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[on-hold music] Consumers wanna consume content in lots of different formats, right? So we see the most valuable consumers of media are the ones who consume it across lots of different format types.

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And that sort of diversity of content consumption preference is going to continue to expand.

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AI is just gonna make it easier to access all of this content in a format that is very specific to what that individual user is looking for.

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[on-hold music] Welcome to The Rebooting Show. I'm Brian Morrissey.

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This is my last podcast of the year.

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It is brought to you by Blueconic, which sponsored a recent research project The Rebooting did in which we surveyed over two hundred publishers to understand the state of publisher subscription programs.

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Be sure to check it out. There are a lot of great findings in there. My biggest takeaway, which we talk about in this episode, is that subscription programs of publishers are maturing.

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They're less about raw subscriber growth and more about average revenue per subscriber, while acquisitions are still a big focus, but mitigating churn is just as important, if not more so nowadays.

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And finally, optimization and customer experience become the name of the game. I mean, that's part of the maturation process. Check out the full study.

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There's a link to it in the show notes and also in The Rebooting newsletter.

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I'm soon gonna have a new site that will be able to house these reports in a central location and, and all the other things that The Rebooting is doing. That'll be coming early in twenty twenty-four.

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Thanks again to Blueconic for underwriting this project. Really appreciate it.

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[on-hold music] This week I spoke to Matt Cronin, founding partner at House of Kaizen, which helps publishers and other companies that are building recurring revenue businesses.

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Matt has a deep understanding of the issues that publishers face when embarking on the subscriber journey.

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We discuss everything from how to fix the misaligned incentives in publishing to whether peak subscription has been reached or even exists, how subscriptions can be a force function to becoming customer-centric as an organization, and the internal challenges to doing so, 'cause that doesn't get enough attention, I think, sometimes.

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What publishers should and shouldn't learn from The New York Times' success with subscriptions, and also the struggles that we're seeing some streaming services hit, and whether publishers need to be aware of those because it might be coming their way.

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And finally, what publishers can learn from companies outside media that have different business models but have tackled a lot of the similar challenges that publishers face with their own subscription programs.

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I hope you enjoy this episode, and if you do, please leave it a rating and review wherever you get your podcasts. You can also send me a note with your feedback. I always like to get feedback.

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My email is brian@therebooting.com. Here's my discussion with Matt. [on-hold music] Matt, thanks so much for joining me on the podcast. Really appreciate you taking the time.

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[on-hold music] So for those that don't know, e-explain how House of Kaizen works with its clients, publishers, and other companies. [on-hold music] Yeah. So

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when you work with publishers, and I know every publisher is different, but what are the sort of common threads that you hear about why they come to you?

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What are their challenges? Because obviously there's been a shift to recurring revenue. Everyone wants recurring revenue. Everyone wants a SaaS business, basically, but not everyone gets a SaaS business, sadly.

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But what are the common threads of the challenges you end up hearing that lead publishers to come to, to, to you to help?

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[on-hold music] Most often people are coming to us typically with a very specific part of that recurring customer or subscriber journey in mind, something that they feel needs to be improved. And at the...

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I would say a couple years ago, prior to the pandemic, folks were looking a lot at acquisition, right? Filling the top of the funnel was the most important thing.

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Doing it in the most cost-effective way, meaning the lowest possible CPAs or CAC, and ultimately building that set of subscribers as quickly as possible was the biggest priority.

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And then the pandemic came along, and actually all boats rise, uh, rose, you should say. In, in that period of time when the tide was rising, everybody was benefiting from probably fairly well-tuned acquisition channels.

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And now what we're seeing is that the shift is-- the focus is shifting. It's becoming much more around retention, churn mitigation, and so we're getting a lot more queries about those kinds of experiences.

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But what I would say is that over time, though the focus may be changing, and I think the thing that, that I see most often is that publishers specifically are often looking for kind of that silver bullet.

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What's the one thing right now that I can do to improve my revenue perspective?

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Which often is just a little bit too focused because the benefit of a subscription business is the fact that you have that entire journey to work with, and it's all related.

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When trying to solve the problem of retention, for example, sometimes that's the result of bad acquisition efforts.And in fact, I would say that so often we see really successful low cost of acquisition efforts brings in low quality customers that results in churn problems later on.

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This is a pretty standard experience in the world of performance marketing. In the world of subscription marketing, it's even more apparent. But there's so much more that we can do about it. Yeah.

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You know, I think everyone was looking for, like, the big numbers early on, and you have to get people on the top of the funnel. You have to people... get people into the flow and everything.

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But a lot of publishers at that table were talking about these incredibly high churn numbers when they're running the dollar offer or the free trial. Yeah, exactly.

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And mitigating churn is what makes these products super valuable, right?

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Because the benefit of acquiring a customer that sticks around within a subscription relationship is that you continually make money on them over time.

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So the longer that relationship exists, the more value you get out of that customer, the higher the ROI is on the investment.

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Unfortunately, a lot of times, that doesn't translate into a higher investment in the individual to begin with.

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So we see a lot of scenarios where there's opportunity to, in fact, play both the quality game and the volume game by looking at acquisition as a place to make smarter, better, maybe even higher level investments to get those higher quality customers in the first place.

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Absolutely. Yeah. One of the things that I believe about a lot of these subscription programs is that you have a certain number of people who are gonna convert, like your loyalists. They'll convert at some point. Right.

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Like, I mean, you have to do the blocking and tackling that get them over the line, but most of them are gonna convert, right?

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And those numbers are going up, everyone's cheering and everything, and then it becomes a slog. Right. And then it becomes an optimization need.

