charging. The point is, bake it right into the renewal.
The second approach is to increase prices ad hoc based on user behavior. For example, if you have a cohort of readers that are consuming a lot more content, you might go after them to increase prices compared to other subscribers that might be more passive readers.
The benefit of this is that you are able to increase your blended ARPU thanks to your most dedicated readers paying more. In some respects, it makes sense because they are getting more value from the content.
The third approach is to just go entirely ad hoc. Build a segment of 10% of your subscribers and alert them that their prices are going to increase at renewal. Then see how many people churn versus upgrade to the new subscription price. If the growth in revenue is greater than the loss of subscribers, you’ve won. You can now roll this out to more of your subscribers.
However, I wouldn’t flip the switch all at once. You want to pay attention to churn for 6-12 months after increasing prices to make sure there’s no long-term negative effects. For example, in month one, you may find churn remains low, but by month six, revenue is lower than it would have been if you didn’t increase prices.
In all three of these cases, you are building a segment of the audience and promoting an updated price to them.
Add Tiers
The Information costs $49.99 per month or $499 per year, and then $999 for The Information Pro. The only difference that I can glean is that users who pay for Pro get monthly org charts and a Pro-exclusive newsletter. Puck costs $100 per year and then $250 for the the Inner Circle, which gives off-the-record calls with the team and other small perks.
The bulk of the products are the same, but there is a small percentage of people that are going to upgrade to the better product just because they want the full experience. And this can have a big impact on revenue.
Let’s use hypothetical numbers for The Information. According to Business Insider from 2022:
Lessin holds The Information’s numbers closely even among staffers, but according to two people familiar with the figure, the publication has about 45,000 paying subscribers.
At $499 per year, that’s approximately $22.5 million in revenue. If it can get 5% of its subscribers to upgrade—2,250 people—it’ll add an additional $1.125 million ($499 base + $500 to get to $999). The Information didn’t have to acquire any new customers and didn’t need to add a ton of new product, but increased its revenue by over a million dollars.
The problem with how The Information rolled out this product is that it suddenly yanked the org charts and put them in the new tier. For years, it had marketed the org charts as part of the base subscription. Then, without notice, that became part of the higher-priced tier.
If you’re going to introduce a new tier, you should grandfather current subscribers into it and then give them an option to upgrade at the end of the subscription if they want to retain those features. Otherwise, it feels like a bait and switch.
The problem with new tiers is, ultimately, that they do require more stuff. The Information moved org charts into a new tier, but it’s still work. Puck needs to do the off-the-record calls with the team. Finding the right additional products without it becoming resource intensive is a fine line to walk. But, if done right, the growth in revenue per subscriber is appealing.
Add a group subscription
This is mostly for my B2B readers, but I believe group subscriptions are an important addition to subscription businesses. And here’s why… if someone is paying for your content and they’re engaging, it means they see value in it. I suspect their colleagues might also see value. Not to mention, they can be advocates for you.
The interesting thing about group subscriptions is that it runs counter to the bulk of this piece, which is about increasing ARPU. In this case, you are actually decreasing the amount of revenue you generate per reader, but increase the total revenue you make from that company. For example, let’s say three people from one company paid to read AMO. I’d make $600. If I offered them 25% off if they purchased five subscriptions, that would be $150 * 5, which is $750. Despite giving a 25% discount, I make 25% more in revenue. And since supporting two additional subscribers doesn’t increase my costs, the extra revenue goes to the bottom line.
There are two ways to go about selling group subscriptions.
First, you can explicitly market them to your prospective audience. I am a fan of how Endpoints does it. Not only is the company calling out that group subscriptions exist, but it is also anchoring the price at $400 per year. And so, when the Enterprise price comes back at, say, $300, the buyer knows they’re getting a deal. (I own up to the fact that this is not the easiest to see on mobile, but you can see it live here.)
Second, seek out all the heads of department in your database. For example, if you have a CMO that’s reading you, I suspect they have a number of direct reports that might also benefit from your content. The CEO might want to get their entire leadership team signed up. If you have the right 1st-party data on your audience and track their engagement, it can become a straight forward business development deal to get more people from the same company paying.
Time is precious
One of the reasons the largest media companies are able to see incredible growth in their subscription businesses is because they have the resources to do in-depth testing to target the right message to the right reader; additionally, those resources extend to dedicated business development activities to grow group subscriptions.
However, the above three tactics—increasing prices, adding tiers, and selling high-level group subscriptions—does not take a ton of effort. And if done right, the impact on the business can be better than just chasing new subscribers.
Thanks for reading today’s AMO. If you have thoughts, hit reply or join the AMO Slack to discuss pricing, communities, and so much more. It’s been unbelievably active the past few weeks and I’m excited to see where it leads.
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See you next week!
