Episode Transcript
Speaker 0 00:00:00 For context, this interview was recorded in June of 2020 amidst the COVID-19 pandemic.
Speaker 1 00:00:11 We all want a business like Netflix or Amazon prime businesses, where once a customer engages with them, it becomes automatic and part of their lifestyle from then on. But how do you build that forever transaction? Robbie Kellman Baxter has been studying subscription and membership models for nearly 20 years. And in this podcast, she uncovers the secrets and strategies of the membership economy. Join us for subscription stories, true tales from the trenches.
Speaker 0 00:00:39 Welcome to the show. This is Robbie Kellman Baxter. Today. We're talking about subscriptions with Greg <inaudible> researcher in residence for the international news media association. We'll talk about best practices in digital transformation and how subscription maturity and approach varies by race.
Speaker 1 00:01:01 Data is everything. If there's one person you should hire first is your head of analytics. You need to understand your customers before you try selling to them.
Speaker 0 00:01:11 We're also going to talk about prioritization of goals when you're trying to do multiple things, going from print to digital, going from third party distribution to direct and going from ad supported to reader based revenue. All at the same time, since we're recording in June of 2020, we're also going to talk about how to manage a news business in times of great change. Welcome to the show, Greg. Welcome. First of all, where are you taking this call? Uh, where, where are we reaching you right now?
Speaker 1 00:01:52 I'm based in Oxford England. So we are in a lockdown. Uh, the shops are still not open. Uh, the kids have just started to go back to school. The first class, the first of the six, the sixth graders have started to come back to school, but basically we are still suffering from the pandemic
Speaker 0 00:02:10 Still in the, in the heart of the pandemic. And how did you come to live in Oxford? Uh, for, for many listeners that seems like a, an idyllic and kind of magical place.
Speaker 1 00:02:20 Yeah. So I'm originally Polish. So I grew up in Poland and I've been a journalist and an editor and a news executive in Poland for more than 20 years. Uh, and I, a few years back together with my wife, we decided to change our lives and she left her job as a head of research for Citibank in Poland. And I left my job as a news editor of the biggest newspaper in Poland. And we went to the United States to study. Actually, I got a fellowship at Harvard university and then we spent a year there in Cambridge, in Massachusetts. We actually stayed longer because I got a job at Harvard business school to study how, uh, technology companies enter other markets and disrupt them and take over customers from incumbents. And after the stint at the Harvard university, I got a job at Oxford, so we moved to England and here is where we are now.
Speaker 0 00:03:14 Oh, interesting. That's quite a journey. And what was it that got you back onto the research side? I know that one of your last jobs, uh, at the news organization was in innovation, was that the springboard that, uh, had you kind of seeking out these fellowships and looking for this more, uh, intellectual research, pure research based kind of work.
Speaker 1 00:03:38 I think, you know, I was very much interested in digital disruption being an editor of a newspaper basically meant that I was dealing person with digital disruption and transformation for most of my professional life. So I wanted to understand what, uh, newspapers or news sites are doing right, and what they are doing differently than maybe organizations and other places. And actually the university opened my eyes that, you know, there are many industries who are digitally transformed or digitally disrupted, and actually you can learn a lot by studying a different industry. So for example, many news sites, uh, facing a struggle how to compete with Facebook that is, you know, the most popular newspaper in the world in practice. And by the way, one of the biggest advertising, uh, based, uh, media houses out there, but the competition between publishers and Facebook that is like both friendly collaboration and sort of enemy kind of bottle is very similar to the experience for example of retailers who, uh, compete with Amazon.
Speaker 1 00:04:46 So they, they, you know, on one hand, if they go to Amazon and they start selling through Amazon, they could increase their sales. On the other hand, they somewhat lose direct relationship with customers. So actually you can learn starting across the industries. This is what I was the, this is what I found fascinating. I also found the academic academics work pretty similar to journalism. You know, maybe you need to be more careful about the data that you study and, you know, the process of academic work is, uh, is slightly more robust because it's slower. Basically it's more robust than it is at, at Malden newsrooms, but still it's very, it's actually very similar. And I found it fascinating to be able to learn how other industries are doing it and how we can actually translate those learnings into what new sites and news businesses can do to fund journalism.
