When chasing reader revenue, if you churn, you burn
The 2016/17 rush to [subscription] reader revenue as the sole income source continues to baffle me given paywalls’ less than stellar results in the past decade. But be that as it may, 2018/19 looks to be heading towards more of the same.
The price of subscriptions varies, but even by adding perks (e.g. fewer ads, rewards programs, commenting access, giveaways, etc.) the growth in paying readership barely made a dent in most publishers’ bottom lines in 2017. When the Trump Bump started to wane a year ago most publishers saw revenues following suit — albeit less so for the usual suspects: WSJ, FT, WP, and NYT.
As of result of The New York Times’ enviable subscriber growth, its reader revenue crossed the US$1B mark in 2017. At the end of its second fiscal quarter in 2018, digital subscriptions accounted for ~66% of its total revenue.
As Vivian Schiller, a former New York Times and NPR executive shared in February 2018, “A lot of people are going, ‘Reader revenue, it’s working for The New York Times, it’s working for specialty publications; that’s our path.’ I’m afraid for most news publishers, it’s going to end in tears.”
Yes, there has been an increase in digital subscriptions in the past year in many countries, but numbers are still nothing to cheer about. Despite the blip in the radar, most people are still unwilling to pay for digital news (except perhaps in Norway. Takk!).
Scott Galloway, founder of NYU Stern, recently said, “Information doesn’t want to be free, it wants to be scarce and expensive.” I appreciate his sentiment, but despite what “it” wants, information is overabundant and mostly free, making it hard to justify paying for it — especially the 90% of which is commoditized.
Which makes it even more important that media execs who do snag a subscriber, better work hard at holding on to them. Because if they churn, it will cost the publisher a heck of a lot more than that person’s annual subscription fee. It’s been proven time and again that it is five to 25 times more expensive to acquire a new subscriber than to keep one.
In The News Media Alliance’s presentation, Innovations in Audience Strategies that Reduce Subscriber Churn, Matt Lindsay, President of Mather Economics shared, “In our work with publishers, we have found that retention and churn-prevention receive less investment than they deserve given the effect of reductions in churn on operating margins. A 5% reduction in churn has been estimated to increase profit 15% to 95%.”
But if that profit potential isn’t enough of an incentive to minimize churn, recently Mather measured the Customer Lifetime Value (CLV) for an anonymous publisher’s digital customers and found that digitalonly subscribers had a CLV of US$650, compared to US$165 for print/digital subscribers, and US$6.50 for non-paying/registered readers.
Let’s talk churn
Venture capitalist David Pakman, who co-founded the Apple Music Group in 1997, knows a thing or two about churn. In his article, Churn is the single metric that determines the success of your subscription service, Pakman talks about what constitutes a good churn rate, “I look for average net monthly churn rates below 5%. The biggest subscription winners are below 5% per month, and usually well below 5%. For example, Netflix is below 1% per month, Dollar Shave Club is very low, ISPs and Pay TV are also low with Dish at 1.5% per quarter; Verizon Wireless and AT&T are about 1.5% per quarter.”
At the end of 2017, Spotify’s churn rate was 5.1%, a decrease from 6.0% in Q4 2016 and 7.5% in Q4 2015. Sirius XM's was 1.8% in 2017.
In 2004, the newspaper industry’s average churn rate was 60%, with digital subscribers churning at about half that. According to the content monetization platform, Piano, average churn rates for newspaper publishers today are ~10%, but can be much higher depending on the publisher.
“A churn rate of 10% a month effectively means you lose (the equivalent) of all of your customers every 10 months. Those businesses are not sustainable. Churn is a reaction to your value proposition after people have tried your service. If it is high, you have a problem with the service, not with your targeting.” David Pakman, Venrock
Retention isn’t easy, but it’s possible and profitable
I’ve always been a proponent of the use of Smart (compared to Big) Data to improve the reading experience for users and so it was good to see how behavioral analytics is helping to increase retention rates in publishing. A number of data-supported campaigns and customer-specific pricing strategies have been shown to reduce churn by 15-75%.
But mobile apps aren’t faring quite so well. According to Localytics, “We’re in the middle of a mobile engagement crisis…Too many brands have yet to shift their focus away from acquisition towards retention.”
Mobile app abandonment over a three-month period is so high in the media and entertainment sector that 72% of app users churn within 90 days. Ouch!
But there are ways to increase retention in apps — ways simplified by the rise of push notifications, location-based marketing, and predictive analytics.
App onboarding can help user retention rates increase by 50% and in-app individualized messages can drive retention up over 300%. For those users who opt-out of push notifications, re-marketing can be a useful way to re-engage them outside the app, but be careful not to get creepy about it. Also, don’t forget about GDPR when collecting user data and gaining consent on its use. And of course, A/B test everything!
Spotify continues to focus on increasing retention in its apps by delighting subscribers with sticky perks, such as:
• A family plan that allows multiple users in the same household to share a subscription
• User-generated playlists that keep subscribers invested in their digital music assets
• Personalized playlists such as Discover Weekly which are surprisingly and delightfully personal
• Free concert tickets for selected fans (My colleague was a lucky winner of two Bruno Mars tickets last year without having to even enter a draw — a US$400 value!)
Last year, the streaming music service averaged 51 listening sessions per user per month, 400% more than Apple Music's 12.
So how are newspaper publishers faring?
As one might expect, the big guns in media are investing heavily in reader retention through audience engagement initiatives, because they know that engagement pays dividends.
But what exactly is audience engagement? According to a February 2018 study by the Tow Center for Digital Journalism, it is much more than just asking audiences to pay for content. Audience engagement is… “a set of audience-focused tasks that include identifying and interacting with people who use your site, as well as prospective audiences.
“Functions include online and offline event hosting, comment moderation, social media management (both on native platforms which don’t link to your site and networked platforms like Twitter that refer visitors directly), search engine marketing, and more. “Newsrooms are increasingly asking editorial staff to engage with audiences to improve coverage reach, spark story ideas, and supply user-generated content.”
So basically, it’s up close and personal interactions with real people. I wish I could say that this is a common strategy amongst publishers, but that