We’ve just rung in the new year and already 2023 is expected to bring a unique mix of challenges, with a host of macroeconomic conditions poised to impact both consumers and media businesses alike. With the goal of turning challenges into opportunities, businesses are experimenting with products, pricing, and value propositions – looking to reduce risk and unlock growth. In this blog, we predict some of the trends that will impact media businesses in 2023 and how organizations can use them 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, albeit at a slower pace as the global cost-of-living crisis continues to challenge media companies and their direct-to-consumer revenues. Consumers will continue to evaluate their wants versus their needs as businesses double down on retention strategies in response.
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 US 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 place emphasis on:
- The effective use of churn management tools, particularly those designed to counter voluntary churn. Businesses should look to reduce churn across various channels including self-care portals, banking apps and in-app purchases by offering more flexibility for the consumer. This can include things like subscription pauses, increased discounts, more lenient grace periods and retry rules, package switches and more.
- An increased focus on operational cost reductions and tech-enabled automation to bring down TCO (total cost of ownership) across the tech stack.
- Experimenting with various pricing strategies to protect subscription revenues. Trends show a shift to dynamic pricing models to maximize renewals, particularly for those customers identified as most at risk.
The continued rise of the Chief Subscription Officer (CSO)
As businesses across various industries experiment with, and adopt subscriptions, recurring revenue streams are fast becoming a strategic imperative. In response, less traditional executive roles such as Chief Subscription Officers are becoming more common. Last year Gannett, The Washington Post, Dow Jones, and streaming platform, DAZN, all hired Chief Subscriptions Officers – 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 and puts 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 as we approach 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, both on advertising and subscription revenues.
However, underneath this challenge lies opportunity – the opportunity to form more meaningful relationships with subscribers and the chance to tailor products and advertisements like never before. The possibility to align advertising and subscriptions under the banner of data. This is a watershed moment for media and a catalyst for change – for the better.
But to capitalize, businesses will need the technology to both harvest first-party data through various registration funnels, surveys, and progressive profiling, as well as act on this data, with the tools to access and interrogate this data to inform strategies across the business. 2023 will likely see 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, Netflix posted its first real slump. Was it a case of running out of runway or just the knock-on effects of the COVID bump coming to an end? Regardless, it illustrates a very real challenge for many media businesses resting on their laurels. Those who stand still will eventually plateau while those that adapt, evolve, and diversify will prosper.
Netflix has since toyed with various value-add products, including gaming and merchandise. But then the cost-of-living crisis hit, and Netflix and several other video streaming services opted to launch AVOD and FAST-based models to combat plateauing subscription D2C revenue, a trend that 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. A hybrid approach to recurring and transactional subscription and advertising revenues is born.
It’s not just video streaming services where we’re seeing this trend. In publishing, media giant, The New York Times, acquired Wordle in 2022. Why? Because like with OTT, a single core offering isn’t enough to engage existing subscribers, nor is it enough to tempt new audiences from alternative demographics 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.”
(source: WAN-IFRA, 2022)
This year, we’re likely to see an increasing focus on product development and diversification across media, as businesses rethink their value propositions. This will lead to many businesses launching alternative revenue streams to place multiple eggs in their baskets, eliminating risk and unlocking opportunities for growth. Brands will also need to think carefully about how they bring these products together to form a more enticing proposition for the consumer through clever bundling and packaging and with thought to where bundles are set by the business or made available as a-la-cart offerings directed by the consumer.
Industry consolidation & convergence will continue despite economic climate
M&A and joint venture endeavors across media have become commonplace within a highly competitive industry, where change and evolution are a constant. 2022 was no exception with several strategic deals occurring to exploit emerging opportunities and stay ahead of 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 is set to continue in 2023, triggered by evolving consumer trends, technological disruption, and the macroeconomic downturn.
2023 will not be without its challenges for media organizations, but it does present opportunities for innovation and the formation of deeper relationships with subscribers. As we move into the new year, media companies should:
- Put the processes, technology, and people in place to drive innovation across pricing, product and data.
- Prioritize subscriber personalization and relationships when designing offers, product bundles and even the unsubscribe process, using data-driven insights.
- With the Covid subscription boom fading and economic headwinds ahead, media companies should fight for every subscriber dollar. This means trimming churn wherever possible, reducing costs through automation and diversifying offerings to address risk in the market.