Publishers and the subscription model.
Recently, I've read reports on how subscription services for content providers have to be part of the business plan. Having believed this for many years and executed an online subscription model in a previous business, it seems that many content publishers are only now accepting an online subscription model (or paywall) is a bona fide revenue model and that the experiment is over.
Although one of the more prominent UK tabloid papers has now dropped their subscription service in favour of returning to an ad model, plenty of paywalls are still towering in front of many users. I can’t help but believe that subscriptions are enjoying a new found prominence as a genuine revenue model for publishers, whether that is online, an app or both. Personally, I subscribe to seven online content services. Three specialist, two VOD, one music and one news service.
Online business should always be looking to increase their ARPU (average revenue per user), and a subscription model is a great base from which to do this. There are three prominent domains for subscription revenues — Online reading (including news), Music and Video services.
What I know from my own experience and from the many market reports, is that while the percentage of subscribers in the user base might be low, the revenue share will always be higher (from at least X2 — X10 higher), given the higher ARPU generated by subscribers. While there are some subscriber-only digital offerings, especially in video, most companies operate on what is termed a freemium model. Subscriptions typically operate alongside an advertising business: All audiences have basic/limited access, but subscribers pay to see no ads, reduced ads, or to access an unlimited amount of content or expanded features behind a paywall.
The freemium model for subscriptions borrows a page out of the app-store play book, where apps are free in order to accumulate large user bases but monetize through in-app purchases that unlock an enhanced experience and added features or content.
Success in freemium comes down to offering core audience exclusive value that can only be accessed beyond a paywall. The key is to target the most loyal audiences, and sell them on an expanded offering — bundles of features, opinion, multimedia or in depth content — that they find engaging and ultimately, value for money.
Interestingly, over the years a lot of the data suggests the promise of no ads isn't enough on its own to drive a strong subscription business, it’s complementary to the service itself. Publishers and apps have had mixed results with subscriptions, and vary in terms of how hard they have pushed them. With exceptions, subscribers still represent a small percentage of the total audience for popular ad-driven internet sites, notably magazine and news sites. What am I saying? Well, more and more online media companies across categories are increasingly focused on converting a portion of their user bases to paid subscribers, attracted by the prospect of boosting average revenue per user based on recurring payments from subscribers. For companies with mixed free/subscription revenue models, like “Freemium”, success in subscriptions ultimately comes down to identifying a core set of loyal power users and offering them features or content they find valuable. And that requires a mixture of market research, A/B and multi variate testing(MVT).
Ultimately, only a content business with a service that’s indispensable for its target audience and found nowhere else can win on subscriptions alone. The battle will be fought on many fronts to secure a publishing business online with advertising, subscriptions, micro payments, events and non-traditional routes you can develop to generate revenue. All to play (and pay) for.