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And I don't know if you see this, that a lot of publishers don't have that ingrained in their DNA, right? Like, this culture of optimization. Yeah. That's absolutely right.

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I think you said earlier, everybody wants to have a SaaS business.

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And I would say that one of the big things that's preventing media companies from having what they perceive to be the same sort of success as a SaaS business is that culture of optimization.

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I think too often media businesses look at their audiences as a single homogenous pool of people and just assume that if they build it, they will come.

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The reality is that there's so much more that needs to be done to understand the segments within that audience group and to optimize those experiences accordingly.

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And that, I think, is probably one of the biggest areas of opportunity.

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Once you get to the level of maturity, as you were saying, where you've built the product, you've made a splash in the market perhaps, you've demonstrated your value, and that core group of users is coming to your product now, you've converted them already, you'll see great gains that ultimately plateau.

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And that plateau, unfortunately, isn't something that people have a lot of tolerance for in today's market, right? Everybody is so interested in really high growth all the time.

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So we hear lots of conversations in the media space about sustainability, both sustainability of the business overall, which is a great conversation to have, but also sustainability of their growth.

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And, you know, it's a matter of both perspective, but also a matter of effort. You're absolutely right.

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You reach that plateau, and you need to begin to invest in the ways in which you can build better relationships with the audience that's gonna continue to grow the value of that subscriber business model over time. Yeah.

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Hockey sticks don't really exist for long, a- at least in, in the media business. [laughs] Right. I think people should have learned that.

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I think one of the things that's interesting about publishers shifting more to subscriptions is, you know, I think initially the typical publisher approach is to treat things as, oh, here's a pot of money I can get, and it's one of many pots of money.

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But the way I think about subscriptions is you really need to reorient your entire approach around being customer centric, right? And that is a...

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That's a really profound shift for a lot of publishers who have existed for a large part as...

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with indirect business models in which they're trying to satisfy their audience on the one hand, but really their customers are completely different, right? Mm-hmm.

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Their customers are the advertisers for the most part, and you're gonna end up in conflict.

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And I just believe that there's been this misalignment that has led to terrible experiences and frankly a lot of terrible businesses. I agree 100%. I think that this idea of customer centricity is so important.

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We see it across all the industries in which we work.

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On recurring business models as well as others, you know, ultimately it's these companies that are truly dedicated to their customer experience that actually achieve those sorts of sustained growth numbers everybody's looking for.

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And even in tough markets, they're the ones that bounce back first.

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So customer centricity has, for many years across many industries, proven its value, but at the same time, it's not as widely adopted as it really should be.

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And in this world of the subscription products, it would seem that it would be kind of a layup, right?

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It's an easy opportunity given the relationship that you have on a subscription model to be more engaged in putting your subscribers' experiences first and foremost.

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In the media business, though, that's totally different, and you make the perfect point, which is that media businesses don't perceive their audiences as their customers so much as they perceive their advertisers as their customers.

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And that right there is a lot of what we try to work with around helping to reorient these businesses for sustainability, because at the end of the day, advertising markets go up and down.

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We see this all the time, right? And as a media business, you have no control over what influences the advertising market and how that's going to evolve.

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But what you do have control over is how your audiences consume and engage your product.

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And by putting that first, you can actually build a lot more sustainability into the business and reduce the dependency upon the volatility of external markets.Yeah, I think control is the word, right?

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Because the internet has been really difficult for most publishers for several reasons.

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But I think that one of the core reasons is it's really difficult to operate a media business when you do not control your distribution- Yeah... pretty much at all.

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And then on top of that, many publishers have little control over their monetization, right?

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If you rely on indirect sources of monetization, AKA programmatic, programmatic has a role, right, but it's not everything, despite what a lot of trade publications would try to have you believe for whatever reason.

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It's not everything. And I see that a lot of publishers want more control over their business.

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They have to get their businesses under their control and not constantly be like whining about and pointing fingers at other companies that are far larger and are fighting completely different intergalactic battles that inevitably [chuckles] the publisher gets trampled.

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Yeah, I would completely agree. In the media space in particular, an audience comes to this publication because of its unique value, right?

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An audience member sees unique value in this publication and wants to engage in a relationship that's long-term.

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So why a media company would want to allow for any sort of like intermediation of that relationship kinda doesn't make sense to me.

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Now, I know everybody was chasing search traffic and social platform traffic for a while. We now see what's happening there. That's all going away.

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And those relationships that the customer was seeking actually don't necessarily exist to the same extent that they really should because the investment that the media companies should have been making in those relationships weren't happening.

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They were too focused on that acquisition effort, they were too focused on the, the traffic component of it, and not focused enough on how to convert that initial curiosity, that initial interest in the content or whatever it was the publisher had to offer, but really convert it into habits, really convert it into a relationship over time that they do control, right?

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They do have the ability, once that relationship begins, to provide a level of experience that can surpass anything else.

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Unfortunately, it's just not where the attention has been paid, and I think publishers are now paying the price for that, for sure. Yeah, for sure.

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What if the concept of peak subscription, right, it regularly rears its head, and it makes sense, right? Every market is very different. The US market is probably the best outside of Scandinavian markets.

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I don't know, they just have... Scandinavians will take out a lot of subscriptions, I think. That's my working theory and what I've seen.

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But at the same time, and we see this in the streaming services, and I don't know how many times I can get Paramount Plus for free. On a regular week, I get InstaCart's telling me I can get it for free.

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Someone else is telling me I can get it for free. I'm on Delta flight, and they're saying, "Hey, do you want Paramount Plus? You can get it for free for a while."

