Five on Friday: Gaming Subscriptions, Paywalls and Unsubscribing
Featuring EA, Mixcloud, PlayStation and Facebook
This week, the big subscription news is DoorDash’s acquisition of competitor Caviar and the mega merger between GateHouse Media and Gannett valued at $1.4 billion. In addition, we look at the value of gaming subscriptions, report the latest news on Mixcloud changes, share lessons learned by Facebook through their local journalism project, offer Forbes’ input on why paywalls aren’t always the answer for newspapers, and look at how unsubscribing is changing.
Do Gaming Subscriptions Provide Good Value?
The gaming world has been on the rise the last several years. With consoles being swapped out for newer models every few years, and new technology emerging all the time, it’s easy to get overwhelmed. Microsoft and Sony announced that they would be teaming up this year, allowing them to work together on cloud-based solutions for not only gaming experiences, but artificial intelligence as well.
It was only a matter of time before subscription options were added to the gaming market. Sony and Microsoft have both had their versions for years. PlayStation Plus offers free games to subscribers, as well as extended demos and other perks for subscribers. Microsoft has Xbox Live Gold, as well as Xbox Game Pass. They have since combined these two to make Game Pass Ultimate. This allows access to players to more than 100 games for consoles and PCs.
EA has also tossed their subscription option to the ring. They have been working on growing their subscription service, and just put their service on the PS4 after a three-year wait, says Engadget. Andrew Wilson, EA’s CEO, believes that gaming subscriptions are just as important as television, according to Engadget. He also said the company has a streaming service in the works, and they’ll be bringing in something similar to Google’s Stadia project.
Gaming subscriptions bring a lot of value to the table for companies like Sony and Microsoft in terms of subscription revenue, but they also offer value to gamers who want to get the biggest bang for their entertainment buck. Most titles cost upwards of $50 upfront, and while players then own the game, they may have to download extra content and still want more. Most gaming subscriptions offer free games, or access to many titles for as little as $5 a month. No matter which side of the console you are on, it seems like a good deal to us.
Mixcloud Mixes It Up with Changes to Service
Calling itself the global community for audio culture, Mixcloud is an online streaming service based in the UK that allows subscribers to listen to more than 15 million radio shows, DJ mixes and podcasts. Unlike Spotify or Apple Music, the content is crowdsourced from its own users, who are registered with the service. Last week, Mixcloud announced it would be making some changes to the service, in a long Medium article, written as an open letter.
The company explained that listeners’ free streaming experiences would be more limited than they currently are. Free users will be under these restrictions. For example, they can fast forward, but they can’t rewind. The reason for limiting free users? Trying to cover costs, to be able to pay their content creators, says Mixcloud. The money that they are making from ad revenue alone is not coming close to covering costs, says Billboard.
Users can bypass these restrictions by subscribing for $7.99 a month, a few dollars a month less than other streaming services. Magnetic Mag shows Mixcloud’s breakdown for their revenue once their premium plan is announced. Seventy percent of their revenue will go directly back to artists and songwriters, 25% will go to Mixcloud, and 5% will go toward transaction fees.
For those that prefer specific creators, they can subscribe directly to creators, and those creators will set their own monthly fees. These prices start at $2.99 a month but can go up depending on the individual creator. This allows listeners to support who they want and allow them to get exclusive rewards in the process. Think of this as Mixcloud’s version of Patreon.
What Publishers Learned in First Year of Subscriptions Accelerator Program
In March 2018, executives and managers from 14 metro newspapers started Facebook’s Local News Subscriptions Accelerator program to see if they could increase subscriptions and build more sustainable business models. Each participating publication received a $200,000 grant to identify new strategies for growing their digital audiences. In an August 1 article, Facebook outlined some of the lessons learned.
“The results are extremely encouraging,” wrote Facebook. “If we’re going to get to a sustainable future for local news, we’ve learned, it means we’re going to have to go together.”
Some high-level results include the following:
- Projects funded through the program were responsible for tens of thousands of new digital subscriptions and hundreds of thousands of new email newsletter subscribers.
- Publishers generated an estimated $5 million in lifetime value from the growth in paid subscriptions and newsletters from the program.
