January 5, 2021

Lessons to Learn From WW84 Launch

Christmas in 2020 was different than other years. Whereas in the past, we’d travel from house to house, this year, we were home. So, we sat down on the couch, signed up for a 6-month subscription to HBO Max so we could watch Wonder Woman 1984.

I’ll hold judgement on the film. I got through it, didn’t hate the 2.5 hours I spent watching it, and then went on with my life. Whether you liked it or not, one thing’s true: a lot of people watched it.

According to Antenna, more people signed up for HBO Max than Disney+ when Hamilton was released.

That shouldn’t surprise anyone, of course. It was the perfect storm for this. People were more likely to be staying at home because of the pandemic. It was also a blockbuster release, which comes with considerable marketing. And finally, there was no additional price. Get a subscription and you get the movie.

That last point took gumption. Even Disney+ didn’t do this with the release of Mulan. But HBO Max wanted to ensure that it could get as many people signed up as possible. The larger the top of your funnel, the more people that come out on the other side. In this case, it’s a retention funnel where the people that come out are customers still paying three years later.

If we look at Antenna again, we can anticipate what some of the churn will like for HBO Max by comparing it to the Hamilton launch on Disney+.

That’s a big drop in subscriptions as time goes on. 59% of people that had signed up when Hamilton was released were still paying three months later. The question is whether HBO Max is going to find similar success or if it’ll deviate positively or negatively.

It seems the team isn’t worried. John Stankey, the CEO of AT&T (owner of HBO Max) said on an earnings call in October:

The customer acquisition game is an originals game. The customer retention game in SVOD is a library game.

I love that quote. Originals get people to subscribe. The library of content keeps people subscribed. And according to Stankey, the library is doing its job with the majority of the shows being owned IP versus licensed content.

This is where HBO Max is in a unique position compared to nearly all of the streaming platforms. It has been producing content for decades that it can now use to keep people engaged. When I finished watching WW84, we watched another HBO Max original, and then jumped over to The Sopranos. HBO started creating that 22 years ago, but it’s accruing value off me today. Maybe next I’ll watch Oz, The Wire, or Sex and the City for the 3rd time.

This sounds a lot like some of the debates we see happening around the star talent at media companies. I was speaking with one media executive recently and he said that a small percentage of the writers drive the majority of new paid subscriptions to the business. I would be curious if that’s the case at other media companies (if anyone wants to share). My suspicion is it is less about the individual writers and more about the category the story belongs to.

However, if we consider what keeps people engaged, it’s the entire library of content. The easy answer would be to zero in on what those individuals are creating and focus exclusively on that. However, it’s important to consider that the entire content library is likely what keeps a person around.

Why? It’s about forming habits. The more often we’re able to keep a user coming back, the more often we form a positive reinforcement with the customer.

The majority of churn takes place in the first 30 days of a subscription because it’s too soon to have formed a habit. This is why I expect more media companies to move from monthly subscriptions to quarterly; it gives you more time to get the user engaged.

But forming habits isn’t a passive activity. Publishers and streamers need to do a ton of work early on to get people excited about the library of content. I’ve received seven emails from HBO Max advertising the library of content since signing up on Christmas. That’s a lot of emails, but the goal here is to show me all that it has to offer.

Publishers need to be doing the same thing. As soon as someone signs up, send them an email with some things to check out. A few days later, send them additional content related to the pieces they have engaged with. Continue to do that throughout the first few months.

But this also means that publishers need to have a library of content worth getting engaging with. It’s why this business takes so long and why I’m suspicious of people that think they can fast track their way to subscription success. You may wow your way to getting people subscribed, but without that habit, no one’s sticking around.

Politico buys E&E News

The Wall Street Journal published a story about the recent acquisition of E&E News, which is focused on the energy industry and environmental news:

The deal will substantially expand Politico’s footprint in the energy news space and is part of a bigger move to grow its professional news business. E&E News has some 65 reporters in nine offices around the country, adding to Politico’s existing 17 editorial staffers focused on energy and environmental news.

Founded in 1998, E&E offers five publications that focus on policy, market, technology and science news about the energy industry and environment issues. Primarily targeting readers at government agencies, corporations and think tanks, subscriptions run from several thousand dollars to over $100,000 annually. The company brought in around $20 million in revenue this year, one of the people familiar with the matter said.

We don’t know much about the terms of the deal or how much E&E is growing, so I won’t speculate on the valuation. That said, the strategy for Politico makes sense for a few reasons.

First, it’s a bolt-on. Politico already has high-priced subscriptions as part of its business model, so this isn’t a revolutionary change to how the business does things. Instead, it’s expanding into a new realm that it doesn’t currently serve, but with the exact same processes in place.

Second, it can likely increase growth by pushing its audience to the product. If we consider the scale of the business, Politico might have more reach than E&E News does. Therefore, if Politico can market appropriately, it might unlock new business that E&E couldn’t have if it were on its own.

Third, and The Journal hints at this, it’s a move to minimize the downside of going into an off-election cycle. With Trump out of the White House and, hopefully, a boring Washington D.C., Politico is going to need to find new revenue streams.

I expect more of these deals to take place this year. With the cost to borrow money so low, larger companies can acquire niche pubs that are immediately accretive.

The bigger question is what has changed at Politico? In a Vanity Fair article from 2018:

According to Allbritton, Politico made $113 million globally in 2018, the highest revenue number in its history, and roughly double what the company made five years earlier. Politico, which Allbritton says will turn a profit of around $2 million this year, has grown by decreasing its reliance on paid media.

I’ve always found this to be bizarre. Why was Politico earning a profit of only $2 million on $113 million in revenue, which is less than 2%? I’ve heard two theories. The first is that the company was investing, so of course, it wasn’t going to be insanely profitable. The second is that the company’s goals were to not lose money and that’s about it. It didn’t have overly ambitious goals to achieve large profit numbers.

Irrespective of the reason, it will be very interesting to see how Politico continues assessing the professional news business. Are there other industries that it might look to expand into? There are plenty of older b2b media companies that could be interesting targets for Politico.

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