It’s been a rough few weeks for publishers that support their businesses primarily with revenue from advertising and sponsorships. Meanwhile, subscription-first publishers say their revenues are holding up relatively well… so far.
Marketers’ budgets have been scaled back significantly in the second half of the year as nervousness about the economic outlook escalates, and publishers say they’re showing no real signs of rebounding heading into the first half of 2023.
As a result, a number of ad-reliant publishers and media companies have been forced to downsize their operations or even shutter completely over the past few weeks. Morning Brew laid off 14% of its staff, lifestyle publisher Outside Inc cut 12% of its workforce, and Gannett says it plans to downsize by 6%. Elsewhere, tech news site Protocol shut down and laid off 64 people, and layoffs also hit Vice and Adweek.
Cutbacks aren’t limited to ad-supported publishers, and the slowdown is impacting companies across the board – particularly those in the technology sector. But leaving aside the arbitrary “advertising vs subscriptions” debate (the best model is typically a combination of the two) – it will be interesting to see if companies with subscriptions and reader revenue at the core of their business models will fare better in the coming months.
Subscription revenue lines are typically more challenging and time-consuming to develop than advertising ones, but they may be more resilient to the effects of broader economic conditions. In conversations with executives at subscription-first publishers in recent weeks, almost all have told me they’ve seen no meaningful contraction of their subscriber bases or revenues since the summer. Revenue can be a lagging indicator of performance, but they’re seeing nothing in their renewal rates that’s causing them concern, they say.
It remains possible that mass subscription cancelations are around the corner, of course. Evidence suggests the number of individuals in the U.S. paying to access digital publications could be contracting slightly, and as converting new subscribers becomes more challenging flat is the new up as far as many publishers are concerned.
Nevertheless, as economic conditions continue to sour, subscription-first businesses may be able to scale back their operations to a lesser extent – and weather a storm more effectively – than those with the majority of their eggs in the advertising revenue basket.