This bylined article was originally published in WARC by Zuora’s John Phillips, GM, EMEA
The worldwide spread of coronavirus has had a quick and damaging effect on the global economy, with businesses seeing operational disruptions and increased pressure to their supply chains. Yet, with news changing at such a rapid rate during the pandemic, digital media and news subscriptions are on the rise and in more demand than ever.
The subscription growth rate for digital news and media grew 110% in March through May 2020 compared to the previous 12 months due to increased consumer interest in news updates. These findings came from the Subscription Impact Report published by Zuora, which analysed the growth of more than 700 of its customers among a variety of industries. Amongst these, the publishing and media industry is inherently on the rise.
This signifies the increase in traffic to news sites and an overall demand for up-to-date information, resulting in sign-ups for digital news subscriptions. In March alone, due to heightened demand, new subscriptions to Bloomberg Media grew by 86% compared with February, despite the publisher hosting most of its coronavirus coverage outside its paywall. The last week of March this year was recorded to be the highest week in terms of subscriber acquisition since Bloomberg launched its paywall in May 2018.
This underscores that content is important, but the real measure of success in the Subscription Economy is maintaining strong subscriber relationships during and beyond the coronavirus crisis.
For the past three years, Zuora has published The Subscription Economy IndexTM (SEI), a report on the collective health of the Subscription Economy. The SEI has found that subscription revenue grew by more than 350% for the past seven-and-a-half years as recurring revenue-based business models exploded, thanks to the growth of digitally-enabled, pay-as-you-go services.
Successful companies today are focused on adapting to this rapid pace of change, deciding to focus on growing and monetising a loyal customer base versus shipping physical products.
The demand for up-to-date information
The publishing industry has long made a success out of establishing and developing direct customer relationships. Being one of the first sectors to adopt the subscription business model, publishers have always understood the value of providing engaging experiences to their readers.
Publishers are wasting no time in embracing new technologies to meet their readers where they are and engage with them on any and every device possible, which is crucial during COVID-19 as downtime increases and there is more competition for attention.
According to Zuora’s Subscription Impact Report, 18% of subscription companies are experiencing an accelerated growth rate, when compared to the prior 12 months, including OTT video streaming, digital news and media, and e-learning. This highlights that publishers are not only ensuring that their content is built for these new ways of consuming content, but are also looking to diversify their offerings. This is what is keeping the publishing industry successful during this uncertain time.
The Seattle Times reported its subscription rate more than doubled in the first half of March, fueled by readers’ appetite to stay as informed as possible during the ongoing pandemic. Putting virus-related content outside of the paywall will encourage new traffic to convert into ongoing revenue long after the crisis has calmed down.
By cutting costs and removing the paywall, the digital media industry is still heavily reliant on advertising, which is always the first budget to be revised during a recession. We are clearly at the beginning of a huge wave of consolidation in media, and a subscription strategy is going to be absolutely crucial for sites that want to stay standing on the other side.
Out with the old, in with the new
So, you might be thinking, how do I merge new subscription revenues with the old ad revenues? The answer is that the best media companies won’t.
Growth in publications like The New York Times, The Financial Times, as well as the success of alternative models like The Guardian’s membership scheme, has demonstrated that reader revenues provide an alternative to digital advertising that most online news outlets have historically relied on.
Fortunately, media companies no longer need ads to be successful. Take Netflix as an example: it has a massive, engaged audience because it focuses on its programming over ads. Today, rather than selling ad space, streaming services and news organisations are asking us to support content creators through subscriptions.
There will come a time when media innovators will stop running ads completely and they’ll find out that an ad-free environment is a huge differentiator in a saturated market. Smart media companies just don’t need them anymore.
Technology driving seamless subscription offerings
In the traditional, transaction-based business model, an item is purchased and then invoiced. When you switch to a subscription model, billing becomes more complex. Suddenly you have to pro-rata customers who sign-up mid-month, bill thousands of customers at different times and in some cases bill for usage – it goes on.
Traditional General Ledgers (GLs) can’t handle the complex processes needed to manage subscriptions seamlessly, but businesses still need a GL to create financial statements. It’s often the case that this may not be solved at the initial subscription launch phase and as a result, things can get messy in manual spreadsheets. Businesses need a way to streamline their accounting-close process and maintain compliance.
Subscription businesses need a flexible, agile and reliable subscription management system to handle this complexity. Homegrown billing systems are expensive to maintain (think of all the time-intensive customisations that come with it!), lack the agility to quickly spin up new offers and go to market, and are limited in enabling companies to truly understand and take action on evolving customer demands.
This is especially true for direct-to-consumer companies like publishers, which need the ability to scale rapidly, evolve their pricing and packaging strategies, and modify their approaches based on reader interests.
Finding the pricing ‘sweet spot’
When it comes to the Subscription Economy, pricing is one of the most valuable strategic tools tied to growth and it has to align with your customers own needs and values. The first step is start with basic models and iterate quickly over time as you gain a clearer understanding of subscriber habits. The second is to be flexible by providing subscribers with different ways of engaging on an ongoing basis through upsells and offers during surges in demand. Another way to find the pricing ‘sweet spot’ is through customer segmentation and using data you have on hand.
You need to understand your audience value before you can figure out how much they’re willing to pay.
Customer segmentation is used to divide customers into meaningful buckets to understand what part of your offering both current and prospective subscribers are willing to pay for. This then helps you to understand the different products that they value in relation to each other. The Economist is a perfect example of this. A few years ago, the publication went against the common practice of bundling digital and print assets where digital access is usually offered “free” with print subscriptions. Instead, they unbundled them and placed a “premium” on their digital content.
How to get customers onboard with subscriptions
People are consuming products and services in new ways. Our desire to own things is shrinking, and instead we’re focusing on the value we can get out of what we spend our paychecks on. According to Zuora, 74% of adults believe that in the future people will subscribe to more services and own less physical goods. When switching to a subscription based service offering, companies need to communicate how they are shifting in order to provide more value and meet the shifting needs of their customers. However, this can’t be a one off, like a free-trial or sign-up gift – value needs to be consistent. With subscriptions, the lion’s share of revenue is found through perceived value realised after the initial payment, and this means opportunities for customer engagement need to be maintained throughout the relationship.
Firstly, publishers moving to subscriptions need to ensure customers are set up to engage with the brand on their own terms. This could be through offering multiple channels, self-service, or any way that ensures they feel in control of their experiences with the brand and to the level they’re comfortable with. Secondly, you need to be accountable and provide customers with channels for feedback and show they’re listening to concerns.
Finally, you will only earn trust through being transparent and by making it clear how the relationships will expand and evolve by outlining all the changes they can expect to your offerings. Successful publishers are the ones that understand the evolving needs of their readers. By delivering a personalised, seamless, and flexible content experience is the only way to compete in the new age of publishing. Those who innovate and continually evolve their offerings will continue to rise amongst competitors, and readers will reward publishers with continual loyalty and a predictable stream of subscription revenue. The COVID-19 crisis has highlighted how publishers need to develop recurring revenues from readers to iron out the dramatic shifts in ad spending. Publishers will come out of the pandemic with more diverse sources of revenue, customer loyalty and a stronger platform to stand on.
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