April 9, 2024

Are We Past Peak Subscription After All?

Welcome back to another edition of A Media Operator. I have two quick things.

First, I told the AMO Pro crowd this last week, but the AMO Summit is coming back again this fall. On October 15, I’ll be hosting a couple hundred amazing operators right here in New York City. I’ll have more to share in a couple of weeks, but I wanted to get this on your calendars as soon as possible. Hit reply and let me know you’re excited. More to come soon!

Second, don’t miss this week’s AMO Podcast with Stephanie Kaplan Lewis, co-founder and CEO of Her Campus Media. It’s a great discussion on a wonderful bootstrapped media company. Give it a listen here or wherever you get your podcasts.

Do you know how your ads stack up relative to your competition and the broader media ecosystem? If not, keep reading. 

Ad Orbit, a platform that helps publishers sell, deliver, and bill for advertising revenue, has just published its in-depth advertising trend report for Q4 2023, and the findings are really fascinating. Looking at data from across 1,000+ unique publications, Ad Orbit found:

  • Average CPMs across B2B & B2C
  • When most ad contracts were signed
  • The price for webinars and other services
  • And more…

Click here to download this trends report and learn how your ad business compares.

Pubs are giving up on subs

Do this job long enough and you’re bound to see media trends change. And it seems that the pivot to subscriptions might actually have peaked. Maybe WaPo’s Will Lewis was right after all.

But Digiday now has some data to back up the argument. Its findings are interesting:

<10% of publishers generate a large or very large portion of their revenue from subscriptions in Q1 2024, down from nearly 25% in Q1 2022.

44% of publishers generated zero revenue from subscriptions in Q1 2024, which is only up from 42% in Q1 2022 but is up from 26% in Q3 2023.

And if we look forward, the research is even more fascinating:

In contrast, the percentage of publisher pros who told Digiday they’re not focused at all on building their subscriptions business in the next six months has trended upward over the last year and a half. Just 14% of publishers said they weren’t at all focused on subscriptions in Q3 2022. By Q1 2023, that percentage rose over a quarter to 27%, before hitting a third (33%) in Q3 2023. In Q1 of this year, 41% of publisher pros said they’re not focused at all on subscriptions.

For the publishers represented in Digiday’s research, there’s a harsh truth that they’re realizing: subscriptions are really hard, and if you’re not the best, it’s not going to work.

John Yedinak, co-founder of Aging Media, tweeted this about it:

To be successful, you need to be 5-10x better than the competition, and the reality is most don’t have the teams to execute that well.

For a lot of pubs, the investment required won’t be worth the investment… even if you can convert 5-10% of your audience to paid.

That new rev source flattens out eventually and makes you think, is the juice worth the squeeze.

There’s a lot to unpack in this one tweet. First and foremost, John’s right. If you’re going to run a subscription business, the content must be better than the competition. This challenge is easier to overcome if you’re operating in a more niche topic, but the reality is that you’re asking people to take out their credit cards. They’re only going to do that if they think that what they’re paying for is worthwhile.

I believe this is the single most important reckoning for media companies over the coming years. For so long, there was less focus on the quality and originality of information because all that mattered was maximizing traffic from platforms. This is why the investment in quality content is so hard for these media companies to understand — they just didn’t have to do that to generate revenue in the past.

And so, once they realized that the pivot to subscriptions would require that, they quickly backed off it.

This leads to John’s second question: Is the subscription juice even worth the squeeze if you can create good enough content? The reality is that even if you’re the absolute best in the business, you’re only going to convert a percentage of your audience. Let’s use The New York Times as an example. According to its 2023 Form 10-K:

Globally, including the United States, our websites and mobile applications had a monthly average of approximately 131 million unique visitors on either desktop/laptop computers or mobile devices, according to internal data estimates.

As of December 31, 2023, The New York Times reported that it had 10.36 million subscribers across 233 countries and territories. In other words, the absolute best in digital subscriptions has only been able to convert 8% of its traffic to a paid subscription. The Times may have a ton of subscribers, but when compared to the total traffic, it’s actually a pretty small number.

This is inherently why relying exclusively on subscriptions is such a bad business decision. 92% of the people who hit The Times would be unmonetized if they were only reliant on subscriptions. That’s why Substack is going to pivot and start offering advertising, and it’s why The Athletic started offering ads. At the end of the day, you’re an under-monetized business if you’re focused exclusively on subscriptions.

But is it worth the squeeze? Even if, as John says, that number flattens out, if you’ve created the quality of the content necessary to justify a 5-10% conversion rate on your audience, other parts of the business will be in a stronger place. It becomes easier to sell tickets, reports, or, well, anything that you want to sell.

You can then treat it like a funnel. If 5-10% of your audience pays for your content, can you get 1-2% to do something even more expensive? Look at AMO. I have a 6.5% conversion rate from free to paid. Only 2% came to my event this year. But many of those people were already paying subscribers to AMO.

Ultimately, the goal should be reader revenue of some sort. Advertising-only businesses can work—many AMO readers, including me in a former life, operate them—but you’re impacted by the macro a lot more. If you can introduce some sort of sustainable reader revenue, it can act as a cushion for the business. It’s why the revenue streams that will, ultimately, matter the most for AMO are my ability to sell tickets to the Summit and get subscriptions. If those happen, I’m in a great place.

But let’s just be clear… It doesn’t have to be subscriptions. It should be something direct, though.

Thanks for reading today’s AMO. If you have thoughts, hit reply. Do you want to help me achieve my goal of generating more reader revenue? Become an AMO Pro member and start receiving all content published by me and the other writers. Plus, you’ll get an invite to the AMO Slack and a first look at future event tickets. Sign up here.