Magazine giant Hearst had to take action to stem losses from discount magazine subscription offers as new subscribers jumped 233% following the start of the pandemic.
The start of the first UK national lockdown in March saw Hearst’s subscription acquisitions “somersault” from being up 5% year-on-year to up 233% according to consumer revenues officer Reid Holland.
But many of these new subscribers made use of the cut-price subscription trials commonly utilised by publishers, with deals such as three issues for £1 designed to entice new readers into signing up.
Holland told Mediatel’s Future of Media conference: “To be frank we lose money on the initial trial and then we make profit through retention
“This is a very well-tested model and something most publishers, most subscription businesses do, and it works brilliantly in a normal market. But Covid of course wasn’t a normal market.”
As the publisher was facing a year of “quite significant revenue challenge”, selling so many subscriptions at a loss quickly became a concern, Holland said.
Hearst therefore ditched its most keenly-priced trials in mid-April and “took a big deep breath and waited to see what would happen”, Holland said.
Orders subsequently stayed close to 100% up year-on-year on most titles with revenue up more than 150%, Holland said.
“I think that’s clearly a commercial success for us but… what I particularly like about that story is it shows you the strength of our brands and the strength of our products, and it also feels like we helped people with a small amount of positivity at a time when things were just really tough.”
Holland noted that Hearst had increased its marketing spend to focus on driving subscription volumes despite many companies cutting budgets.
The publisher ended up with “booming” subscription conversion rates and a drop in cost per acquisitions as a result, he said.
Like many publishers, Hearst is focusing on leveraging its brands and audiences with diversified revenues alongside the core content business – with branded curated beauty boxes for the likes of Harper’s Bazaar and Red among the latest launches.
“But I think it’s also important to say that we’re absolutely certain that not only do we need to sell more things to more people but our audiences and our customers and our subscribers want more from our brands,” Holland said.
“What I mean is if we talk about the holiday business or the beauty box business or even our event programme we know that almost all of what we sell in those areas is sold through our own media to our first-party audiences, to our existing customers, to our print magazine subscribers, and that to me is exactly where we need to be going as a business.”
Holland said the publisher is now doubling down on direct-to-customer relationships and revenues to increase the scale of its engaged audiences, which is likely to mean more registration, paywalls and memberships.
There will also be a focus on how to use data to get a “more complete picture of the customer”, with the goal to “walk into the world of machine learning and artificial intelligence” and automate clustering and personalisation.
Hearst UK reported in September that it was preparing for Covid-19 losses to “eat up” a large amount of its cash resources, with newsstand sales and physical events among the most impacted areas despite a boost in subscriptions.
The publisher increased its profitability in 2019, with pre-tax losses going from £6m in 2018 to £2m and operating profit more than doubling to £2.2m.