October 18, 2022

The Washington Post Leans Into Price Lever to Grow Subscription Revenue

When many operators think about increasing their subscription revenue, getting more people to sign up is the first thought. However, another way to generate more revenue is to charge more. Last week, I received an email from The Washington Post that said:

To deliver on our priority of providing you with original, quality journalism, the price of your Basic subscription is increasing for the first time.

The new price of your Basic subscription will be $120 plus applicable sales tax every 52 weeks.”

This wasn’t too much of a shock, considering I was already paying $100 a year. So a 20% increase isn’t all that controversial. But many people were getting WaPo through their Amazon Prime accounts, and there were reports that these customers were about to be charged $12.99 a month, up from $3.99.

That’s more than triple the amount they were going to pay. However, the Washington Post quickly told Nieman Lab that this wasn’t true and that there had been a mistake in a statement, saying:

Subscribers at the $3.99 monthly rate through Amazon Prime will see a price increase to $7.99 per month on their next renewal date. They can also see the effective date of the new price by signing in to MyPost. Yesterday, these subscribers were notified of an inaccurate new monthly rate. We have communicated the mistake and clarified the correct pricing.

Well, that’s a relief. It’s only double. But this is still a significant increase. I’m only paying 20% more, whereas Amazon Prime readers are paying over 100% more.

Increasing the price makes a lot of sense to me. Back in August, The New York Times reported:

The organization is on track to lose money in 2022, after years of profitability, according to two people with knowledge of the company’s finances. The Post now has fewer than the three million paying digital subscribers it had hailed internally near the end of 2020, according to several people at the organization. Digital ad revenue generated by The Post fell to roughly $70 million during the first half of the year, about 15 percent lower than in the first half of 2021, according to an internal financial document reviewed by The New York Times.

The company is going to lose money this year. However, owner Jeff Bezos has long said that The Washington Post needs to be profitable. CNBC quoted some of what Bezos said at an event back in 2017:

“This is not a philanthropic endeavor. For me, I really believe, a healthy newspaper that has an independent newsroom should be self-sustaining. And I think it’s achievable. And we’ve achieved it.”

Part of the reason, he said, is that “constraints drive creativity. The worst thing I could’ve done for the Post, I believe, is to have said don’t worry about revenue, whatever you need, just do the job. Because I don’t think that would lead to as much quality when there are in fact constraints.”

And so, here we are. The Post has an owner that rightfully expects it to be self-sustaining, its audience is shrinking, and therefore, profitability is shrinking, if not disappearing. That’s a rough position, but it explains why we all got this email last week.

As I said, there are two ways to make money in subscriptions. The first is to get more people to pay. This is why so many publications offer discounts; they’re trying to increase the number of people paying because that, in turn, will increase revenue. The second way is to increase the price of the product.

I find operators are not comfortable with charging more. Once they settle on a price, that’s the price they always charge. But costs always increase. And that means profit per subscriber compresses yearly even if publications add more subscribers.

As an aside, this is why I find the Bloomberg Terminal pricing so interesting. It ties its terminal subscription price to inflation. And so, in 2023, terminal prices are going up by roughly 9%. Costs go up, so why wouldn’t Bloomberg’s Terminal price?

Back to The Washington Post. When you have an audience that is shrinking, the first instinct is to try and decrease the price so you can get more people in. But in this case, increasing the price makes the most sense to maximize how much revenue you’re generating.

Here’s why… The Washington Post is not growing for an obvious reason: people are tired of the news. As I wrote in that piece, people are tired of all the partisan chaos. When there is as much doom and gloom as exists in the world today, it’s no wonder people are tired and don’t want to engage with the news.

And so, the people who are left are the people who are the die-hard readers. These are the people who are unlikely to balk at a price increase. So if you have 3 million readers paying $3.99 a month and doubling the price cuts your subscribers by 1 million, you still come out ahead by a solid amount of money.

This is what Craig Fuller, CEO of FreightWaves and Flying, did when he bought the magazine from Bonnier. As he wrote in a piece:

The other thing I’ve discovered is just how broken the newsstand supply chain is. Distributing magazines through newsstands is a loser for publishers. To give you some context, for every issue Flying distributes through the newsstand, it generates $.11 in revenue. Yet, it costs $1.10 to print and fulfil. If issues aren’t sold at retail, the magazines are thrown away and the retailer is not out of money, but the publisher is.

And so, he now sells the magazine directly on his site. But not only does he sell it directly, but he also recognizes that the people who are coming to his site to get a subscription are die-hard readers, so he was able to increase how much he charges for a subscription. So, naturally, he delivered a product they’d be happy to pay for, improving the quality of the paper and adding more photography. But all in all, the magazine is far more profitable than before he took over.

Sometimes, you need to look at a smaller subset of your audience and be comfortable charging them more. Fewer people may read, but the revenue will be more significant. Ultimately, the goal is not the number of subscribers or an ARPU, but instead, the goal is to maximize revenue. That’s it.

The Washington Post was intelligent. In a digital world, the cost of a subscriber is zero. And so, when I went to cancel my subscription because I didn’t want to pay more, it offered to give me a significant discount. So sure, it’s making less than before, but it’s making more than if I canceled.

This is an example of a publication being smart. It has to tell readers that it is increasing prices. Many people will ignore the email, which is a win for the publication since it just makes more money. Some will seek to cancel their subscription because of the price increase. Stopping any percentage of these people from canceling is basically free money, so offering a substantial discount for a year is a win.

But it’s not just a discount on the monthly rate. Instead, I had to commit to another full year. That gives them an entire year to help convince me that the publication is worth $120/year. And who knows? Maybe next year, I’ll ignore the email alerting me to a price increase. Anything’s possible.

For publishers reading this, though, considering your pricing is a good idea. Have you never increased it? Are you afraid to see massive churn? Test it on a small percentage of your audience and see what percentage churn. If you see a scenario where the churn is less than the increase in revenue, you might be onto something. Ultimately, the goal is to maximize revenue. That’s what pays the bills.

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