Speaker 0 00:05:37 So we're, we're kind of two peas in a pod because, uh, my focus in subscriptions has always been very broad, um, in terms of working with industries across a wide range of, uh, of areas as well as people in different functional areas and organizations at different stages in maturity. And it's always so interesting, I think to look for patterns in one place and see how they can be applied or whether they can be applied in another. Uh, so it's interesting to hear you talk about your work, um, and kind of the similarities between retail and news.
Speaker 1 00:06:13 If you think about veterans in industries, sometimes, you know, what you, what happens is that over years you just attend your industry conferences. So you are exposed to of course, new ideas and new ways of doing things, but basically coming from the same industry. And sometimes, you know, it's like, you feel like, uh, like one of these horses that basically cannot look around because it has these blinders on, on both sides because you, you know, you, you face your trouble. So you just focus on solutions to your, to your direct troubles. You don't look around that much. And actually when you do you realize that seminar problems are shared and similar business models are shared by many industries and subscription obviously is one of them. And that actually digital, this digital transformation is making businesses most similar to each other, because for example, so many businesses are based on data.
Speaker 1 00:07:07 So in a way, if you are a retailer like CVS and you are, I know an Amazon basically collecting data about what people are buying and how, you know, what, what kind of products should be promoted. You know, you, you learn a lot for example about people's, I dunno, health, and these can be a basis for a new business model. So data becomes like something that is shared across industries, and it makes, you know, very D companies from different industries suddenly compete with each other. You know, if you, if you've got in the retail, for example, you've got companies like ACEs in England, that basically is a retailer that sells cloths, but they found that the way to sell clothes today is more about inspiring people. What kind of, what, what, what, you know, to help them discover the needs. So they do it through content.
Speaker 1 00:07:56 So basically SS has become a sort of a lifestyle magazine publisher. They, they do it, they do it in all that. You can buy everything they show to you, but basically they try to inspire their customers. So how is it different from like a Vogue magazine and other, other lifestyle magazines that basically were showcasing people's clothes and just trying them and just trying to sell advertising for retailers like ASIS in the past, actually we see a digital transformation is fascinating because we see very, very different industries, companies from many different industries, suddenly competing for the same, uh, for the same currencies, like, you know, attention, uh, like a direct relationship with somebody, you know, do you have the credit card number of somebody and so on? So, uh, this is what makes it, this is what makes it very, uh, very interesting. And I think that, uh, you know, I'm glad that that as a journalist is, or as a researcher, I can actually news publishers to, uh, find ways, uh, to, to, to grow their business, despite all the, all the challenges.
Speaker 0 00:09:02 So what's your advice let's say for you gave the example of, of ASIS and Vogue. So when a company like ACEs with deep resources, um, and a direct relationship with the customer suddenly says, we want to start creating inspirational fashion content very much like Vogue. Um, what is, what is Vogue to do? What, what is, what would be the guidance there for, for organizations that are seeing a competitor come from a totally different space? Um, but as you said, competing for the same resources, the attention of the customer, the credit card, the permission to present new offers,
Speaker 1 00:09:40 I think, you know, what, what happens is that basically the business model of publishing is challenged in that way. And I'm thinking that one of the first questions I would ask myself is who is your God, who's your primary customer? And I bet that in case of the Vogue, the primary customer who pays for Vogue to be, to be to exist, it's actually another advertiser. And this is what makes it, this is what makes it very challenging for them to actually respond to disruption by ACEs, because ASIS no longer needs them in a way, no longer needs the Vogue, uh, in a way to reach individual consumers and show them amazing new things you can, you can have in your, in your wardrobe. So this is, this is what makes it challenging. And I think when we look at the business model of publishing, this is actually, this is actually what is happening.
Speaker 1 00:10:38 So traditionally many news consumers and many magazine consumers were basically subsidized by advertisers. Advertisers were primary customers of those media companies and consumers were of course important because they, you know, they paid with their attention. Uh, but you know, most magazines were almost free. Most newspapers were almost free because they were mostly funded by arts. What is happening right now is that advertisers have many more options to advertise, to show their products. Some of the advertisers become media companies themselves, you know, the biggest sports newsroom in Europe. It's not run by any news organization. It is actually run by red bull from Austria. That is just an energy drink producer. So, you know, some, some advertisers become basic media, saw the media need to like redefine their role within the set of customers that they used to serve. Maybe readers cannot, can no longer be subsidized.
