Adopting a membership orientation can be a simple and powerful way for media companies to reinvent their business models. In fact, membership can make them practically disruption proof.
Over the past decade or more, publishers have had to deal with two related transformations that are causing them to rethink their business models: the shift from print to digital and from ad-centric to reader-centric.
The shift to digital dominance has changed the economics of production, the limitations on timing and publishing frequency, and the reach on distribution. Startup media companies can establish a brand, create content—perhaps without a dedicated team of content creators—and distribute it globally with a minimal investment. Legacy publishers have had to seriously rethink everything in light of the shift—and rising competition.
There is a glut of content available, much of it available for free. This means that many readers are less willing to pay for much of the professionally created content of traditional media companies.
Meanwhile, advertisers have more places to advertise, at the same time as consumers are increasingly able to hide or ignore the ads, making advertisers less willing to invest in cost-per-click ad models.
What’s a publisher to do? The answer could be rethinking your offering beyond the current product, with a membership mindset.
The Rise of the Membership Economy and the New World of Subscriptions
With the rise of what’s come to be known as the Membership Economy, companies in virtually every industry from software (Salesforce) to hardgoods (Peloton) have been moving from ownership to access, from anonymous transactions to known relationships with customers, and from one-time payments to ongoing payments.
Technology is extending the ways companies can interact with the people they serve. Always-on devices, declining costs of both generating and distributing content, and perhaps most of all, the ability to leverage data and algorithms to provide a more personalized experience, have changed consumer expectations. Consumers expect companies to optimize services for their individual needs, and to “learn” their preferences over time.
Companies that optimize their services around building a long-term formal relationship with their customers, rather than focusing on their own products or short-term revenue, are disrupting long-time players. Think of what Amazon, and particularly Amazon Prime, has done to retail, or what LinkedIn is doing to professional associations and recruiters.
These membership-oriented businesses are able to build predictable revenue through subscription pricing, even as many traditional subscription businesses struggle. This is because they understand that the initial moment of transaction is the starting line, and not the finish line. To move from a subscription to a membership approach, businesses need to focus on engagement, and understand the warning signs of churn.
Membership is the mindset of the company—the focus on understanding what the customer wants and is willing to pay for, forever, and delivering that. Subscription is just a pricing decision. Many media companies have always offered a subscription option, but few have been focused on treating their subscribers like members, and focusing on their evolving, long-term needs.
But some media companies have committed to membership approaches, focusing on winning their subscribers for the long-term and in many cases offering new features to better achieve their subscribers’ goals. New media companies like Spotify and Netflix have pointed the way to success, and traditional media companies like the Wall Street Journal, the Guardian and the New York Times have followed that lead with a member-centric approach.
Three Steps to a Membership Mindset
This approach can be adapted to suit virtually any media company in 3 steps.
Get a clear picture of who your “members” are. Are you in business to support advertisers or readers? There is no shame in either. But too many publishers are getting lost in the middle—trying to become more reader-centric while not being willing to give up any ad revenue. The problem is that advertisers want volume of eyeballs while readers want unique content and experiences. Their goals aren’t aligned, and media companies that spread themselves too thin, trying to manage both, end up doing neither well.
Determine your “forever promise” to those members. Is it around entertainment or deep analysis?
If your focus is on readers, is your promise to be hyper-focused on a specific topic like The Information or broad and high-level like theSkimm? And if you serve advertisers, how creative are you in devising solutions that help them achieve their ongoing business objectives? If you asked your best (happiest, most loyal) subscribers why they stayed with you, what would they say?
Use that “forever promise” as a guiding principle in determining the content and features you offer. Don’t be limited by your current product and packaging.
Netflix used to offer “3-dvds-out-at-a-time” and then moved into streaming content. Now they are investing $8 billion to create unique content to deliver through multiple channels including cable and mobile device. But their forever promise of “a great assortment of professionally created video content delivered in the most efficient way possible with cost certainty” hasn’t changed at all.