- Half of the publishers saw increases of more than 50,000 net new email subscribers during the project period. A few publishers saw increases above 100,000.
- Five to 10% of email subscribers became paying subscribers.
- Syracuse.com grew its newsletter list by over 275%, or 30,000 new readers.
Another key takeaway was creating best practices that publishers can share with one another. Read more findings and publisher examples from the FacebookJournalismProject.com.
Newspapers with Unique Content See the Best Success with Paywalls
Speaking of newspapers, a trio of professors – Doug J. Chung, Harvard; Ho Kim, University of Missouri; and Reo Song, California State at Long Beach – did an intensive research project on digital paywalls as a business model. The professors analyzed 79 print organizations using 10 years of circulation and subscription data, print and digital ad revenue, pageviews and time spent on site data, says Forbes in a summary of the findings.
Their work yielded some interesting findings, presented in a 38-page white paper titled “The Comprehensive Effects of a Digital Paywall Sales Strategy.” For example, in March 2008, average print circulation was 275,594. By September 2017, it had dropped to 106,525. For the same period of time, the average print subscription went from $205 to $573. Between January 2010 and September 2017, average website pageviews dropped from 49,198 to 14,920.
Their research also showed that paywalls as a sales strategy varied across media organizations. Some experienced an increase in total revenue while others experienced a decrease. Factors that contribute to the success of a paywall include the newspaper’s reputation and the uniqueness of their content. Another factor is if digital subscriptions are intended to replace or complement a print subscription.
The authors determined that the net effect of a paywall on digital revenue was negative. While digital subscription revenue may increase, digital advertising revenue drops when webpages lose pageviews and eyeballs. Success – or lack thereof – is in the execution of a digital paywall.
“Overall, we find that the adoption of a digital paywall can lead to positive demand substitution from digital to traditional channels, particularly for large-sized firms and those with unique content. In addition, unique content mitigates the decrease in digital demand, alleviating the loss of digital advertising income while adding a new source of income – digital subscription revenue,” the study said. “The effectiveness of a digital paywall, however, varies by the source of income via channel across heterogeneous media firms.
Reduce Your “Unsubscribe” Rates by Keeping Your Customers Coming Back for More
The opposite of subscribe is unsubscribe, and unsubscribing is the death knell of any subscription service. Subscription companies, large and small, must keep their customers happy to retain them. In a 27-page report by Lenati, the firm talks about the evolution of subscription businesses. They are currently very popular because they address several key areas.
- Subscriptions provide customers with access to a product or service, not ownership. Consumers no longer have to own things; they can rent them and pay-as-they-go.
- Subscriptions offer convenience. No more remembering to buy toilet paper, order dog food or to pay your monthly SVOD subscription. It is automatic.
- Subscriptions can provide customized experiences. In fact, they need to. That’s what customers have come to expect, says Lenati.
- Customers want continuous value in exchange for their money.
Customers expect these considerations for all of their subscriptions and not just at the time they first enroll. They expect them throughout the life of the subscription. Some companies, however, are apt to focus on providing when first attracting the customer and then at renewal time. That does not keep customers happy though. In fact, it drives close to 40% of subscribers to unsubscribe, and one-third of Americans have subscriptions they pay for but haven’t used in the last year.
“Many companies do quite well with acquisition. Plenty of brands have a great product and creative awareness marketing to draw in users,” writes Lenati. “Yet every subscription service business struggles with retention. It’s more than just understanding the churn rate – it’s understanding where a customer stops realizing new value in the service and therefore loses the deep brand connection the top-of-funnel marketing team worked so hard to build.”
Lenati encourages firms to focus on customer lifetime value to determine the value each subscriber has to their business
“Companies must invest in continuous customer engagement and value delivery to counter customers’ susceptibility to switch or cancel at renewal time,” says Lenati. “Brands that provide customers with the best experience throughout the subscription lifecycle can expect to increase customer satisfaction, improve sales and retain users.”
Learn more about how your subscription company can reduce “unsubscribes” and increase overall customer lifetime value. Download Lenati’s report, “The End of the Unsubscribe: How Leading Subscription Services Use Digital Engagement to Keep Their Customers Happy and Renewing” here.