Speaker 1 00:11:36 That's why many publishers make such a strong push to build a digital subscription businesses to make readers actually pay for the value they get. Uh, there is, uh, there is another, another set of customers who are Newsmakers, who traditionally were, you know, newspapers writing about what they do for free. But today you see the trend of native advertising or branded content. We're actually some Newsmakers basically start paying for, to create content that will cover whatever they, uh, whatever, whatever they would do. Uh, you've got another set of customers like, uh, people who are, I don't know, buying cars and selling apartments, and this business is gone for newspapers, but in a way, it's, I think it's reinventing itself into eCommerce. So you see now so-called content to commerce, uh, kind of models. Boss feed is one of those publishers who follows this business model. Uh, but then he's publishing in United Kingdom is a former magazine publisher that made 40% of revenue last year from selling cars directly to consumers,
Speaker 0 00:12:44 Is that work. Can you explain the model?
Speaker 1 00:12:46 So they used to publish many hobbies magazines and among them very strong models, magazines about cars, about motors and motorcycles about Lori's, whatever. Then when the internet came, of course, these magazines were partly funded by readers who are buying the single copies. All the advertisers. When the internet came, the company wanted to build a classified business, but they were, they were not first to the market. They were second. Basically these, this market of classified advertising car sales is basically a sort of a winner takes all market. So, you know, number one is taking 80% of the value and everybody else is fighting for the remaining 20. It wasn't, it wasn't good. So they thought, okay, so we need to make our apps better than on the market. And they thought, you know, we need to engage readers very well. We need to tell them a lot about products so we can basically lead them to the decision. And then we can sell not just eyeballs, not just attention of our readers, but basically an intent of a user to buy a car. So they started selling leads, but when they started selling leads, they re they realized one thing, if I can make somebody want to purchase a car through me, why should I be sending leads? I should be selling the car because the, because the margin I can make on a car is much bigger than I can make on a lead. And then they read it
Speaker 0 00:14:14 Doing the hard work. They're doing the heavy lifting of finding the relationship and finding the lead. It's easy to close the deal once, once somebody decides they want that.
Speaker 1 00:14:23 Exactly. But then they realized even more that basically car dealers are not making money on selling cars, actually cars, a very discounted, you know, they have a various low margin. You make money with finance, you know how to find those, the sales, you make money with guarantees with insurances. So now this company, you know, is first, they have all those media that gather attention of car seekers. Then they can inform them about all different cars that can choose from. And then they can take the intent into basically lead it to their website, where the sell the car to the individual consumer, and they can sell the car. They can help them finance it. They can help them insure it. And this is where most of the profit actually comes from not for the sales of the car, but from the, from those financial services. And it's amazing a magazine publisher who actually is a car dealer. You know, this is not perhaps what, what the founders wanted, but this is where they ended up by innovating with the business model.
Speaker 0 00:15:23 And it's really interesting because, you know, if I can break down what you've, what you've said or sort of summarize it, um, you're talking about a couple things. The first thing that you brought up, which I think is really important for people to understand is that whatever business you're in, you have to know, you said who your God is, who is your real, your forever customer, who is it that you're in business to serve? And in the case of publishing, which is what we're talking about today, you really have to decide, are you in the business of supporting the advertisers or the end readers and, um, what is the expectation that they have of you? And then you gave this excellent example of this car enthusiast magazine, who I would guess, would say, you know, we're in the business of helping car lovers. And he said, motorcycles and trucks and everything else get the most enjoyment and value out of their passion.
Speaker 0 00:16:14 Right? And maybe when they started the way that they did, that was through, um, through articles and pictures. And over time, it's been helping them understand which cars to buy. And then it was making that car purchase a reality for them. Um, it reminds me actually, you know, you talked about analogous businesses and how important that is. One of my clients has Haggerty insurance, uh, and they're, uh, the largest, um, insurer of classic cars in the world. So, you know, if you have a whatever, a 66 Mustang or a Barracuda, or one of these cool old cars, or even a new, much older car, they provide you with insurance. They do, you know, palette, you know, flatbed, uh, pick up roadside service. If you have a problem, they know all the, the, the mechanics who fix old cars and they've actually gone the other way. So they did car insurance and then they built a membership model around the ownership. Cause they said, once you own the car, there's all these other things you want to do. You want to meet other car people. You want to drive your car on cool roads. You want to repair your car. You want to, you know, rebuild the engine. And so they built a membership kind of the opposite. They built the community and the content after they did the, uh, the insurance.