Once you start focusing on your best members, and optimizing your offerings around them, instead of building around your products (magazine, newspaper, 30-minute sitcom) you will create a virtuous cycle of product and service creation that protects you from competition and builds tremendous loyalty.
Does Information Really Want to Be Free?
There’s a piece of Silicon Valley folklore that has Steve Wosniak and Stewart Brand in conversation at the first “hacker conference” in 1984. Apparently Brand told Wosniak that information wants to be free. To this day many believe that consumers are unwilling to pay for any kind of content. This is simply not true as everyone from Netflix to The Financial Times has proven.
While it’s OK to give some content away for free, as a trial, or even invest in a freemium model, it’s critical to make sure you understand the return on investment of your free component.
Many organizations are using a “metering” model, in which readers get a certain amount of free content each month before hitting a paywall. With a few exceptions, this is generally a terrible model. Consumers can “game the system,” consuming as much free content as they can get without any intention of paying. Publishers aren’t able to discern between good prospects and free riders. And they can’t treat different segments differently.
Metering is neither a clear trial—a way for someone to understand the value you provide—nor does it provide a benefit to the company (like data insights) or to paying subscribers (a network effect, like LinkedIn). It’s a tactic in search of a strategy.
An increasing number of savvy publishers are closing the metering loophole, like the Boston Globe, which has gone from 10 to 5 to 2 free articles per month, since launching digital in 2011. The New York Times has also dropped from 10 to 5. At the same time, organizations are tracking the journey from prospect to paying subscriber, making note of the articles and topics that drive conversion and retention.
When you optimize content around paying subscribers, and treat those subscribers like members, the metric changes from clicks to engagement among paying subscribers and qualified prospects. Suddenly Kim Kardashian articles aren’t seen as successful, while in-depth analysis of the bond market, with its small but fully committed following, becomes “Most Valuable Content.”
Taking the Plunge to Membership
It can be scary to change the business model. Moving to membership requires focusing on a specific group of people, and letting other readers go. It requires clarifying your corporate mission. If you are going to have an obligation to your readers, be specific. By “readers” is that anyone who might ever read an article? Or paying subscribers? And if none of them paid you, do you still have an obligation? Just because you have always offered certain features or content, if it doesn’t attract new subscribers, or hook them so they’ll never want to leave, there’s no reason to keep those features.
You also might want to look at new features, like live events, in-depth research or educational content to more fully deliver on your promise.
I recently spoke to a group of senior business and editorial executives of major publishing companies. Many held that their businesses would be unable to survive without advertisers. And yet, many others (of all sizes and from across the globe) have been able to build new models blending old offerings with new ones and being paid by their consumers. It’s possible, but it requires focus and discipline.
It’s hard enough to join the Membership Economy as a startup, paths blazed by Salesforce, LinkedIn and Netflix. But for companies that have been around for decades, or even centuries, transformation is hard.
There are the tactical changes: how does content creation change when the goal is paid loyalty and binge watching and not anonymous “drive by” consumption? What about selling to consumers and not corporate advertisers?
But there are also cultural changes: it can be hard to take a more data-driven approach in an industry based on experience and instinct. As new skills become more important, what happens to the influence of long-time employees? And how do you find the courage to take very real risks that might tank a proud and successful organization?
It’s not just publishing facing these challenges. Retail, consumer products, nonprofits, services, manufacturing—any business that depends on customer engagement and loyalty is dealing with disruption.
And the north star to guide these new paths is the customer.
About the author
Robbie Kellman Baxter is the founder of Peninsula Strategies LLC, a consulting firm based in Menlo Park, CA that helps companies excel in the Membership Economy. Her clients have included large organizations like Netflix, SurveyMonkey, and the Wall Street Journal, as well as smaller venture-backed start-ups.
Republished with kind permission of Digital Content Next, advancing the future of trusted content