May 28, 2024

WaPo’s Subscription Tactics Are Smart

I hope you had a good Memorial Day for those of us in the United States. And for everyone, I hope your last week of May is off to a beautiful start. As I type those words, I can’t believe how fast the year is moving. We’re about to close the first five months of my being a full-time entrepreneur, and it’s truly remarkable. Thank you to everyone who has supported AMO along the way.

A few CTAs:

Speaking of registering…

On June 6th at noon ET, James Capo, CEO of Omeda, and I will discuss the state and fate of media businesses. We are both fortunate to work with hundreds of media organizations, either as Omeda clients or AMO subscribers.

And so, we will discuss what’s going on across the industry. We’ll break down:

  • The current pulse of the state of media and what opportunities and topics are on their watchlist
  • Highlight the macro drivers and dissect the micro-trends that leaders should focus on to drive their business
  • Share examples of media organizations and teams turning obstacles into business and consumer media opportunities

This is the first of a three-part series with Omeda in June, so you won’t want to miss it. Register here.

Using subscription tiers to maximize revenue

The Washington Post is in a very tough position right now, and we are starting to get hints at how new CEO William Lewis plans to turn things around. Despite my advocating for the publication to focus its energy on becoming the national component in a hub-and-spoke local news network, it seems that the current focus is to double down on Washington DC political coverage.

While I find this strategy pretty lacking considering the competition in Washington DC, there are some things to glean from a recent blast of press about the Post that other publishers might learn from. According to Puck, the Washington Post imagines several new subscription offerings:

For core audiences, the Post will introduce three additional subscription tiers: “Plus,” a B2C offering with additional editorial content for superfans; “Pro,” a B2B offering with in-depth policy data and analysis (the Post’s answer to Politico Pro and Axios Pro, essentially) for the K Street and Capitol Hill crowd; and “Membership,” which adds access to exclusive events and forums (think: WSJ C.E.O. Council). For non-core audiences, such as younger news consumers who engage with Post content on social media, the Post will also introduce a pay-as-you-go option to access single articles or work from a specific author. This offering isn’t about netting a few quarters and dimes from passersby, of course; it’s about getting their email addresses and credit cards and putting them in the marketing funnel, with the hope that they’ll subscribe down the line.

Let’s break this into two parts.

Part one is the core audiences and the introduction of three new tiers. This is a smart strategy primarily because it doesn’t treat every subscriber equally. For most consumer subscription companies, the goal is to get someone to pay the monthly rate. It doesn’t matter if that person consumes a few articles a month or dozens. Every subscriber is created equal.

The problem is that it ignores that some subscribers will likely pay more for the Washington Post. Theoretically, every publication has some percentage of its audience dedicated to the product and will for a more profound offering. Not offering that limits your potential upside.

Think about it as a funnel. If you have 10,000 readers and 5% convert at $50 a year, you’re making $25,000 on 500 subscribers. But if 5% of those subscribers convert on a $1,000 subscription, you’ve doubled your revenue even though it’s only 25 people. And if you look at the offerings that the Washington Post is proposing, only one seems to require legitimate investment:

  • Plus: More editorial content for superfans
  • Membership: Exclusive events and forums
  • B2B: Competitor to Politico Pro

The first two are likely straightforward offerings. I’ll be curious to see how the third plays out. Politico charges thousands, if not tens of thousands of dollars, for access to Pro, but it has some unbelievable reporters who are getting up-to-the-minute news.

Puck itself does this. For $100 a year, you get all of the content that the company publishes in a year. For $250, you get “exclusive inner circle calls with Puck authors.” Not everyone is going to pay $250, but there is some percentage that will. And for everyone who does, it’s like getting another 1.5 subscribers at the base rate.

Or look at The Information’s subscription page. Its standard offering, which gets you exclusive reporting and newsletters, is $399 per year. For $999 per year, you get all that reporting plus org charges, databases, surveys, and other data tools. I don’t know what percentage of standard subscribers upgrade to the Pro offering, but every incremental addition moves the needle at $600 more per year.

The other benefit is that it adds an element of price anchoring: The high price of $999 makes the $399 look very reasonable. By offering that more expensive tier, more people might be willing to convert to the lower-priced level because it appears “reasonable.”

This is a strategy that more publishers should explore. The basic tier can be content only, but then you can add additional data or community benefits for those with more wiggle room on their subscription price.

If we return to the quote from Puck’s story, there is this talk about the non-core audience. A pay-as-you-go option sounds a lot like microtransactions, which I have historically been very against. But the way the Post is thinking about it could be smart.

