Multiple digital publishing executives I’ve spoken with in recent months say they’ve considered raising the price of their subscription products as inflation and rising costs eat away at their margins. The vast majority have reached the same conclusion, however: Hiking subscription prices at the moment is just too risky.
For publishers, converting new subscribers remains challenging as consumers and businesses continue to control their spending closely. Many publishers are setting aside aggressive growth expectations and redoubling efforts to shore up their existing subscriber bases and revenues as a result.
In that context, the prospect of raising prices and risking widespread churn is not a particularly appealing one, even if the data suggest it could result in greater revenue yield over time. Price hikes might make sense on paper, but doing so now “feels like a gutsy move,” one publishing executive said.
Price increases have become a common occurrence for streaming platforms and other subscription-based media in 2022, but relatively few publishers have followed suit. That’s why eyebrows were raised by some last week when The Washington Post increased the sticker price of its basic subscription from $99 to $120 per year and doubled its price for subscribers via Amazon Prime from $3.99 to $7.99 per month. (Although some subscribers reported being offered a much lower rate of $60 per year when threatening to cancel.)
WaPo aside, data suggest average prices for major publishers’ subscription products may actually be falling in practice, particularly when accounting for inflation. The average promotional price for major U.S. publishers’ subscription products was $0.067 per day in September, down 12% from $0.076 per day in June, for example. Meanwhile, the number of publishers offering free or discounted introductory rates reached 79%, having crept up consistently from 75% in June.
Publisher nervousness around price increases is understandable: Competition for attention from a relatively small market of subscribers is becoming increasingly fierce, and some publishers are well aware that chunks of their existing subscriber bases don’t engage regularly with the products they pay for as it is. (A recent study we conducted revealed that a small group of consumers currently accounts for an outsized portion of subscriptions to digital publications in the U.S., and that 46 percent of subscribers hold at least one subscription they access less than once per month.) For some publishers, attempts to raise prices might therefore trigger churn among significant portions of their paying subscriber bases.
Shrinking subscriber bases can also have implications for other revenue streams and business operations. For some publishers, the importance of maintaining logged-in subscriber bases stretches beyond just subscription revenue. For those layering advertising and sponsorship products on top of subscription-first models, for example, the opportunity to target highly engaged audiences of paying, known subscribers is an increasingly important part of their pitch to partners.
Not all publishers have the same considerations, of course. Some subscription products may be significantly underpriced in relation to what subscriber bases will pay, and publisher reluctance to raise prices may simply be resulting in money left on the table – even when accounting for any churn that price increases might trigger. And for publishers that believe they have already captured a large chunk of the total addressable market for their products, increasing revenues might be the only way to grow revenues.
Publishers should therefore continue to run the numbers and carefully consider the impact pricing tweaks might have on their revenues – both in the short-term and over longer time horizons.
But as far as many are concerned, price hikes are off the table for now – at least until improvements in economic conditions and/or changes in subscriber conversion dynamics inspire them with greater confidence to take the plunge.