Business Media Should Move Away From Monthly Subscriptions

When first starting A Media Operator on Substack, the supposed “best practices” was to offer a monthly rate of $10 and an annual of $100—and their required minimum was half that. And so, I did what every other creator launching a newsletter in 2019 did and priced at $10/$100. I quickly increased the price to $20/$200, but kept going with that monthly/annual offer.

But I noticed something that should be pretty obvious… the monthly subscribers were churning at a much higher rate than the annual ones. Now there can be any number of reasons for this, including some people like the optionality of paying monthly, they’re simply testing it out, or they don’t want to feel trapped. Ultimately, the reason monthly subscribers churned more is because they had more opportunity to churn.

Remember, there are two types of churn. And so, many people are being given the choice to actively churn, but every month that goes by is another opportunity for passive churn to take place. I wrote about that back in 2021, but the crux of it is when a payment fails for any number of unintended reasons.

And so, in February 2022, I turned off monthly subscriptions for all new subscribers. In its place, I put quarterly ones. However, I question whether I went far enough. Frankly, I believe—and it’s something that I am going to explore myself—that more business media companies should get rid of the monthly subscription entirely and, arguably, do away with quarterly as well (with one exception that I’ll come to).

I spoke with a senior executive at a media company with a healthy subscription business about this. They did a test where they did away with monthly subscriptions entirely to see how it performed. What they found was that they saw no real drop in revenue, but an obvious drop in churn. “It’s always the monthly subscribers who sign up and then immediately turn off auto-renewal,” this executive said.

This resonated with me. As subscription businesses continue to mature, we are seeing an evolution away from the quantity of subscribers that you have in place of the quality of subscribers. It’s why fewer media companies are doing the “get one year for $1” offer than they used to. It’s why AMO has only ever done a couple of discounts in the four years I’ve had a paywall.

There are a number of reasons that annual performs so much better than monthly, though, beyond the simple answer of increased opportunity.

First, when a user subscribes to monthly, you’ve only got 30 days worth of content to get them hooked. In the case of AMO, that’s just eight pieces of content. And so, if the user doesn’t feel as if they got a sufficient quantity of information in that month, they’re likely to churn. Compare that to someone who is there for a year; you’ve got multiple touch points.

Second, you’ve only got 30 days to build a habit. The reason media companies send so many email after the paid conversion is because they are desperate to get the user to build a habit. If you can get readers to come back to the site more often, you are far more likely to get them to renew. Therefore, increasing the time in which you can help them build that habit is impactful.

Third, you have more control over your CACs and can be more aggressive. One reason software companies can afford to spend so much money on their marketing is because when they get someone to pay, it’s typically revenue over multiple years. While a publisher’s media business is not as lucrative, an annual subscription provides a lot more upside in CACs than monthly.

And fourth, it’s not the reader’s money typically. You’ll notice the headline calls out business media. I suspect the vast majority of these readers are either using a corporate card or expensing it. And if that’s the case, there’s less room for price shock.

I would caveat, though. While this piece is predominately focused on business media, I’d argue more consumer media should get comfortable experimenting with annual pricing. But while with business media, I think we should do away with it, consumer may want to give incentives for the user to commit. I’ll give two examples of competing consumer magazines, one that offers an incentive and one that doesn’t.

First, you have New York Magazine. Its pricing is pretty competitive. Get 6 weeks for $1 and then it’s $8 every four weeks (so it can get that 13th billing a year). Or you can spend $50 and get it for an entire year. This is aggressive and I am unsure if it’s necessary. It’s a nearly 52% discount compared to the monthly plan.

Second, you have The New Yorker. It offers a more aggressive introductory offer of $1 per week for an entire year, which then jumps to $2.50 per week. Or its annual rate is $50, much like New York Magazine. So, you’re only saving $2 in year one by going with an annual subscription. It’s on the renewal when the incentive completely goes away. In year two, you’re paying $10 every four weeks or $130 a year. If you do the math, they’re equal.

Without knowing the data, it’s hard to say which one performs better. However, New York Magazine certainly does a better job incentivizing the annual subscription. I think it’s a little too giving on the renewal, but maybe its data says that it needs to and it really wants to keep people from going monthly.

Nevertheless, annual is a great way to keep a reader around, get them addicted to the content, and increase the likelihood of the renewal.

One argument against annual-only subscriptions it that the user doesn’t have an opportunity to get a taste of the content before forking over a large amount of money. And I don’t disagree with this, which is why one experiment that might be worth running is a quarterly-to-annual conversion. In essence, for first-time subscribers, give them the chance to subscribe for one quarter. And then at the end of that quarter, they auto-renew on an annual plan.

Whatever the case, if you’re running a business media company—and, heck, even a niche consumer media brand—consider moving away from monthly. Get the user hooked on a quarterly or, bite the bullet, and go all the way to annual. It’s something I am considering heavily for AMO.