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And I'm like, you know, we're seeing some of these subscription services start to go backwards. Is the concept of peak subscription even valid, first of all? Yeah, that's a great question.

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From my perspective, looking across lots of different recurring revenue businesses across different business categories, I would say no, I'm not concerned about it.

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I don't think that the business model of subscriptions is under threat.

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I do think it had its moment in the spotlight for the last few years, and lots of businesses that hadn't previously operated on a subscription model entered the space.

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So there's a lot of excitement and a lot of growth around subscription, all of which came together at the consumers, right? Consumers began subscribing to more and more things.

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And what we're seeing is a maturation of that experience for consumers as they begin to recognize that the management of subscriptions in areas where they may not have been used to doing it requires a little bit more effort.

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So from my perspective, this idea of peak subscription is really the combination of two things.

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It's the maturation of the market and consumers speaking out about that experience as it evolves, and I think also the same sort of thing we were talking about earlier about growth rates, right?

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So growth rates are slowing for sure because we're coming out of a period of rather hyper-growth. But the truth is that generally speaking across all different categories, the general trend is still growth.

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More industries are picking up subscription recurring revenue models, and they're generally growing, though you will see certain companies or certain niche industries that operate in this way having a harder time growing than they were previously.

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And to your point, a lot of that actually is self-inflicted. So part of the effort to continue to drive growth is to experiment with other ways of building that growth.

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You know, everybody talks about bundles these days, and I think The New York Times is often held up as having succeeded with bundles within their own universe.

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But as you highlighted within streaming and in other areas, mobile phones is another one, you have companies from totally different industries coming together to offer bundles.

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And all of these offers in the marketplace still tend to be oriented towards aggressive acquisition, which can create this sort of negative feedback loop, right?

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You're creating a scenario where the offers you're presenting to new subscribers, potentially through new bundled channels, undermine the relationships that they maybe already have or that they're getting elsewhere.

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So it incentivizes, to a certain extent, the churn. It incentivizes canceling what you may already have in order to pick up this new offer in a new environment that resets your own economics, right?

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So there's a whole lot of dynamics, and I think there are a lot of headlines that people have been catching that make them believe peak subscription is something real.

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But I would say that across the board, it's generally not. Subscriptions are a fantastic way to create more diversity in any business, whether that's a publishing business or a retail business, whatever it might be.

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It's just a great way to meet more customers with the kinds of relationships that they're seeking to have with your product, right?I think a good example of where we see this sort of innovation taking place is in the car category.

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We're now able to get subscriptions to cars. Oh my God, I have one. Great. There you go, right? I do. I have Sixt. I got a subscription to a car. Sixt, the car rental company. Yeah, I do. Absolutely.

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They're, like, European, but they wanna make a splash here. I actually like them. I hate all car rental companies, to be clear. [laughs] Yeah. I hear you. [laughs] Well, what led you to that?

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Like, why is that a good deal for you? I like that because of the flexibility. I've never actually owned a car, which is very unusual. I'm like, "I need to turn in my American passport."

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But I wanna try having a car in Miami because you need a car. I don't need one in New York. Think I'll be there more this winter, and there was a Black Friday deal. What I like about it is the flexibility.

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Rather than commit to buying a car or even leasing a car, I can suspend it or I can just stop the subscription. Yeah, exactly.

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I think it's such a perfect example of how this industry is adapting to meet different customer needs, right?

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You're a segment of customer that's not gonna buy a car, but by having a subscription to a car and everything that entails, the simplicity and the flexibility, all of those things, it allows them to expand the market just simply by offering the same product on a different model.

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Yeah.

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And I think that's a key point here is when we think about the maturation of certain industries, the ability to offer the same product in different relationship structures or different models is a really good way of, again, diversifying your revenue streams and creating more sustainability.

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You know, in the world of media, we're not gonna say that everybody should be 100% subscription, just as we realize that being 100% advertising isn't sustainable. Yeah.

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At the end of the day, and again, this comes back to that idea of customer centricity, we make sure that we're measuring the value of each individual customer and the value coming from all the different ways in which you can provide value to them and make money from them.

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So in publishing, if that's advertising, if it's subscription, if it's events, whatever it may be, all of that needs to be understood at the individual user or the audience segment level so that you can optimize those experiences and drive more and more value.

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But having more tools in your toolbox just gives you more opportunity to create that sustainability.

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[gentle music] Yeah.

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I always say that publishing in general or media overall is like a copycat league in some ways. It's like the NFL. Like, once one team finds something that works, every other team goes in that direction.

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We saw this with Buzzfeed in a previous era. Obviously, you don't see that now. And now it's The New York Times, right? Everyone wants to imitate The New York Times, um, but not every publisher is The New York Times.

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What can publishers learn from the success that The Times has had? 'Cause it ha- has been undeniably successful with subscription.

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I think it's 10 million at this point, like, and it's leading the way with bundling, and it seems like its business is, uh, in that regard is going from strength to strength.

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So I understand looking at them as a case study and as an example to emulate to some degree.

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But what should publishers who are not The New York Times take away from The New York Times' success, and what should they maybe not take away? Yeah.

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Your point about publishing being a space in which people kinda follow the trends and follow the shiny objects is 100% something that we see.

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And from our perspective, looking across lots of different industries, we do see it more in publishing and in media than in other places because there tends to be, particularly in news where New York Times generally sits, there tends to be less sort of competition, especially when you spread it out across the globe or across the nation, right?

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So I know a lot of news publishing businesses like to get together and learn from one another and then emulate the tactics that seem to work in one scenario and apply it to another.

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So we do see that a lot more in this category than we do in other categories. The New York Times is a really interesting one though because you're right, not everybody can be The New York Times for lots of reasons.

