The perils of launching a subscription product too early

PLUS: How a veteran journalist built a thriving local news outlet

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The case for delaying the launch of a paid subscription product

Now that I’ve been operating my media business basically full-time for three years, I get asked the same question over and over again: If I could start all over, what would I do differently?

It’s a great question because it really forces you to home in on the biggest lessons you learned along your journey. If I really could jump back in time to February 2020, there are all sorts of things I would change, from my publishing cadence to my newsletter format to how I organize my work week. But perhaps the biggest change to my previous strategy is that I’d hold off launching a paid subscription product for as long as humanly possible.

In fact, that’s advice I give to a lot of creators and media entrepreneurs who are in the process of launching a new venture. Over the last half decade or so, subscription models became the de-facto approach to monetizing digital content — or at least text-based content — and that’s led to every aspiring creator just assuming that subscriptions will be the primary method they’ll use to generate revenue right out of the gate.

And sure, subscriptions can be a great way to make money, and they now form the bedrock of many successful media operations, both big and small. But the problem is that new outlets rush into launching subscriptions too early and then quickly find themselves tethered to a business model that’s failing to produce any discernible ROI.

So for those who are contemplating launching a subscription product in the near future, here’s the case for why you should delay it for just a little while longer:

You’ll hinder your audience growth

Audience size isn’t everything, but all things being equal it’s a hell of a lot easier to monetize a larger audience than a smaller one. And one of the biggest downsides of subscription products is that they can produce a huge drag on an outlet’s ability to scale its audience.

While subscription products vary widely in their design, most bootstrapped outlets embrace a similar approach: One free newsletter a week followed by two or three issues that only get sent out to paid subscribers.

Think about what that means: you’ll be dedicating a minimum of 66% of your time to creating content that ultimately doesn’t help you grow your audience. The slower your audience growth, the slower you convert people into paid subscribers, and once churn kicks in then it suddenly feels like you’re wading through molasses. That quickly leads to discouragement and the creeping feeling that your media startup is unsustainable.

Your conversion rate will be low

Many aspiring creators have this misconception that there are lots of people out there just champing at the bit to hand over their credit card information so they can support great content. But the reality is that media subscription economics are brutal, with consumers doing everything they can to avoid having to pay for content.

I get a lot of questions about the average free-to-paid conversion rates for content. I’ve spoken to some creators who have converted an impressive 10% of their free list into subscribers, whereas many others report conversion rates as low as 1%.

What’s the difference between those at the upper and lower ends of that spectrum? I think brand recognition and exposure play a big part in it.

By the time Judd Legum launched his subscription newsletter, for instance, he had already been running the progressive blog ThinkProgress for over a decade and had amassed hundreds of thousands of Twitter followers. His readers were extremely familiar with his brand and work, and that’s why he was able to convert upwards of 10% of his list right out of the gate.

A newly-launched media brand just isn’t going to see that same rate of conversion since it hasn’t had any time to build brand familiarity with its readership. So not only would a prematurely-launched subscription model hinder its audience growth, but it’ll perform poorly at pushing its existing audience toward recurring payments.

There may be better business models to try out first

I think one of the consequences of a media entrepreneur just assuming that their primary revenue driver will be subscriptions is it causes them to ignore other opportunities that may be much more lucrative.

Earlier this week I had a call with a seasoned media operator who’s launching an outlet that caters to a large addressable consumer audience that’s prone to spending money on a wide range of products, both expensive and inexpensive. To me, his outlet seemed absolutely perfect for a mixture of both traditional and affiliate advertising, but when I brought it up he seemed surprised by the suggestion. He was so laser focused on a subscription model that he seemingly missed the much bigger opportunity, at least in the short term.

Not only could advertising be much more lucrative for him, but such a model would allow him to keep 100% of his content free, thereby juicing his audience growth and making a future subscription product much more likely to succeed. In my opinion, his decision to go with subscriptions first would set his business up for excruciatingly slow growth.

***

So let’s return to the original question that I posited at the beginning of this piece: If I could start all over, what would I do differently?

In February 2020, I had enough of a slowdown in my freelance consulting work that I decided to make a go at turning my newsletter and podcast into a full-time gig. To do that, I announced a paid subscription that cost $100 a year, and then…I basically floundered for two years.

Every month I was frustrated by both my audience growth numbers and the paltry amount of revenue I brought in. It wasn’t until 2022 that I finally launched newsletter sponsorships and found a subscription offering that drove more conversions:

Instead, I probably should have delayed my subscription product by at least a year and monetized through a mixture of high-level strategy consulting, advertising, and evergreen information products like ebooks and online courses. That way, once I finally launched the subscription offering, I would have had a much larger audience and revenue base to build from. 

Obviously, I can’t travel back in time, but if you’re reading this right now and on the verge of launching a subscription model, then perhaps you can learn from my mistakes. You’re about to embark on an extremely steep climb that’s plagued with myriad obstacles, so maybe you should at least pause to consider for a moment whether an easier path exists.

What do you think?

Do you have regrets about launching a subscription offering too early? What would you do differently if you were to start all over again?

I actually want to read your thoughts. I’ll round up your answers in this Friday’s newsletter. Click this button to sound off in the comments:

This veteran journalist launched a thriving local news outlet

When it comes to creating content for online audiences, few people are more experienced than Mark Talkington. He was one of the original editors of ESPN.com and then later spent 20 years as the news editor for MSN.com, the massive web portal owned by Microsoft.

But at the beginning of the pandemic, Mark began writing for a much smaller readership: the residents of Palm Springs, California. Taking advantage of the fact that most government meetings were now being broadcast online, he spent his nights and weekends writing a daily newsletter dedicated to keeping citizens informed about their local community.

The newsletter was called The Palm Springs Post, and it was an instant hit, growing to 13,000 subscribers in a little over a year. By 2022 he was able to hire another journalist and launch a second newsletter covering a nearby region. Earlier this year, he left his job at Microsoft to focus full-time on growing his company.

In our interview, Mark talked about how he produced the newsletter during his free time, his business model, and what other local news entrepreneurs can learn from his approach.

Check out our discussion in the video embedded below:

If video embeds don’t work in your inbox, go here.

Quick hits

The Messenger's business strategy seems deeply rooted in 2012-era thinking when we all believed that a VC-funded hyper aggregator of digital news could achieve escape velocity. [The Rebooting]

Indie podcast studio Tenderfoot "has been turning a profit since 2017 and is on track to exceed $10 million in revenue this year." [NYT]

A lot of newsletters that left Substack a few years ago are now moving back onto the platform. The growth potential is just too huge. [Substack]

I find it absolutely bizarre that Wattpad has restricted authors' ability to lock content behind a paywall to an "invite only" basis. Too many platforms launched under the idea that we should all be grateful that they allow us — the content creators — to publish to them. [Simon Jones]

"Podcasting can be a bit of a chicken-egg situation where you need the money to be invested before you see any return so it’s quite tricky for a lot of publishers because they don’t see any return so they can’t invest anymore on it and it goes round." [Press Gazette]

ICYMI: How publishers can drive more subscription revenue

It’s incredibly difficult to convert your audience from free readers/viewers/listeners into paying subscribers. I convened a group of media operators to discuss the best strategies for doing so.

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Simon Owens is a tech and media journalist living in Washington, DC. Follow him on Twitter, Facebook, or LinkedIn. Email him at simonowens@gmail.com. For a full bio, go here.