August 17, 2021

Newsletters as a Subscription Hook Are Now a Core Offering

The best driver of paid subscriptions isn’t social media or SEO, it’s not even direct or other platforms like Flipboard. No, the best driver for a paid subscription is email. According to the registration platform Piano, the median paid conversion rate with email is over 50%, nearly double any other source.

Is it any wonder, then, that so many media companies are looking at newsletters as a means of getting a paid subscription? What better way to build a habit with someone—and therefore, hook them—than with a tool that communicates directly with the reader?

But we are starting to see media companies look at the newsletter as more than just a habit-forming tool. Instead, media companies are looking at the newsletter as a product worth subscribing to directly.

For the first analysis, we have The New York Times. It has decided to take 15 of its newsletters (about a third in total) and make them exclusive to paying subscribers. But it’s being very methodical with which products go behind the paywall.

According to Nieman Lab:

Kathleen Kingsbury, the Times opinion editor, emphasized personality-driven writing, consistency, and, often, a more casual tone as draws for readers. She also said the Times would continue to experiment with the newsletter form, mentioning serialized fiction and including audio and video clips in emails.

“If you think about the pricing power of individual newsletters right now, it’s still really nascent,” Hardiman said. “You might for $15 or $20 be able to get three individual newsletters for a given month, whereas with us you can come and get a full subscriber newsletter portfolio and a full subscription for $17 a month. There’s real value in the bundle that we think people will see just because we can help address so many different needs in their news life.”

If you dig into the newsletters that are going behind the paywall, I would bundle them into two broad categories. The first category is the somewhat niche, but general newsletters like At Home and Away, Well, and Watching. The other category is the personality-driven ones from columnists and opinion writers. There’s Kara Swisher, former Businessweek writer Peter Coy, Paul Krugman, and Jamelle Bouie.

If we look at many of the successful paid newsletters over the past couple of years, they are led by a personality willing to say the words “I think” or “I believe.” I say those words all the time. Even if I don’t write them, you know I am saying them because this entire piece is me offering my thoughts. I think, therefore I write.

There’s a very simple reason for this. People want to pay for thoughts that resonate with them and confirm their inherent biases. Therefore, The Times is going to push forward writers that are going to publish opinions and thoughts that are more in line with what their subscribers like.

But the real magic here is the same thing that has helped The Times grow to eight million subscriptions. It doesn’t need any single newsletter to be an absolute rock star, unlike all of us solo-writers. Instead, it simply needs each newsletter to serve a subset of the audience. That means it can launch new newsletters relatively easily if it finds new audiences that are more inclined to convert.

Suffice it to say, this opinion-driven newsletter strategy will likely be replicated across multiple media companies in the coming months. If you have someone on staff that people resonate with, their thoughts rather than reporting might be what gets someone to become a paying subscriber.

If we turn our attention to Quartz, we see another publisher also looking at pushing the newsletter as a primary asset in the subscription. It has retrofitted four of its current newsletters and launched a fifth to be exclusive to paying members. According to Digiday:

When asked if she was worried about overwhelming members’ inboxes with Quartz emails, Bell said there “is always that danger.” However, this “forces you… to be really selective to what you bring attention to” in the newsletters. She likened Quartz’s emails to a “very modern take on a weekly magazine,” in terms of the curation and analysis that goes into them. And like a magazine, the newsletters don’t have “endless space,” so the newsletter team aims to keep the emails concise, insightful and useful for readers, Bell said.

Quartz is “simply responding to their users’ behavior,” Chowning said. “A publisher should never force a reader to get content on the publisher’s terms, but instead where the reader prefers to engage.” And because email is “much less likely” to be affected by algorithm changes by platforms, “establishing email as a primary benefit to a membership makes a lot of sense,” she said.