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Also, it's interesting that The New York Times is, in fact, competition to a lot of these other brands, whether they recognize it or not.

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But we know that The New York Times has more subscriptions in Dallas, for example, than the Dallas Morning News does, and that's true for many markets across the United States.

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So there needs to be a better awareness, not just around trying to learn from what seems to be working in some places, but recognizing that your region or your product, whatever it might be, has to develop its own unique value proposition, its own unique experiences built for its own audience versus just doing what others have done.

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Yeah. Everyone loves to go tactical at the end of the day. Yeah. Right? And this is not... I don't think it's unique to publishing, but it's probably more acute to some degree. I've just always noticed it.

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It reminds me of, like, when I was in, like, journalism school, had a Pulitzer Prize-winning journalist in. He had been, like, held captive in Bosnia for months and stuff like this.

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And of course, the first question is, "Do you take notes or do you use a recorder?" [laughs] It's like, no, this is not the question you should ask the Pulitzer Prize-winning, like, war correspondent. Right.

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But there is that, like, tendency. But one specific area that I'd love to drill down on is bundles, right? And the role bundles can play as these businesses mature. And then also the role that they shouldn't play. Yeah.

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Bundles, I think in media in particular, is fascinating, right?

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Because The New York Times has done a really good job of segmenting out their various kinds of offerings and then giving them the opportunity to then package them in a variety of ways, right?

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So now we know that they offer audio, they offer games, cooking, The Athletic, Wirecutter, core news as the major components that can be brought together in one subscription or subscribed to independently.This is a tactic that not a lot of other regional media publishers are gonna be able to do very easily because they're all already offering a bundle.

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The New York Times has invested in these new products and new things that they can present as a unique or a discrete offering.

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For example, cooking, something that they didn't necessarily have, certainly not to the extent that they have it now.

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They created something entirely new that stood independent of the core New York Times product offering.

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The acquisition of The Athletic is different enough from sports coverage that it allowed them to do the same sort of thing.

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But if you look at other regional newspapers, they're offering most of what they're offering already as part of a bundle. And in fact, what they probably need to consider is how they de-bundle before they bundle, right?

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How do they create more experiences that are truly discrete from their core offering, but add incremental value to their local audience's experience so that they have the ability to create more, more packages, more offers, and diversify the product experience to a greater degree.

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So this is a really interesting one. New York Times' model here I don't think is gonna be replicable for most. So give me an example of the unbundling. Hmm.

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And, and then, 'cause it's, it's the old John Malone, I think he said it. Might have been Winston Churchill or Mark Twain, I don't know. But like there's two ways to make money in media, like bundling and unbundling.

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Explain like the unbundling to rebundle. This is like waiting for Godot. We just like bundle, unbundle, and then rebundle. Yeah. [laughs] Just r- rinse and repeat every few years.

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So as people who are in regional local news know that one of their core offerings to their market is local sport, like high school level sports. Yeah.

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And so this is a really valuable property to that business, and whether or not that exists as a part of everything else that they put together, meaning local news, local politics coverage, local weather, all those other things, that's something worth considering, right?

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Because potentially there's an opportunity to break those offerings apart.

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They may be currently selling all of that together right now, but if they were to break those two things apart and potentially serve the high school sports audience differently than they might serve the local politics audience.

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But for those in the Venn diagram that have the overlap, of course, there's the opportunity to get those two things together in some sort of a different pricing package model.

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So I think that that's probably one of the most obvious examples in understanding the value that- Mm... that local media bring to their market.

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Yeah, it's the need to basically understand that what you're offering is different to certain segments of your audience. Like we were talking about before, you can't consider the audience to be one homogenous group.

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The reality is everybody has a different reason for their relationship with your media property- Yeah... with the content that you consume.

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And the closer you can get to understanding those segments and what it is they truly value, whether it's high school sports or something else entirely, those motivations will be revealed with a greater level of understanding.

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And that I think is where you can then identify the opportunities for unbundling. You know, this- Yeah... actually it reminds me of...

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So I think in your recent state of subscription analysis, the survey, I think the top two priorities for publishers were diversifying revenue sources was number one, and number two was understanding the audiences better.

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And I, it struck me because the role that we play in the relationship with media companies is essentially that of the user, of the consumer, of the, the reader, whatever it might be.

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And when I saw those results, I'm immediately thinking, well, number two, understanding audiences better is going to be the thing that allows you to create more diverse revenue opportunities.

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So it's a little bit of putting the cart before the horse. We need to elevate the value of understanding audiences, make that the number one priority so that we can then elucidate the revenue diversity opportunities.

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Yeah. I mean, I've heard a lot of talk about this segmenting the audience out. This is something that came up a- at the dinner. Rather than treating the audience as like homogenous blob, right, you have to separate out.

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But it seems to me like you kinda have two things working against each other. Simplicity works really well with products. Like putting like 15 choices in front of people just paralyzes them.

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I guess there are some people that like to go to the Greek diner and get the 68-page menu. Like [laughs] I would prefer something a little bit pared down.

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It's just like, like I can't believe you can make all these things. How do you square that?

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Like, I mean, one publisher, I think it was Skift, like I think Ra- Rafa was, was talking about it, got like six different like subscription. And I mean, that's a lot, right?

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How do you end up not just confusing your audience to some degree? Yeah. I agree.

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I think the temptation in terms of the promise of personalization can get us down into this realm where the level of effort to require deep personalized segmentation far exceeds the value of it.

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We're not seeing that in most publishing businesses. It's, it's way at the other end of the spectrum.

