When chas­ing reader rev­enue, if you churn, you burn

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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

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