Speaker 1 00:17:36 Yes. What, what is, what is really, what is really amazing is that when you connect those two cases, you see that it's about this being basically customer centric. You need to choose who's your God too, because you need to, if you don't focus, you don't get a, you don't get a breakthrough. So when you focus and you start to really try to understand, what's the job that these people have, uh, what's, what's what really they want to achieve. And what's the job they are hiring products to do are like, like a car or a magazine. Then you can really, then you can really build up on it because then you can imagine, okay. So what is actually, what is actually the, the, the in service that people wanna, uh, that people wanna, uh, people want to have, and, you know, let me give you another example of a magazine publisher that went through a similar, similar discovery to basically end up being somewhere else.
Speaker 1 00:18:32 So this is a company called essential in the United Kingdom. Uh, they used to be known as an EMAP, uh, you know, they started as a newspaper publisher, like a hundred years ago, and then they switched into magazines that were very active in the, uh, magazines for different industries, like retail week, a magazine for nurses and magazine for motorists and so on. And at a certain point, they sold most of the magazines. They just decided to focus on the business of FMCG retail. They still have a magazine FM retail week, but it's no longer a magazine publisher because they started to ask questions. Okay. So what these guys who are running FMCG businesses and retail businesses really want really need, they want to sell more. They want to understand their customers. They want to understand how the market works. So they want to have intelligence and they want to act on this intelligence. Uh, so the company started to use the relationship. They had to basically build new services, dashboards about what's going, what's selling currently on major online retailers, what kind of clothes? What's the, what's the color, you know, what's the popular size, whatever you, so you get live intelligence about what's going in the shops. It's not actually journalism in a way it's more like dataset, but the process was asking the right questions. What my customer really needs. Did they really wanted to read articles about shops or they wanted to sell more clothes in their shops?
Speaker 0 00:20:09 Right. Well, it's, it's, it's such an interesting point because a lot of businesses, especially we're talking in the world of publishing, a lot of these businesses have been around, as you said, for, for, for, for tens, if not hundreds of years, and they not only do they have this mission of, you know, helping a particular group of professionals or a particular community, but also they build up a way of delivering that value. So for example, they have journalists and suddenly, you know, in the model you're talking about, instead of journalists, maybe they need market researchers or they need, uh, technologists, right. You know, we, you and I went on a tour a few years ago at the times, and they had more technology people than journalists on their team. Um, that's a very different, um, kind of, of, of business. And I think for some organizations, they have kind of a crisis of identity. Um, you know, if we don't need the same people and the same skills, are we still, is it more important to keep the same employees and the same jobs, or is it more important to keep the same mission, uh, and promise to the people we serve to our customers?
Speaker 1 00:21:17 I would say that you really go to the fundamentals. What's the purpose of the company. And, you know, Peter Drucker was always was writing that the purpose of the company is to create a customer, uh, create a customer, meaning basically solving the problem of a customer. Otherwise there was no customer, so there was no money. There was no business. And I think this is especially important when you try to build a, you know, the forever transaction, because whatever deficiencies you, you might have, you know, they will come out over time. If you think about the newspaper business is about serving the needs of a, of a news consumer. And in her lifetime, basically, you know, this is the, this is the objective. We want to make somebody subscribed to the paper until she dies and even longer, because we want to have a family package here.
Speaker 1 00:22:05 So this is what's the business is about. So we need to think about the core value that we deliver to those people. And the core value is not what you ride, as we say is that they read. Yeah. So they, they, they, they get the value. They define the value that they are, they are life choices, they are problems. Like some people want to, you know, to be better informed. Some people interact with news sites because they want to get entertained. Some other people want to basically be able to speak to other people, interact with others, feel they belong to a group. Some others, you know, they don't want to learn about anything. They are just stuck in a, in a subway during rush hours. And they don't want to look at those faces around all in mosques. And they just, you know, turn on the mobile phone and they start reading news. So we, these are different customers and these are different needs. They have towards media. And we need to think how, how are we serving those needs in such a way that they want to stay forever? Yeah. So we really need to deliver the value. We can cheat it.