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There's definitely opportunity to move in baby steps and to have just a couple of segmentations that can be managed independent from one another, and experiences and, and value contributions can be optimized independent from one another.

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A g- actually, a really great example, this goes back to that concept of customer centricity, but so many media companies, they're still looking at their advertising P&L and their subscription P&L independent of one another without recognizing that it's the user or the consumer that unifies those things.

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And understanding that consumer in terms of their contribution to the advertising P&L or to the subscription P&L, or to the commerce P&L, or to the events P&L, whatever that is, right?

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Understanding that each individual user segment has a pie chart of revenue contribution and getting to the point of really recognizing the segments from those key differences could make a huge difference in the way these businesses build more sustainable growth through leveraging that revenue diversity.But instead, we have audiences looked at from an advertising perspective as one whole thing, segmented usually just for the advertisers, right?

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How, how does it best match what they're looking to buy? And subscribers are looked at as one whole group of people and generally looked at in terms of how many do we have in the pool at this moment in time.

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But not really getting into understanding the key differences between how consumers wanna consume the content, where the value they contribute to the business may be.

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And that's-- we're not talking about every individual, we're talking about three or four groups as a great place to start. Yeah.

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Like, I think a lot of the challenge ends up being internal to some degree in that you're-- you need people who wake up and go to sleep focused on, ideally, maybe that's a little bit much to ask, but ideally focused on, how do I drive this part of the business forward?

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And I think the, the downside of that is that nobody's, like, looking at the whole. And so someone in advertising will see subscriptions as, "Wait, this is gonna make our audience smaller. This is bad."

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Or, you know, I ran into this where the advertising sales team would wanna sell Hulu to make the paywall go away.

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And it's like, wait a second, this is not like mud flaps to get a car off the lot at the used car dealership. I'm trying to build a, a recurring revenue business here.

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So I think getting that, a lot of times these things are almost pitted against each other, right? A hundred percent. Yeah, absolutely. I think that's the biggest hurdle in the evolution of these media companies.

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Everyone's talking about how these businesses are just not sustainable generally. So the way we've been doing it so far is not working.

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We're not gonna solve the problems of the future by continuing to have those same sort of internal debates and discussions.

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I think at the end of the day, again, it comes back to that concept of what are the elements within our product experience that we can control.

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And as a subscription business, as a media company that maybe operates both with subscription and with repeat visitors who are valued perhaps more on their advertising revenue side of things, just gonna put them at the center, really bring the customer to the fore.

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As I was saying before, make that the number one priority and understand your customers better so that you can serve them better.

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Because over time, what changes in the market is the value of advertising or the budgets available to be invested in advertising.

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But what shouldn't really change is the value that the media company is giving to its audience, to the consumers of that information.

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That is kind of the keel [chuckles] of the ship that steadies it through the turbulent waters of whatever the marketplace variables may be. Yeah.

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At a different dinner, one large newspaper publisher was talking about how they decided to stop showing pre-roll to their subscribers because they found the data showed that the more subscribers were engaged with doing things like watching video to completion, the more likely they were to be retained and not churn.

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And so the trade-off of, like, foregoing that revenue, which, you know, but obviously pre-roll revenue is gonna be the highest for a publisher, was it, it made sense.

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That stuck with me because I was like, "That's the kind of thing that more publishers need to be doing," I would think, viewing things holistically like that. Yeah, absolutely.

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We worked with some publishers who understand the advertising value to an individual subscriber.

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And at that individual level, the advertising contribution in terms of dollars is actually not that significant, especially when you compare it to how much that individual may be paying for access to the content, right?

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So if you equalize the perspective on these things, yes, advertising dollars in aggregate can be worth lots of money to a business, and that's really, really important.

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But when we bring it down to the value that it equates to at the individual level, it actually could be more valuable to remove some of that advertising, as you were saying, in order to get one more month of paying subscription from that individual.

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Or to leverage an opportunity to increase the cost of that subscription because people may be willing to pay more for a better experience, and those dollars can be worth even more.

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I think so many publishers, again, going back to The New York Times example, so many publishers are using these very low cost points of entry for subscriptions.

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They're undermining the value that they bring to the table, and they're kind of putting themselves in this position where those initial acquisitions aren't really worth a whole lot. Yeah.

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And there's a brand problem, right? You're going out there. Everyone says they're premium. Everyone. Every publisher I've ever met has been premium, apparently. Hmm.

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There's no non-premium publishers that-- at least I have never met a publisher who's like, "Yeah, we're not premium." But anyway, other people decide you're premium.

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It's like someone calling themselves a genius is they're most likely not a genius. Right. Not any, like, politicians come to mind with that.

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But I think when, when you're talking about trying to build a premium brand and sustainable, and then you go in the short term, here's a dollar offer for the first, like, month, and then we're gonna jack it up three hundred percent.

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First of all, you're gonna run into a not insignificant number of people who feel ripped off, right?

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And they feel like they ran into the "you broke my sunglasses" guy in, in Times Square that used to operate in the nineties. Yeah. And that doesn't show up necessarily directly on a spreadsheet.

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It might like in, in churn numbers, but there's a real, there's a real problem, and I think when we talk about the trust issue, I think that for, particularly for news publishers to solve a lot of the trust issues, they have to look at their own business operations too, right?

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Like, you can't...

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When people be-- when your audience becomes not the product you're selling, but your customers, [chuckles] right, you gotta really look at how you're aligning your interests with your, their publish- with the, with your customers.

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Churn is a reality, and mitigating churn, when you have that meeting to mitigate churn, it quickly leads to friction.Let's put some friction in the cancellation process. And it works, right?

