Dear ZEITGUIDE Readers,
This is a preview of one of the chapters in our just released Quarter Two Update. We hope you enjoy this new product with a new format and support us by ordering our annual cultural almanac, ZEITGUIDE 2018 (sample here), which includes all quarterly updates.

IN SUBSCRIPTIONS WE TRUST

In January, we asked: In this era of countless content choices, who is winning the eyes, ears and hearts of consumers? Streaming video, streaming music, physical books and investment in entertainment VR were up. Domestic box office receipts, linear TV viewing and sales of e-books were down.

Since then, media companies have taken the risk to start charging consumers with digital subscriptions.

News

Digital tech had the impact of muddling the connection between publishers and readers. Publishers that once relied solely on subscriptions sold directly to consumers now had to navigate Facebook and Google to ensure their content was seen, often for free. Coupled with the revenue loss was the conundrum of content visibility: How many people actually saw that content has been, and continues to be, in flux, as Google and Facebook are constantly adjusting their algorithms.

Now, in a move to assert more control over their own metrics and provide their readers with a better product, many publishers are moving back to a subscription-only model. Publishers with sterling reputations have been boosted in this effort by fake news scandals that have underscored the importance of having reputable news outlets. President Trump’s continued attacks on established media channels may also have helped in boosting subscription numbers. The Washington Post doubled its number of digital subscriptions from January to September of last year. The New York Times blew past its earnings expectations by adding 157,000 digital subscribers in the last quarter of 2017.

In an interview with Atlantic Media’s weekly newsletter The Idea, Ben Cotton, executive director of retention and customer experience at The New York Times, detailed the Times’ strategy from here: retaining paying subscribers with exclusive content such as podcasts, newsletters, guidebooks and, of course, by providing excellent customer service. (At ZEITGUIDE, we’re doing something similar with these quarterly updates.)

Sports

Digital subscriptions have also caught on with sports media. In its first two years, subscription-only sports site The Athletic has raised $20 million and plans to have local editions in 45 markets by the end of 2018. This as many local papers have had to cut—or significantly downsize—their own sports coverage.

“Being a subscription site, it’s back to basics,” said The Athletic’s chief content officer Paul Fichtenbaum of the site’s appeal to readers. “It’s back to storytelling.”

ESPN is even getting in on direct-to-consumer subscriptions with ESPN+. This over-the-top video streaming service is seen as a precursor to more OTT offerings to come from ESPN parent company Disney in the future.

Music

The other major subscription success story continues in the music industry. Spotify skipped an IPO in lieu of offering through a direct listing. In January, we said the company could be valued at around $20 billion upon going public. It soared past those expectations with a $29.5 billion valuation on its first day of trading. To help boost subscriber numbers further, it partnered with Hulu to offer a bundled offering for $12.99 a month.

Spotify’s success comes even with reports that Apple Music is expected to overtake the company in paying subscribers by as early as this summer. For now, there seems to be enough demand for streaming for both services to grow. The bigger question will continue to be whether this model proves lucrative enough to support music artists themselves.

So, What’s Next?

Interested in starting your own paid subscription service? Our CEO, Brad Grossman, picked up these tips from a boot camp run by The Information, itself an example of a successful paid-subscription news site and newsletter.

1. Your content has to be ten times better than everyone else’s.

2. Subscriptions is a hit-driven business, so it’s imperative to have great talent.

3. Know your customer through data: what they open, what they share and what they want. Target the most engaged customers—your superconsumers—with additional content and offers.

4. Learn who your future customer is and target them.

5. It’s better to be loved by 100 customers than liked by 1,000.

We see other subscription services buddying up as a solution to a fragmented media marketplace. Soon, every major television network will have their own streaming apps as a way to combat Netflix. Clearly, all won’t be able to survive in an ecosystem of thousands of apps, so we see a great new rebundling happening in the future. We have already seen this with a Hulu-Spotify partnership, and a Comcast-Netflix bundle is on the way, as well.

Not every subscription-based company will succeed. Each consumer will have to choose what’s worth subscribing to, and what he or she can live without. Winning in this space will mean maintaining an unassailable reputation and making smart use of a direct connection to digital subscribers. Those media companies that choose to use this direct connection to make more relevant and easy-to-discover content—rather than for serving their consumers up to advertisers—will be the ones that ultimately win.

Want to learn more about ongoing business and cultural transformation? 

#GetSmartQuick with ZEITGUIDE 2018.

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