Selling Subscriptions in iTunes

iTunes newsstand has been a remarkable success for the magazine industry, and the success has overturned some standing assumptions.

First, there is a general point which may be of some interest to a broader community of Apple watchers and publishers. Magazine subscriptions through iTunes have worked at much higher prices than would be believed by most outsiders. There is a fairly widespread view that apps have to be very cheap to work in the iOS economy (and perhaps that they have to be free to work at all well in Android app stores). This is not true for magazine subscriptions. Some magazines are selling well as apps in iTunes at prices barely different from their print equivalents. The Economist app, for example, is regularly in the top 10 grossing newsstand periodicals in the USA, the UK and other markets, but in the UK the lowest price offering is £39.99 for a quarterly sub (£159.99 annual). And yet the Economist app is regularly top-grossing, not just for newsstand, but across all apps. You can check this yourself in great detail with AppAnnie (a web service which collects public data from App stores and makes a lot of that data freely available to registered users).

Book publishers have found that ebook prices are much lower than for the print equivalent. There is a general assumption in the book publishing industry that competition and the advance of technology will inevitably drive prices for ebooks down below $9.99 (that has happened), below $4.99 (happening) towards the 99c per book level. The digital magazine experience suggests that there need be no inevitability about this progression.

The second point to make, and it is one which emerges very clearly from the data we have collected and examined at Exact Editions, is that paid subscriptions work very well in iTunes, and that monthly subscriptions appear to hit a very satisfactory ‘sweet spot’. They combine two features — the prospect of a relatively low initial price, and a high probability of renewal. The key thing is that digital subscriptions (unlike through-the-mail subscriptions) can be sold on a monthly basis with billing as you go. It was in October 2011 that Apple introduced their in-app subscription and auto-renewal model, and since that time we have seen a dramatic growth in digital magazine sales via iTunes. We looked at data on all the 30 day (ie monthly) subscriptions that we sold in December 2011 and discerned the following trends:

  1. Renewals are strong and on average a 30 day sub gets renewed 5 times. 
  2. The cancellations are highest in the first month, but even at this initial stage, the renewals are 85%
  3. Thereafter the drop out rate is much reduced.
  4. Even after 12 months, 20% of the initial cohort are still renewing their 30 day subs.
  5. The golden lining in this already encouraging story is that many of  the ‘drop outs’ switch to annual subscriptions.

Someone asked me yesterday whether the digital magazine business was in early stages or maturing. When we consider that so many magazines still lack an effective digital distribution channel, and when we consider the strong upward curve that you see on graphs of digital subscriptions, we have to say that the digital magazine business is still very much in its early days. 2013 has started very well for iTunes newsstand.

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