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[laughs] It works until the regulators catch you. Yeah. It's like, let's make them call to can-cancel.

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Okay, let's make them call between the hours of nine and three, and then I was like, "Let's make 'em show up at our door." Exactly. Yeah.

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You know, building that friction in is obviously proving not to be a valuable tactic.

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And I would say a similar tactic that seems to be burgeoning right now, which I think is gonna be proven to be ineffective, is a lot of publishers saying, "We're gonna do away with our monthly subscription and only go to the annual," 'cause the annuals retain more.

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Yeah, we heard that actually. Yeah. And it's like, well, yeah, of course, annuals retain longer because their contract is twelve months, not one month. Yeah. Right?

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So if you have an average of three, just moving everybody into that twelve-month contract is going to improve your retention.

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But I would suggest that after you get through that first twelve-month cycle, you're gonna see that your churn numbers are gonna go back- Yeah... to something similar.

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And so it's really a question of what's the problem with this cancellation issue? Is it that we're making it too easy for people to cancel, therefore they're canceling?

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Or with the contracts, the terms issue, is it because we've made the terms so short, people are wanting short relationships? And I would say the reality of the churn issue is actually more of a product fit issue.

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It's more of an engagement issue in reality, right? Yeah. If you solve that relationship and that level of engagement that the subscriber wants with your product, those things go away.

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And in fact, offering more options for level of commitment will be better for you.

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It'll give you more tools to meet the market where it is and to maximize the value of each individual potential subscriber to grow the total pie of your audience. Yeah.

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But it really starts again with saying, what is it that the subscriber or the customer wants, and how do we deliver on that day in and day out? It's a, it's an engagement issue, not a sales issue.

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[gentle music] Well, I mean, like I've, I've been in these meetings for-- I'm glad that's one of the big upsides that I'm, I'm not in these meetings anymore, is there's people who are responsible for subscription or membership revenue who if the p-problem is the product and the product market fit, they can't affect that even though it's an alignment issue in that like a lot of times people are taking actions because they're the actions that they can take.

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Mm-hmm. Rather than it just being like, well, I would be in a lot of these meetings where I'm like, you know, the answer is always just we need to make better shit.

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Like, so we could end this meeting, I could go back and do that. [laughs] Like- Yeah, exactly. Yeah, that was-- I wasn't the best person at these meetings.

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But ta-talk to me about deciding the type of recurring revenue model you're gonna have because I always think about the early days of subscriptions, it was an all or nothing. It was a paywall.

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You either had a paywall or you, you had a ad-supported, ad-driven, whatever you wanna call it, product, right? And then the meter came about, but there are now several permutations.

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You can have strict paywall, you know, you gotta pay, otherwise you get nothing. You could have a, a meter. You can have a membership. Some people have a subscription that they call a membership.

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I'd love to hear what makes a membership in your eyes. There's freemium models.

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Walk us through how a publisher should think about what is the recurring revenue model, and maybe it's not recurring, maybe it's one-off payments, but how they-- how to determine which model is right for their product and their audience.

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Yeah. I think, again, this comes back to that idea of understanding the audience better.

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We have been around for quite a long time and have a great history in performance marketing at the dawn of the age of digital media and digital advertising, and really emphasizing the value of performance, really emphasizing the value of data.

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And I, I think we've grown into this world now where there is so much data, it's a bit overwhelming, and in truth, it's not driving a lot of real decisions around how to improve a business.

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But in the process, what's happened is we've forgotten about the other side of that equation, which is kind of qualitative understanding of the consumer and the customer and how they want to engage with the product.

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This is something that we used to do all the time. A lot of money was invested in this before the days of high velocity, highly accessible quantitative analysis of performance.

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But right now, we sit in this really fantastic state where understanding consumers from a qualitative perspective is easier to do, it's cheaper to do, it's faster to do than it ever has been before.

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And so when we look at building new subscription products, the first thing we wanna do is really dig into understanding who the audience is and how they want to engage with a product like the one that we may be building.

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And this is a, it's a fantastically creative opportunity because we don't have to follow the models that exist in the space already.

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As you pointed out, there's a whole myriad of ways in which we can engage people and get them to pay for something on a recurring revenue basis.

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So let's start with the potential end users, and let's understand what their expectations are and what their experiences have been, and then how we can improve upon that to give them the right options.

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And I think a great example of this is, I am gonna go to the SaaS world for this example, but I think a company that has done a good job of this is Slack.

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You know, if you were to go and actually look at the pricing page on Slack, we all kinda think of Slack as the same sort of product experience, I'm sure. It's very similar for each of us as end users.

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But the people who are paying for it are purchasing different things, and it's not just the scale of access, right?

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Not just like you get more people on it or you get more features or whatever it might be.But it's actually priced and packaged for specific user segments.

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You know, the pro is different than the individual user, who's different than, than the free user, and they have individual needs, so therefore the product has been packaged in a way that's specific to those segments.

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And that to me really speaks to the opportunity that exists in publishing.

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So if we really understand those segments, if we really understand how an individual group of people is going to use this product, then we can price and package it for them specifically, for their use case.

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And the decision matrix becomes much more simple, right? Because they see themselves as a part of this group, and there's really only one product that works for them, though there may be multiple products available.

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But those are actually meant for other groups of people.

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You know, and when you think about the audience as one homogenous group, and then we give them different bundle offers or different, different pricing options, contract duration, term duration options.

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You know, what we're really doing is just trying to throw spaghetti at the wall and see what sticks. And from our perspective, that's not the right way to go about it.

