Digital Publishing Reader Revenue Top Stories
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With storm clouds on the horizon, what’s next for subscriptions?

Of all the trends publishers have pivoted to over the years, subscriptions was one of the more sensible. Relying on the support of those you serve puts pressure on content and quality in all the right ways. But as economic headwinds blow, there are forecasts of not just a slowdown, but a decline in subscriptions as consumer budgets come under pressure.

In the immediate term, digital subscriptions in particular are continuing to grow for publishers. The International News Media Association’s Subscription Benchmarking Service of 125 international news brands has shown steady linear growth, despite declining engagement and news avoidance. “When we try to forecast what is going to happen in the third quarter, in the fourth quarter, using mathematics… we basically see forecasts telling us it’s going to grow again and again and again,” INMA Researcher-in-Residence Greg Piechota noted.

What the INMA has noticed, however, is that there has been a recent spike in subscription cancellations. The past few quarters have seen cancellations go up 34% compared to Q1 of 2021.

It may take some months yet to see economic pressures translate through to reduced uptake of digital subscriptions, and more cancellations. To some extent, this was predictable after the Covid-19 subscription boom many publishers enjoyed.

“It was inevitable that we would see a correction in the market post-pandemic,” Toolkits co-founder Jack Marshall said in a recent episode of the Media Voices Podcast. “People had a lot of expendable income, they had a lot of time to consume content, and at the same time, everyone was launching ‘Brand plus’”.

For Marshall, the most important factors when it comes to predicting the success of a subscription is the content and the product. He pointed to Netflix’s recent subscriber contraction as an example. “Some people would argue that the content [on Netflix] hasn’t been as strong over the past year as it has been in previous years,” he explained. “So as it relates to publishers, a lot rushed subscription products to market because they decided to be in on subscriptions – everyone else was doing it. They threw their hat in the ring, but didn’t really give a tonne of consideration to whether it was the best model for their content or their audience.”

A subscription for everything

From BMW’s $18-a-month heated seat subscription to a daily taco for $10 a month, it seems like you can subscribe to pretty much anything these days. An excellent piece in The Atlantic from Amanda Mull recently stated that we had reached ‘peak subscription.’

But even if we are getting tired of paying £5 a month for everything possible, that doesn’t mean there’s not value in subscriptions for publishers. “There’s a lot of talk of peak subscription. But I don’t think that speaks to the viability of subscription models at all,” Marshall said. “More than anything, publishers need to be honest with themselves about whether they really have the content and product to support subscription models sustainably in the long term.”

“We’re starting to see many adjusting their approaches now, realising that maybe they got that wrong the first time around.” 

Quartz is one example Marshall pointed to as a publisher who realised that the subscription model they had in place was perhaps not suited to the type of content they were producing. “It wasn’t necessarily differentiated enough or high value enough to warrant a subscription to the site at large,” he said, echoing Digiday’s labelling of Quartz as a ‘mushy middle’ site. 

But he was complimentary of their new strategy. “The adjustment they made makes a tonne of sense. They’re opening up the majority of their content to grow their brand, grow their traffic. But then the idea is to reserve highly specific newsletters for [paying] portions of their audience.”

“I wouldn’t be surprised if they – and publishers like Quartz – start to roll out multiple subscription products that are targeting different segments with their audience.”

Storm clouds on the horizon

Given the current economic pressures, it is understandable that a growing number of publishers are nervous about the prospects of the subscription model. It’s not just Netflix coming under pressure; even some of the leaders in the subscription model, such as The Washington Post and The Atlantic are struggling to maintain the pace of subscriber growth we’ve seen over the past few years..

But let’s not be too quick to write off the subscription model. Media Analyst Simon Owens pointed out that there is a simple reason behind the slowdown. “It’s been a few years since most publishers launched their paywalls, and they’ve simply run out of low-hanging fruit,” he noted in his newsletter. “Once they converted all their superfans, they then had to begin the long, difficult task of bringing in new superfans, something that’s notoriously difficult to do when your casual readers keep hitting a paywall long before they’re ready to convert.”

“It’s probably time for many publishers to admit to themselves that the paid subscription model was never going to be the silver bullet that would completely reverse all the trends that gutted many legacy news outlets. For a time, we looked at the subscription success stories coming from places like The New York Times and Wall Street Journal and really wondered if we were entering a new era in which reader revenue could single-handedly save us from declining ad rates. 

“While subscriptions certainly did help publishers find a more stable footing, it turns out that the future of media still heavily depends on diversified business models.”

Owens predicted that we’ll see more publishers loosen up paywalls, and turn to technology that will help assess propensity to subscribe. He highlighted The Globe & Mail, who created an AI that predicted when a reader is most likely to convert to a paid subscriber. “Some readers can consume dozens of articles without ever hitting a paywall,” he explained. “The basic logic here is that it’s better to keep serving a reader with more ads than it is to bounce them off the website.”

Of course, publishers can have reader revenue as a stream without the need for a paywall at all. The Guardian is the best-known example, but other publishers like Vox, BuzzFeed and now Quartz have all got membership schemes, albeit with varying levels of success.

Segmenting subscriptions

Marshall has also started to see more organisations consider a freemium model, where some content is open but longer-form or more valuable content is put behind a paywall, or registration wall. “I think a lot of publishers should become comfortable with the fact that 80% of their audience is not going to be monetisable through subscriptions, but 20% is,” he said. “So how do you carve out that portion of content, that portion of audience and super-serve them with subscriptions? The other 80% then opens you up for advertising, commerce, and whatever else you can add on.”

This approach sees the subscription offering as something for the superfans, and means that publishers have to think about how to monetise everyone else. Even the most niche publisher will have an audience who reads them for a variety of reasons. Some will be devoted fans, others will be casual, drive-by users. Marshall expects to see publishers segment their own subscription offerings to get more targeted about serving these different groups of people.

“This may ultimately lead to publishers having multiple subscription products,” he explained, highlighting Axios’ recent launch of Axios Pro, its premium news subscription focusing on deals across Fintech, Retail, Health Tech and more. “It’s saying, look, we’ll slice this little portion of content off for people who work in finance, this piece for people who work in media, and just slice the pie a little bit thinner.”

“This ultimately benefits everyone because the product you’re buying is way more targeted. There’s less waste; you’re not paying for content that you’re not interested in. But it still enables you to grow your top-of-funnel audience, and leave some content out beyond the paywall to grow your brand.”

Challenging times often produce the best innovations. The subscriptions market will be no exception. Rather than simply throwing up a paywall, publishers should be looking at audience needs and working out how they can best monetise different segments. This will help shore up against ad market contraction and subscription slowdowns, while also keeping the reader and their needs as the North Star.

Toolkits co-founder Jack Marshall spoke to Media Voices about the subscriptions wave, and his advice for publishers considering developing a subscription product. Listen here or search Media Voices on your podcast app of choice – the interview with Jack starts at 15.25.