2013 seems to have started off with a bang for our industry after Andrew Sullivan announced plans to make his popular blog The Dish independent of The Daily Beast and adopt a subscription model.
But while many media outlets are reporting on it (really, kudos to Sullivan for getting such widespread publicity), no one seems to be willing to stick their neck out and answer the question on everyone’s mind — Will it be profitable?
My answer? Yes, in the first year, but no in subsequent years — unless Sullivan changes his business model a bit to optimize retention.
What Sullivan has going for him is a fanatic audience around 1.2 million — he stated that the 12,000 readers who have already paid for a subscriptions make up only 1% of The Dish’s total audience. A 1% conversion rate on your launch day is a good sign. But after getting 9,588 readers to subscribe on day one, that number dropped to 1,523 on day two — a clear early warning sign that conversion and retention might be a problem once Sullivan’s massive publicity dies down.
One thing Sullivan has been smart about is making his initial offering a suggested minimum of $19.99; subscribers can really offer to pay whatever they want above that (a number of subscribers paid $25, and one even gave $9999.99 — which I think means Sullivan has a rich friend or relative). This is both ingenious and problematic.
On the one hand, given Sullivan’s large audience, it’s a great way to price test his market and find the most acceptable price (“Contributors paid an average of ‘nearly $8’ more than the $19.99 minimum,” reported paidContent). On the other hand, the minimum price point may not be able to support The Dish’s operations. With a staff of seven, and additional expenses to be incurred by going independent, The Dish’s operating expenses are likely around $1 million. Assuming The Dish can get the standard 3% conversion rate, with a $19.99 minimum, the site would generate $719,640 in revenues.
However, if Sullivan increases his minimum price point by year two, the numbers could add up. But he will need some savvy marketing to get the large amount of supporters paying $19.99 to pony up the extra cash (unless he grandfathers in his “early contributors”).
The other problem with Sullivan’s model is that he values anonymity, stating in his announcement, “All your extraordinary emails are anonymous – a sign of a community eager to debate the real issues rather than take credit for their own insights.” While this is an editorially interesting stance, it’s problematic for measuring usage, a leading indicator of renewal rates. And Sullivan is also offering PayPal as a payment method, which will just make tracking subscribers harder.
As for the content management model, Sullivan has chosen an interesting one, which he describes as a “freemium-based meter.” Apparently, the meter only applies to lengthy posts that readers can expand to read by clicking on a “Read On” button. Everything else will be free to view, including any links through other blogs or social media. The one exception is the answer to the site’s popular View From Your Window Contest, which only paying members will be able to access.
And this may be the brightest idea Sullivan has had (however disheartening it may be to editorial purists). For years, newspapers have known that crosswords, games, horoscopes and the weather are what readers come to rely on and make them willing to pay for daily delivery. But putting The Dish’s popular contest behind a paywall, Sullivan can easily convert die-hard fans while still allowing noncommittal visitors to peruse his and his staff’s editorial prowess.