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Let's take advantage of the opportunity we now have to really understand consumers, to really understand their expectations with recurring revenue models, and give them something that's more uniquely tailored to their specific needs as a segment of people, not as individuals, but as a segment of people to start, and that's where I think the magic happens.

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That's where we can really build good traction for sustainable growth, where we can continue to optimize and make improvements over time again and again by delivering upon that proposition. Yeah.

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I have a tactical question for you. Sure. Does ad free drive subscriptions? I've just... I've always doubted that outside of video, like most people avoid pre-roll and like video advertising when they're watching video.

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I do not believe that most people pay to get rid of banner ads. That's a great question. [laughs] This is one that again, you know, this understanding from a qual- That's my vibes analysis then, by the way. Totally.

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Yeah. No, vibes analyses are a great place to start. We call those hypotheses. [laughs] Okay, good. I'll, I'll rebrand. There you go. So this I think changes over time, quite honestly.

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And again, it's the result of that, the volatility of the advertising market, right? So when we get into the end of a quarter or the end of a year, a lot of times advertising environments just pack- [laughs]...

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advertising into the customer experience. Yeah. And that affects the customer's experience to the extent that it affects how they interpret the value proposition, the value that they get from that product.

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So I would say this, this kinda changes, there's a tide that evolves, right? And you look at the streaming space where everybody was paying full price for an ad-free experience.

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Now we have these folks adapting to an ad supplemented experience for a lesser price. I think that a lot of that has to do with just the changing dy- dynamics and the changing expectations of consumers.

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They will have an increasing appetite for lower cost, more ads at some point in time. Yeah. And then publishers are gonna abuse that relationship, and the tide will turn back the other way. Yeah.

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I remember years ago, I always thought Pandora's model was very strange because they were going to advertisers and they were saying, "We want you to pay us so we can use your ads to annoy people to the point where they will pay us.

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And we'll actually tell them, 'If you wanna get rid of our customers, pay us.'" And I was just like, me personally, I don't think I would wanna be like the cudgel [laughs] that- Right...

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a service uses to beat people until they like try to escape me. Yeah.

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Like, I don't know, like I always found it very strange, but like anytime I like brought it up people were like, "I don't know what you're talking about." Yeah.

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It's just such a great example of misaligned incentives that exist- Yeah... in the world of media, and it just creates an interesting complexity that, that does change over time.

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You know, there's no way to fix this forever. The only way to be perfect at this is to just constantly change, right? To be- Yeah...

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super adaptive and to be able to understand how your audience is changing so that you can meet their needs as these market dynamics evolve.

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We like to say that it's sustainability is the result of empathy and adaptability, right? Yeah.

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It's being empathetic to your audiences and understanding what their needs are, and also being adaptable to those needs from a business and product perspective so that you can constantly maintain a strong relationship that creates value.

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Yeah. So tell me, I, I always struggle with this. Is there a difference between a subscription and a membership to you? No, not to me. I think it's a matter of positioning and branding to a certain extent.

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It's a point of differentiation for brands, I would say. I think the reality of any sort of recurring revenue relationship is that it's a relationship. That's probably the umbrella term that needs to be used most often.

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And whether you wanna call it a membership to create some sort of sense of exclusivity or just simply a subscription as a way of fulfilling upon a convenient need, right, or making a need more convenient to be fulfilled, is a matter of how your product fits into the marketplace.

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But the reality of it is, I think from our perspective when we think about how to engage those consumers most effectively, is to think of it as a relationship. Yeah. I have one more tactical question. Let's keep going.

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It might, it might just be like personal preference. Plus, Pro or Max? I mean, from a consumer perspective, I like Plus. I do. [laughs] From a B2B perspective, probably Pro. The Max I've never understood.

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[laughs] It's like you get everything. Yeah. I remember when we were naming the membership program at Digiday, I was like, "All right. Let's call it Digiday Plus."

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[laughs] I got some pushback that there might be a brand problem with Google Plus. I'm like, "I don't think so." [laughs] Oh my gosh. Yeah.

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I'm like, I was like, "I don't know what data I can produce to disprove this hypothesis, but let's just assume it's wrong."

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I just love how Uber, the car service, took the term uber off the table for all of these things, right? Yeah. No, add an umlaut maybe to your name and call it a day.

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Okay, so final thing is, you know, it's a generalized question, but what are the common pitfalls or mistakes you end up seeing when you get under the hood of these different publishers' businesses?Yep.

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So very tactically, and I like to think about things in terms of what we call the subscriber framework, subscriber growth framework, which is- Yeah...

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all the seven sort of generic stages of a subscriber journey from awareness to acquisition, onboarding, engagement, expansion, retention, and then win-back.

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Think about it from that perspective and all the ways in which you can improve the customer's experience.

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I think generally speaking, major pitfalls that exist within the awareness stage is that there's just way too much dependence for media companies on these intermediaries, right?

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They've been separated in terms of the relationship and their value proposition to those customers. And so there's a real need to rebuild those relationships.

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And I would say right now, this very moment in time, it is super critical for media companies to be rebuilding or building from scratch the relationship that they have with their audiences and making it as deep and as strong as ever.

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Because we just saw what happened when we gave that away to platforms, Meta and Google, right? And then they turn off the switch. Audience relationship is gone, and media companies are really struggling.

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What they thought they valued at first in terms of that traffic has turned out to be it's disappeared, and they also don't have the relationship any longer.

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And we're on the threshold of this AI era where that intermediation is likely to be even greater.

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It's gonna be different, but it's going to be even greater in terms of the experience that consumers have with their sources of information.

