The new year has just begun and already a host of macroeconomic conditions are poised to bring a unique mix of challenges to consumers and media businesses alike. With the goal of turning challenges into opportunities, businesses are experimenting with products, pricing, and value propositions in an attempt to reduce risk and unlock growth. In this article, we predict some of the trends that will impact media businesses in 2023 and how organizations can use these trends to their advantage.
Increased attention on economic pressures & subscription fatigue
The good news is that forecasts indicate subscription revenues will continue to grow in 2023. This growth will come at a slower pace, however, as the global cost-of-living crisis continues to challenge media companies and direct-to-consumer revenue streams. This pressure also means consumers will continue evaluating their wants versus their needs and eliminate subscriptions they no longer desire. As a result, businesses will double down on retention strategies.
Additionally, in an interview with NiemanLab, Julia Beizer, Chief Digital Officer at Bloomberg Media, stated that “news and subscription fatigue are both very real.” With the average U.S. household subscription count in the double digits, the proliferation of subscription services magnified by the pandemic is driving consumers to be more discerning. To combat losing subscribers, media businesses should seek to emphasize the following:
- The effective use of churn management tools, particularly those designed to counter voluntary churn. Businesses can reduce churn across various channels, including self-care portals, banking apps, and in-app purchases, by offering more flexibility for the consumer. Strategies for flexibility include: subscription pauses, increased discounts, more lenient grace periods, retry rules, and package switches.
- An increased focus on operational cost reductions and tech-enabled automation to bring down Total Cost of Ownership (TCO) across the tech stack.
- Experimenting with various pricing strategies to protect subscription revenues. Trends show a shift to dynamic pricing models can maximize renewals, particularly for those customers identified at high risk of churning.
The continued rise of the Chief Subscription Officers (CSOs)
As businesses across various industries experiment with and adopt subscriptions, recurring revenue streams are fast becoming a strategic imperative. In response, emerging executive roles such as CSOs are becoming more common. Last year Gannett, The Washington Post, Dow Jones, and streaming platform, DAZN, all hired CSOs – or slight variations on the title – showing the critical nature of subscriber revenue.
This shakeup of senior and executive leadership teams places increased importance on recurring revenue. It also places cross-product adoption on the boardroom agenda. This shift will likely force a review of top-down metrics as media businesses build for the future.
The final [cookie] countdown will force businesses to act in 2023
The sunsetting of third-party cookies by Google in 2024 will force businesses to put plans into action in 2023. The topic of first-party data has been circulating across dinner tables, exhibit halls and boardrooms for multiple years now. But in the final 12 months before the death of the cookie, mass panic will likely set in for those who haven’t yet realized the importance of first-party data on advertising and subscription revenues.
However, underneath this challenge lies an opportunity – to form more meaningful relationships with subscribers and to tailor products and advertisements like never before. There’s now a possibility to align advertising and subscriptions under the banner of data. This is a watershed moment for media businesses and a catalyst for positive change.
In order to capitalize on this opportunity, businesses need the technology to harvest first-party data through various registration funnels, surveys, and progressive profiling, as well as to act on this data, with the tools to access and analyze this data to allow for informed decision-making across the business. 2023 will likely see the mass adoption of first-party data harvesting as media businesses brace themselves for the final cookie countdown.
Growing revenue beyond core propositions paves the way to increased bundling
Swapping a transactional consumption model for a recurring-based consumption model was the entry point for many media businesses as they jumped on the subscription bandwagon. However, it still leaves an element of risk on the table: it’s only one egg in the basket.
Netflix is a good example of this issue. In early 2022, they posted their first. Did they exhaust all of the possibilities for their platform or did the COVID boom finally come to an end? Regardless, it illustrates a very real challenge for many media businesses resting on their laurels. Those who stand still will eventually be passed by those that adapt, evolve, and diversify.
Since that first slump, Netflix toyed with various value-add products — including gaming and merchandise. But then the cost-of-living crisis hit, and Netflix along with several other video streaming services opted to launch Advertising-Based Video on Demand (AVOD) and FAST-based models to combat plateauing subscription D2C revenues. This trend will likely continue into 2023. Deloitte recently stated that by mid-2023, all major video subscription services in Europe will have launched an ad-funded tier alongside ad-free offerings. Thus, a hybrid approach to recurring and transactional subscription and advertising revenues is born.
It’s not just video streaming services that are experiencing this trend. In publishing, media giant, The New York Times (NYT), acquired Wordle in 2022. Why? Because like with Over-the-Top Media services (OTT), a single core offering isn’t enough to engage existing subscribers. Nor is it enough to tempt new audiences to subscribe to the brand. This strategy is clearly paying off for the NYT as they’ve reported great success from non-news subscriptions – successfully growing revenues and increasing engagement outside of its core offering.
“The way we talk about this is, if our products at The New York Times are the solar system, then news is the sun, right in the middle, and the other products are building off of that,” said Ben Cotton, NYT’s Head of Subscription Growth (source: WAN-IFRA, 2022)
2023 will likely see an increased focus on product development and diversification of revenue streams, as businesses rethink their value propositions. Brands need to think carefully about how to bring products together to form a more enticing proposition for the consumer. Clever bundling and packaging are a must and can be set by the business or directed by the consumer through a-la-carte offerings.
Industry consolidation & convergence will continue despite the economic climate
Mergers and Acquisitions (M&A) and joint venture endeavors across media have become commonplace within a highly competitive industry, where change and evolution are constant. Several strategic deals occurred in 2022 that exploited emerging opportunities and offered a jump on the competition. Examples of this include The New York Times’ acquisition of The Athletic and Wordle, the merger between WarnerMedia and Discovery, and the pending takeover of Activision Blizzard by Microsoft.
In an industry driven by global giants, this consolidation trend is set to continue in 2023, triggered by evolving consumer demands, technological disruption, and the macroeconomic downturn.
In summary
2023 will not be without its challenges for media organizations. However, this year presents opportunities for innovation and the formation of deeper relationships with subscribers. Moving into the new year, media companies should:
- Put processes, technology, and people in place to drive innovation across pricing, product, and data operations.
- Prioritize subscriber personalization and relationships when designing offers, product bundles, and even the cancellation process, using data-driven insights.
- Trimming churn wherever possible, reducing costs through automation, and diversifying offerings to address risk in the market.
This article was originally posted on The Aptitude Blog. Read this and other blog content here.