I actually really like the way this is being described. I have often believed that we need to slow things down for readers. If you’re writing for a trader audience, then yes, publish at the speed of light. But for many of us, minutes don’t actually matter. A better product that comes at the end of the day or week is better than an inferior product that comes immediately.

Right now, Quartz still seems to be straddling the line between going large and niche. Some of the newsletters include The Forecast, which focuses on emerging technology, and The Company, which digs into specific companies and how they change how other businesses work.

These topics are interesting, but are they worth paying for?

Compare that to how The Times is doing it with its very focused, personality-driven products. These can build loyal sub-audiences that are likely to pay for everything because they are interested in one thing. Quartz’s newsletters, on the other hand, are trying to target a much larger percentage of the audience.

If I was Quartz, I’d look at what topics paying subscribers care a lot about and lean into those much more aggressively. This would force the publication to niche down, but I think these would be worth paying for. Trying to tackle broad “weekly” newsletters won’t be helpful.

Nevertheless, in both cases, newsletters are becoming the product people are going to pay for. And this should come as no surprise to anyone that has been paying attention to the newsletter market over the past 24 months. People want to read curated products. Even if it is all original reporting, they still want it in a format that is less overwhelming. The website still matters, but for the most loyal readers, that inbox remains paramount.

Future keeps buying

For many in the United States, the publisher Future is not a name that is incredibly well known. But over the past couple of years, it has been on an absolute tear with its acquisitions. According to The Guardian:

Future, the owner of titles including Country Life and Metal Hammer, has acquired the publisher of magazines including The Week and Minecraft World in a £300m deal.

The deal is the latest in a buying spree by Britain’s biggest magazine publisher, which spent almost £600m buying the comparison site GoCompare in November, and will hand a significant profit to Dennis Publishing’s private equity owners Exponent.

Future is buying a portfolio of 12 titles including the adult and junior versions of current affairs title The Week in the US and UK, MoneyWeek, Coach, Computer Active, PC Pro and IT Pro.

According to an analysis by Colin Morrison over at Flashes & Flames (paid):

The price is 15 x EBITDA in 2020 (£20m) and almost 3 x revenue (£104.8m). Revenue and EBITDA had increased by 12% and 14% respectively. It is believed the double-digit Dennis growth has continued in the first-half of 2021. Future is expecting to achieve cost savings of some £5m per year, mostly through overheads.

The profit improvers are a rich reward for Future’s skillful acquisition of what has itself been a highly successful magazine-media company. It may mean that the seemingly heady 15 x EBITDA price tag for Dennis will be more like 10 x before the end of 2022 – a relatively low price for a predominantly subscriptions business.

What’s become so fascinating looking at Future’s growth is just how much the market has rewarded its strategy of acquiring brands. Nearly five years ago, shares of Future plc were trading at approximately £100. Shares closed on Monday at £3,869.48. That’s a growth of over 3,700% and an annualized return of over 100%.

Clearly, investors like what they see.

Going forward, I’m interested to see how Future benefits from its acquisition of Kiplinger Personal Finance and MoneyWeek. As Morrison explains in his piece, “The Kiplinger and Money Week parts of the deal are expected to be used to turbocharge its growth in wealth management, an area targeted by the Future management team in the US and UK.”

There is an increasing focus on personal finance-related content, in part because there is so much money in advertising dollars from all the major fintech players. This is creating a bit of an arms race between the traditional players and these newer, leaner operations. When this happens, publishers typically win.

My suspicion is that Future will likely look to acquire a few other financial publications to ensure it has enough scale.

My broad-level question is what the strategy will be. We saw that NewsCorp bought Investors Business Daily in May for $275 million. IBD primarily sells subscriptions for a variety of “stock picking” products. Is this an angle that Future might look to take or is it going to focus, instead, on recommending financial products like brokers and roboadvisors? Or both?

Nevertheless, Future has proven that it can acquire brands and really integrate them into the operation. And investors have rewarded it for these moves. What comes next is certainly something worth paying attention to.

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