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So I see this very moment in time as the moment in time when p- media publishers need to be building and investing into that relationship so that when AI consumption of their content becomes a real thing, people will have established preferences to tune their AI to say, "I want more information from these specific sources," whether it be journalists, editors, or publications overall, and to leverage those relationships through the tools.

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Yeah. We may lose that opportunity in a short matter of time. So publishers who don't invest in those relationships now will probably never have the opportunity to do it again, quite honestly. Yeah.

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I mean, the Journal today just had a, an article about, you know, Google's AI search, a new version that they're testing, and- Mm-hmm...

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and The Atlantic ran a sort of scenario, and they expected, like, seventy-five percent, you know, drop. Publishers are not gonna have a choice.

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There's a force function that's gonna happen in the market to become customer-centric and to have direct relationships with the audience, direct relationships with the publishers, and that is you're not gonna have the option of all of this traffic coming from search engines and social.

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It's already mostly gone. And so you have to adapt, and there, there's sort of no choice at the end of the day. Yeah, I completely agree.

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Where we're headed is a realm in which the winners are the ones who control the interfaces with the consumers, right? Yeah.

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And there's literally nothing that anyone else can do about it other than investing in those relationships to the greatest extent possible so that when they lose the interface war [chuckles] or when the majority of their interactions are not through the interfaces that they're directly providing,

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at least there will be preferences driving through those other interfaces, right? This is something that we've seen in the travel space.

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It's a really great case study for the media space as well, is to look at how online travel agencies intermediating, or they got in between the customers and the suppliers.

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The internet was this really great opportunity in travel, and travel was one of the first industries to really capture e-commerce potential, moving away, of course, from their travel agencies, the old school travel agencies, to selling direct to customers.

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And then they just got so focused on the cost of acquisition issues and the, the difficulties- Yeah...

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in, in reaching and growing audiences that they outsourced that effort to the online travel agencies who built better experiences for the customers. Yeah. And the travel suppliers were like, "Yeah, here you go.

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If you're gonna be better at building those experiences, I'll let you do it." And in the process, they lost the relationship with those customers. Um- Yeah, and they're clawing it back now. I mean- They are...

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I, I think Delta is a really interesting company. I mean, I didn't totally agree with what they did to their Sky Miles program.

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But the fact that they were able to do that was just because, like, it's been wildly successful. They've been wildly successful, like, at reclaiming that direct relationship. I mean, I might- Yep...

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I don't think I'm unique in that, like, I don't go to Kayak I-- or Expedia. I go to Delta because of all the benefits and, and the fact that they've worked hard.

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First of all, they have a, they have a good, they have a good product overall. You know, the comparison set's not great in America, but...

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This is where I think Delta and the travel category can kinda highlight the opportunity that exists in media, right? You can claw back that relationship.

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And I would say again that this right now is the time to invest in making that happen, just in the way you see Delta has done for you as a customer of theirs.

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Where it's different and more challenging for media is that the near future media won't really be providing the context or the environment in which the product is delivered, right?

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So whether or not you buy your Delta ticket through Delta or through Expedia, at the end of the day, you're gonna sit in a Delta seat on a Delta airplane. So they will have the opportunity to shape the experience.

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They will have the opportunity to affect your perceptions of the brand and affect your preferences for them. Media's gonna lose that opportunity because people are gonna consume their product in other environments.

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And so this is where the example kind of separates ways, and truly where we can see the potential pitfall for media is even greater than it was in the travel space. 'Cause nobody's seeking- How do you mean...

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Uh, wait, how do you mean that, like, they're going to experience the product in different environment?I think where we're headed is that there's, well, there's currently an understanding that consumers wanna consume content in lots of different formats, right?

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So we see the most valuable consumers of media are the ones who consume it across lots of different format types, whether they're coming to the website and reading articles, whether they're listening to the podcast, engaging in infographics, all these going to events, all these different things are what highlight the potential to grow your audience and create much more valuable audiences as well.

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And that sort of diversity of content consumption preference is going to continue to expand.

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AI is just gonna make it easier to access all of this content in a format that is very specific to what that individual user is looking for.

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I think we see a future in which content is just exported from the source to an interface environment that's specific to an individual in the way that they want it.

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You could almost see Apple News as something of an example of this. We're beginning to see that it-- we've created an environment that Apple manages, designs, delivers, right?

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But they're using the content of these other sources. And just take that to the next level. What does that look like- Yeah...

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going forward, where we're aggregating different sources of content in an environment that those sources of content no longer own, right?

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And I, I think that it's just a future in which the relationship, the literally the tangible experience between consumer and producer of content, media, whatever it is, gets further and further apart. Yeah.

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Travel doesn't suffer from it. Yeah, that is interesting. We could do an entire another hour on that because like- Totally...

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the packaging and things to, to signal premium, I've written about this before, you know, are already going away, and AI to me, just like any sort of technological change, is just a great accelerator, and- Yep...

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it will accelerate. And I think personally, I mean, just 'cause like a lot of that stuff was frippery anyway, and- Mm-hmm... it was a lot of hand-waving, and it was a lot of unearned privilege, to be honest with you.

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I-- The legacy is a lot of unearned privilege. It's like having a trust fund. It's not really super fair to those who don't have trust funds.

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And now, like, look, a lot of legacy media are gonna have to, like, fight truly on a level playing [chuckles] field with newcomers.

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That's why I do believe that people starting out are always advantaged when there's a major environmental shift. Matt, thank you so much for spending this time. Yeah, it's great to be here.

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Always good to chat with you, Brian. [upbeat music] Thanks for listening, and thank you to Jay Sparks for producing the Rebooting show.

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If you have a podcast that you're considering making, you should check out Podhelp Us and what Jay can do for you. Go to podhelp.us.

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