‘Peak subscription’ and the paywall shakeup
The viability of subscription models for media has been called into question in recent weeks, spurred largely by the demise of CNN+, Quartz’s decision to drop its metered paywall, and a decline in Netflix subscribers. Taken together against a backdrop of soaring inflation and consumer spending cutbacks, these events have prompted some journalists and commentators to question if we’ve reached “peak subscription.”
The reality is that a shakeup was inevitable for publishers’ subscription products, and potentially overdue.
Many publishers rushed to bring subscription products to market in recent years with relatively weak value propositions and tenuous roadmaps. Relatively few have succeeded in piecing together products and models that will be sustainable long-term as a result. This fundamental problem has also been obfuscated by heavy discounting, paid acquisition and other aggressive marketing and growth tactics.
While a narrative that “subscription models are flawed” might provide a tempting excuse for those publishers hitting walls with their subscription efforts, the inconvenient truth is the challenges they’re facing primarily reflect the quality and nature of their products and approaches rather than the viability of subscription models more generally. Subscription models continue to work well for publishers that have entered into them with strong and differentiated value propositions, realistic expectations, and a clear understanding of how and why they succeed.
Looking across the market – and informed by our advisory work with a variety of clients – publishers’ subscription initiatives typically fall short of their expectations if they have:
1. Failed to deliver products that audiences deem valuable or differentiated enough to pay for on a recurring basis
Despite what they might believe, relatively few publishers deliver highly valuable and differentiated content consistently. A few “hits” here and there might be sufficient to drive subscriber conversions and a temporary sense of traction, but without the ability to deliver and communicate ongoing value to audiences, subscription products are impossible to sustain.
Pricing is a critical variable too. Some publishers might be creating enough value to justify a subscription but have unrealistic expectations around the price points their audiences and the broader market will tolerate.
Ultimately, not every publisher is capable of creating content and features strong enough to support subscription models, and that’s OK. Content that’s less differentiated and/or provides less evident value is often better monetized through other revenue streams, such as advertising, sponsorship and commerce.
2. Adopted the wrong paywall approach for the nature of their content and products
In their haste to bring subscription offerings to market, many publishers adopted paywall approaches and models that are simply mismatched to their content and products.
This is most noticeable in the use of metered paywalls which are relatively simple for publishers to implement without significant changes to their content, editorial approaches, or broader organizational mindsets, but can come with significant downsides in terms of their ability to extract optimal revenue from audiences. The prospect of “unlimited content” is not an appealing one for the majority of publishers’ audiences, let alone one that’s deemed valuable enough to pay for.
Other publishers have taken overly aggressive “hard paywall” approaches that are simply unrealistic relative to the value their content and products provide. They also drastically limit the ability to grow audiences and brands, and to generate revenue through additional streams as a result.
As their approaches to subscriptions mature and evolve, we’ll continue to see more publishers moving to more nuanced “freemium” paywall models. These reserve a relatively small portion of content for paying subscribers, and making the majority of their content available for free to be underwritten by advertising, sponsorship and other revenue streams.
A shift to “freemium” might result in slower subscription revenue growth than some publishers had hoped for. But it would enable them to build stickier, more valuable products designed to meet the needs of specific audience segments while maintaining their ability to reach and monetize broader audiences. For many publishers, this more considered approach may result in more robust and engaged subscriber bases in the long term. (And more sustainable businesses that are less reliant on revenue from “sleeper subscribers” who don’t actually use the products or services they’re paying for.)
Subscriptions aren’t a panacea for publishers’ revenue needs, even if they were billed or perceived that way by some.
For publishers capable of producing the high-value content and features necessary to support them, subscriptions will continue to play a powerful and central role in their revenue mixes. However, for others, it might be time to ask themselves some honest questions about their content, expectations, and whether the models they’re employing are in the best service of long-term goals.
Debates around whether or not we’ve reached “peak subscription” aside, we’re entering a phase where publishers will be forced to be more disciplined, deliberate and realistic about the products and approaches they’re bringing to market. That, for many, will be a healthy and valuable exercise.