Speaker 0 00:23:08 One of the challenges that we've seen in the news world, and I'm interested in your, in your take on this, you know, we've talked about the kind of transformation around the customer. One of the big challenges though, structurally is this move from ad revenue to subscription revenue and a change effectively, and who the master is or who the primary customer is. When I have talked to news organizations, you know, I've, I've often said, you know, it's really hard to do a good job. If your customer is the advertiser and your customer is the reader, it's hard to find where those goals align. And I'm interested in your point of view with all of these organizations that are saying, well, we need the reader. We need the, we see that reader revenue. We see that subscriptions are the future for our industry. We know we have to get there, but we're dependent on the ad revenue right now. And we don't want to cannibalize that revenue. And yet, do we balance our investments? What is your advice to organizations that understand they need to move to subscription, but are concerned about the cannibalization risk and leaving money on the table in the interim as they move from one model to the next?
Speaker 1 00:24:20 I think this is a very good question. Many, many publishers trucked with balancing the business models and, you know, balancing where we should invest, how quickly we can, uh, we can get there. Uh, can we afford to lose some businesses? And I think that increasingly it's becoming clear that actually advertising and subscription business models are very much connected. It seems that because of the world, publishers have learned by building their subscription businesses, they are now re-inventing what are, how advertising works. And they build the, like the fundament for the future growth of advertising. Why is that? Because basically today's advertisers, they do not want to buy just ad impressions. They want to buy ad impressions to the right people at the right time. So they require targeting. They require sophistication from the media and they get it from Google today and from Facebook and from Amazon.
Speaker 1 00:25:22 And this is why this companies dominated digital advertising all over the world, except China, where, you know, three other Chinese guys basically dominated the advertising. So publishers now realize that thing because they, uh, when they, when they focus on subscriptions, uh, the focus is basically on making people read more and the focus is on making them to register on the sides and log them in. Otherwise, you know, if you're not logged in, you cannot, uh, get, for example, the premium content that you paid for when, because people are loading, basically they leave much more data, uh, like footprints in a way about what they were doing on the website. So publishers collect data about their reading habits. Publishers have data about their, I don't know, uh, they are, they are transactions in the past, uh, publishers ask them questions in surveys. So they get information about other things, their plans, their interns, their lives, and so on.
Speaker 1 00:26:18 All these data, uh, is today use mostly to sell, uh, to sell subscriptions, like to predict who's going to buy, who's going to churn. And actually the same data, the same technologies can be used to build a advertising business based on first party data of publishers. And we are now seeing that the biggest publishers like the wall street journal, the New York times, I know the new score, uh, and the others. They are focused on translating these skills that they learn to building a subscription business and, uh, taking the data that they collect about their subscribers to actually be able to rearrange event advertising, you know, for the future. So I think actually that in a way as of today, it's very difficult to the thing that you will be successful in advertising in the long term. If you don't build a successful subscription business, I'm sorry, decided, but this is, this is how we are seeing it. Now
Speaker 0 00:27:18 It's so important. This is such an important, um, important point for anybody. Who's building a subscription business right now about the, the kind of interconnectedness and, and, you know, I think what Greg is talking about in terms of there needing to be a new way of advertising, that is much more based on the customer's goals and their need States. So another really important kernel here is to think about the role that subscription plays in your broader business model and be willing to refocus, uh, your entire model around your kind of current market conditions.
Speaker 1 00:28:04 I would very much encourage people to think about subscriptions as something that can stabilize the business model. So because it's forever revenue because it's long term and you aim at having these relationships with customers long term, basically it helps you to, you know, after, after some time, you bet you can predict, you know, the revenue in the future. This is very important. You can predict based on your turn rates, based on the, your pricing, you can predict the lifetime value of each customer. So I know how much money I will make next year. This is what makes subscription very good for, to build the fundament of the business, to be able to understand, you know, how to cover the most important costs in the business. Because for example, publishers, this is what is stable. Actually, readership revenue is stable. Uh, the difference with advertising is advertising cyclical.