The problem with a non-core audience that is likely to find your story on social media or search is that there is little brand loyalty. Your story has piqued their interest, just this once, but they’re unlikely to convert on a $10-a-month subscription. If you give the story away for free, you’ll get some fly-by traffic and make a tiny bit of money from ads, but then you’ve lost them.

But you’ll now have their information if you can get them to register. And that can help you promote additional content. However, registering and paying are vastly different user behaviors because putting your credit card in is full of friction. Therefore, if the Post can create an offering that entices someone to pay a tiny amount of money for an article but then has the credit card stored, getting them to convert down the line should become easier.

Ultimately, the goal should not be to generate meaningful revenue from microtransactions. That model is just not good. But if you view this as a way of getting people with a propensity to pay for content to enter your marketing funnel with an active credit card, at least theoretically, the conversion from free to paid seems easier.

There remains a ton of uncertainty about WaPo’s business. Its traffic has been cut in half since 2020, the remaining audience is unbelievably unengaged, and I don’t see how it can win editorially. But from a tactics perspective, at least on the subscription side, I think there are some things worth paying attention to.

News Corp gets a major cash haul

According to the Wall Street Journal, News Corp has reached a massive licensing deal with OpenAI.

The deal could be worth more than $250 million over five years, including compensation in the form of cash and credits for use of OpenAI technology, according to people familiar with the situation. OpenAI would use content from News Corp’s consumer-facing news publications, including archives, to answer users’ queries and train its technology. 

This includes many of its U.S., U.K., and Australia-based publications, including the Wall Street Journal, Barron’s MarketWatch, New York Post, Times of London, the Sun, and the Australian. However, its book publishing division, HarperCollins, and research tool Factiva are not included.

As part of this story, WSJ reported on what other media companies have made, including Axel Springer generating $25-30 million over three years and the FT generating $5 to $10 million yearly. So, for News Corp to walk away with over $50 million a year is a massive coup compared to its competition.

Whether this is a good win for News Corp remains to be seen, especially if OpenAI can use this training to create products that keep many people from visiting News Corp’s properties. As a reminder, the news division generated $530 million in fiscal Q3 2024 revenue. And that doesn’t include any Dow Jones revenue, which—with its b2b business—added $544 million in the quarter. And so, while generating $50 million a year in licensing revenue appears great, how much of that $1.074 billion in revenue gets cannibalized because of this?

Jessica Lessin, founder and CEO of The Information, wrote a poignant op-ed about publishers doing deals with OpenAI. And this part has stuck with me since reading it:

The long-term solutions are far from clear. But the answer to this moment is painfully obvious. Publishers should be patient and refrain from licensing away their content for relative pennies. They should protect the value of their work, and their archives. They should have the integrity to say no. It’s simply too early to get into bed with the companies that trained their models on professional content without permission and have no compelling case for how they will help build the news business.

Unfortunately, as she also writes, many of these media companies are run by executives fighting to survive their jobs for one more quarter. Perhaps getting a $250 million deal is great in the short term, even if it hurts over the long term.

The question that now comes to mind is this: what does The New York Times do? It spent $1 million last quarter on litigation costs, so at what point does it use this $250 million number to try and anchor some premium deal? I would be shocked if The Times got anywhere close to that since News Corp owns so many more brands, but The Times is the behemoth of the industry. That brand premium should also carry a licensing premium.

AMO Pro: Are there scenarios where AI should be used to create content?

If we stop discussing AI from the perspective of lost traffic and, instead, look at it as a tool to help our journalists create more and better content, are there scenarios where using AI makes sense?

I had this discussion with Morning Brew’s CCO, Devin Emery, who has taken a very firm stance against it. In his mind, once you take the leap into using them [AI] to create core elements of your content, you’re on the path to commoditization.” And I mostly agree.

Yet, I think there may be parts of the content creation business—especially in news—where using AI to help with some parts of the process could actually be beneficial.

Read the full article here to dig in more.

AMO Podcast: Kat Craddock Talks Saveur

This was a great conversation with Saveur’s editor-in-chief and CEO. We talked about how Craddock acquired the brand from Recurrent a year ago, the brand’s strategy with print and advertising, and where they are taking the business next with events. Listen here or wherever you get your podcast.

Thanks for reading this week’s AMO. If you have thoughts, hit reply or become an AMO Pro member to never miss another issue of A Media Operator and for an invite to the members-only Slack channel. Have a great week!