Why Publishers Should Be Wary of Subscription-Only Models

We are well and truly living in a subscription economy. From paywalled news to scheduled grocery orders and even monthly underwear deliveries, there is a subscription service for just about everything. The New York Times recently passed 10 million subscribers, a shining example of subscription success for publishers. Furthermore, as the deprecation of third-party data looms closer, subscriptions have become an attractive proposition to offset the potential loss of ad income. But is the subscription bubble about to burst? Recent news that Netflix is losing subscribers faster than it can gain them has caused its share price to tumble. With increasing competition and the cost-of-living crisis squeezing consumers, how can small- to medium-sized publishers hope to compete when even the subscription giants are being affected? Feeling the fatigue It is all very well to cite The New York Times as a subscription success story, but how to replicate these triumphs is not so clear. With the ever-growing number of subscription options available to consumers, fatigue could be setting in. Video streaming services are a good example. As more options launch, users feel their budgets stretch significantly. Now, with the increases in cost of living as a result of the war in Ukraine, alongside inflation and ongoing supply chain issues, many consumers are cutting back. Netflix revealed that it had lost subscribers for the first time in 10 years and is looking toward an ad-supported option as a result. When you add the fact that one-third of U.S. consumers feel overwhelmed by the number of subscriptions they have to manage, the switch to a subscription-based model looks even riskier for smaller publishers. Embracing advertising More publishers are looking to subscriptions as advertising is increasingly being seen as less of a priority. In 2020, 81% of publishers said display advertising was an important revenue stream, but this dropped to 73% in 2022, per the Reuters Institute for the Study of Journalism. But with the loss of third-party identifiers, publishers are about to be put back in the driver's seat as they wield rich first-party data that's invaluable to advertisers. Putting advertising at the core of their revenue strategy should be a no-brainer. There are two key advantages that advertising-based strategies give: greater agility and better audience growth. Subscription models need long-term planning and the correct infrastructure. They also necessitate more hands-on marketing to bring in new audiences. By contrast, digital advertising is highly flexible, with publishers able to work alongside partners to optimize advertising for their audiences. These partners can also assist with audience outreach, helping to broaden content reach. Diversifying content offerings can also facilitate sustainable growth for publishers. Both audio and video have grown rapidly over the course of the pandemic. The number of podcast listeners, for example, is expected to reach more than 500 million by 2024, almost double from 2019. Though these new content types can take time and investment, they can bring in a new captive audience and greater income. Best of both worlds The choice between subscription- and advertising-based models is not binary. Combining them can both engage new visitors and offer repeat users exclusive content. Micropayment models, such as those offered by Patreon and Substack, have previously been explored by publishers to put certain newsletters or podcasts behind paywalls while allowing users to access other content for free. But to achieve this balance, publishers must be led by their audience. By delving into the data, examining user journeys and building profiles of the whole audience spectrum, publishers can better deliver a model that works for both sides. Optimizing infrastructure Publishers fully reliant on advertising have strong incentives to constantly improve website performance and user experience to appear higher on Google rankings and draw in more user traffic. Less discussed is the need for the majority of small- and medium-sized publishers that opt for a mixed advertising and subscription model to provide the same reliable experience as their fully ad-funded counterparts. In fact, a well-performing website is essential to capturing return visitors and converting them to subscribers. A non-paying visitor not returning to a site if they have a negative experience is a poor outcome, but not nearly as bad as having a paying subscriber cancel their subscription for the same reason. There is no one-size-fits-all solution to monetization for publishers. Diversified revenue streams will be ideal for most, but publishers will need to listen to the data to create the best mix. Axios Local Tops 1 Million Email Subscribers as it Eyes Its 24th City

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Hitting a Brick Paywall: Publishers Should Be Wary of Subscription-Only Revenue Models

A third of U.S. consumers feel overwhelmed by the number of subscriptions to manage

Sivan Tafla

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