Speaker 1 00:28:57 You know, it's going great when it's great, but when the economy is down, advertising is down the first. Yes, right. Like right now. So this is why I think it's interesting to think about subscriptions as a, you know, what about the benefits of a subscription business model and predictability of revenue and stability of revenue is one of them. So I think it is even more important than just a profit driver for, for, for, for some publishers. It helps you to do many things like for Facebook, you know, because they know the lifetime value, they can plan their marketing, spend the acquisitions. So why they are able to invest so much money in your movies because they spent not today's money in a way, not today's revenue, they future revenue. They know how much revenue they are going to make next year. And they are spending it today to outgrow everybody. This is what is the beauty of this business.
Speaker 0 00:29:51 Yeah. The predictability of the cash flow is so, is so important. Um, I wanna, I want to just finish by asking you what advice you have for, uh, entrepreneurs and executives, maybe not in the news world, not in the publishing world, um, but who are trying to build robust subscription businesses. Um, as someone who's been both an operator and a scholar in this field, what would be your advice for them?
Speaker 1 00:30:20 If there is one big thing that publishers learned over the past, uh, more than 10 years of building subscription business models is that data is everything. If there's one person you should hire, first is your head of analytics. You need to understand your customers before you try selling to them because you need to, uh, define the product that is the right. You need to find the delivery. You need to define the pricing you need to, and then you need to track the performance to be able to improve on it. So data, I think data, this is the one thing that I would say,
Speaker 0 00:30:58 Great. And I'm a speed round. Uh, I've a couple of quick questions for you, and I just want you to answer the first thing that comes to your head and we'll go really quick. Um, what was the first subscription you ever remember subscribing to?
Speaker 1 00:31:10 Oh gosh. It must've been probably a cable cable, cable subscription. Yes.
Speaker 0 00:31:18 And what is your favorite subscription today?
Speaker 1 00:31:21 My favorite subscription today, I think Zipcar, I don't have a car. I live in a medieval town, so there was no place to park and I'm using Zipcar. So there are cars parked around, uh, you know, in some places. And I can just use my mobile phone to book it immediately open it and ride somewhere. I just think it's amazing how you can use subscriptions to, you know, to, to get a car.
Speaker 0 00:31:44 Oh, that's wonderful. Um, what would you say is your super power?
Speaker 1 00:31:48 My super power, I think, is making very complex things, sound simple so people can better make decisions about them. This is, I think is my power as an editor and hopefully as an academic.
Speaker 0 00:32:02 And, uh, what are your colleagues hate about working with you and what do they love about working with you?
Speaker 1 00:32:09 I guess, you know, if I would talk about my former employees, I was running a newsroom of, I dunno, 500 people. So, uh, they hate it. Um, I'm relentless, I'm a, I'm a workaholic I'm always on. And if I, if I needed to learn something and improve was that I was always on, I was always asking and demanding. So this is my, so I saw night. So imagine the, basically a, sort of a, a sort of a monster. So this is, this is who I was as a manager, perhaps I can improve now working, but working very differently.
Speaker 0 00:32:43 And what do people love about working with you?
Speaker 1 00:32:45 I think because I'm focused on longterm relationships. I, I think I ha I help people improve and to discover, you know, they are superpowers. So I had, you know, I had very low, um, how to say it. Not that many people wanted to leave, uh, working with me and I'm very proud of it.
Speaker 0 00:33:07 Yeah, that's it. That's, that's high praise. This was wonderful. Um, I certainly got some, some great nuggets, um, some takeaways and, uh, I'm sure that the listeners did too. This was great for Chota. Thank you so much for joining us on subscription stories.
Speaker 1 00:33:23 Thank you very much. It was a pleasure was mine.
Speaker 0 00:33:30 Thanks for listening everyone. This has been subscription stories today. I was talking to Greg P Chota researcher in residence at the international news media association to hear more success, stories of entrepreneurs, creating their forever transaction in this new and exciting membership economy. Subscribe to my podcast, wherever you download your podcasts. Also, if you like what you're hearing, please give us a rating and review. They mean so much. Thanks for listening and for your support To learn more about the international news media association, go to <inaudible> dot org. I'm Robbie Kellman Baxter.
