⏳Your July update: Valuable yet finite audiences

A note from our Managing Director

Our latest article exploring the value of monthly subscribers created a healthy discussion amongst the media community. So much so that we have written a follow-up, examining the interplay between billing periods, pricing, churn, and customer lifetime value. The key observation made in those articles is that many organisations (including the FT) are willing to share overall subscriber numbers, but few voluntarily declare subscriber revenue. One reason behind the lack of reporting is that media organisations have prioritised volume over value - offering short-term, zero lock-in subscriptions and using aggressive discounts to attract new customers. This approach can provide good (or bad) publicity and limit financial performance. 

Our analysis, and that of the Reuters Institute in their 2024 Digital News Report, has shown that a significant proportion (41%) of digital subscribers are paying less than a full-price subscription. The Digital News Report also highlighted that, across 20 countries, there has been a levelling off of those paying for news at around 17% of the population - “Publishers have already signed up many of those prepared to pay, and converted some of the more intermittent payers to ongoing subscriptions”. 

These findings support our view that:

• Companies need to focus on the small portion of their target audience who are open to paying for news and emphasise growing their lifetime value through long-term relationships (as opposed to placing major focus on net acquisitions). As Joshua Topolsky recently wrote, “Thinking of your audience as finite and building a sustainable business model around that audience — that’s going to matter”.
• Companies need to experiment with other revenue streams that are growing and offer higher margins that are adjacent to the core business - for example, Schibsted’s news media business represents 50% of revenue but has an EBITDA margin of just 7%; conversely, their Marketplaces business represents approximately 31% of revenue but has an exceptional EBITDA margin of 39%.
• Companies need to acknowledge that there is major financial value in audiences that don’t pay. Although these audiences have historically been monetised via low-CPM programmatic ads, that doesn’t have to be the case. Building direct relationships with audiences and collecting demographic data can dramatically improve conversion rates and CPMs in a way that is meaningful to publishers top-line (it’s no coincidence that Spotify still offers a free plan)

If you would like to discuss any of these themes, or how we might be able to help, please do get in touch.

Best wishes,

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Recommended Reading

On Corporate Strategy:

• Telegraph on the block again as RedBird IMI seeks to recover its £600mn (Financial Times)
• AP launching nonprofit group to raise at least $100M for local news (Axios)

On Revenue Growth:

• Future moves into adtech business with solution aimed at publishers (PressGazette)
• Many people don’t pay full price for their news subscription. Most don’t want to pay anything at all (NiemanLab)

On Operational Transformation:

• Why publishers are preparing to federate their sites (Digiday)
• Is the news industry ready for another pivot to video? (NiemanLab)

On Data, AI & Tech Advisory:

• Perplexity was planning revenue-sharing deals with publishers when it came under media fire (Semafor)
• India Today features GenAI-powered TV anchor (INMA)