Hunger For New Subscribers Is Driving Down Prices As Brands Discard Acquisition Cost Models

The subscription business has never been easy. But this is perhaps the toughest season ever for subscription-based companies.

On the one hand, physical product shortages and ecommerce delivery struggles make digital subscription deals more compelling. Consumer products like Masterclass, Peloton and Audible all sell subscriptions.

But those same businesses are among the most keenly affected by Apple’s ad targeting and data restrictions. Their MO has been to track individuals and optimize campaigns carefully so as to understand how much they can spend on marketing to profitably acquire new customers.

There’s also a lot of competition. The market is awash with companies from news and entertainment, gaming and ecommerce to financial apps, learning resources and more all fighting for a spot on the finite roster of subscriptions that any given person can carry per month.

The result is that subscriber acquisition costs have spiked across all major platforms, including Apple’s App Store and iOS, Google’s Android and Facebook.

One way to deal with that dynamic is to simply say “eff it” to customer acquisition and lifetime value calculations and go heavy on price cuts and promotions to keep the new sign ups flowing, albeit at a less effective profit rate.

A lot of companies are doing just that.

The Magic Subscriber Kingdom

Take Disney, the thirstiest new-subscriber acquisition player in the market.

Disney’s Black Friday promotion for Hulu cuts the price of an ad-supported subscription to 99-cents per month for a year, down from $7 per month. Earlier in November, it offered a one-month special for Disney+ at $1.99, normally $7.99. And then Disney introduced a bundle of ESPN+, Disney+ and Hulu for $13.99, which demonstrates quite the thirst considering the services cost about $23 if bought separately.

Disney is also a big partner for new subscription suppliers. Basic Verizon contracts now bundle six months of free Disney+, or a full year for the top plan, as part of a holiday sale. New Amazon Music subscribers also pick up six months of free Disney+.

But the subscription bundling between Verizon and Disney is hardly unique. New T-Mobile subscribers now get a free year of Apple Plus, Paramount Plus and Netflix as part of a deal announced this month.

(AT&T is the only carrier that includes free HBO Max with its mobile contract promotion, because HBO is part of the Warner Media empire.)

The cost of journalism

But if you think Disney is thirsty for new subscribers – they don’t even know what desperation feels like. Just ask a traditional publisher.

USA Today is offering a Black Friday digital subscription for $1 per week for 52 weeks before reverting to its standard $9.99 per month rate.

“Your subscription helps our journalists seek the truth,” reads The New York Times copy on a limited time offer this week of $1 per week for one year for a digital subscription, which is typically $4.25 per week.

The Wall Street Journal’s digital subscription deal drops the price from $38.99 per month to an even $4. Its tag line reads; “Trust your source. Trust your decisions.”

In other words; “Try it for a year, but for the love of god, please subscribe.”

Service subscriptions

The subscription world is no longer just news and entertainment, though.

Peloton is known for rarely discounting its price. In the same vein as Apple, the cost of a Peloton is the cost of, well, a Peloton.

But it’s knocking $350 off its Bike and Bike+ models through the end of November as it tries to bring new blood to its subscriber program to replace many riders who have returned to the gym as pandemic restrictions continue to loosen up.

Moving over to digital goods, the meditation app Headspace is offering a 60% subscription price cut to $5 per month for Black Friday. Masterclass, meanwhile, isn’t cutting its price, but is adding a second freebie subscription for buyers to gift to someone else – a cunning BOGO-inspired ploy to increase subscription numbers … that is, if a brand is comfortable relaxing its standard acquisition cost structure by giving away free or heavily discounted accounts

Learning and information services are big subscription players now. Rosetta Stone cut the cost of a year-long language learning program from $143.88 to $89.99, while Audible dropped its monthly rate from $14.95 to $6 for Black Friday, plus a $20 credit to buy books.

Sweet deal

There’s nothing new about subscription entertainment deals. They’re a classic method to get people in the door.

When Disney+ launched two years ago, it handed out free or discounted year-long accounts like candy to get millions of people into the program. And many other streaming services followed its lead, Paramount Plus, HBO Max, NBCU’s Peacock and Discovery Plus among them.

But there’s new urgency behind these promotions.

Amped up competition in the market and higher user acquisition costs on mobile platforms have reduced the paid media pipeline of potential subscribers to a trickle, which hits hard for subscription-based revenue business that can’t just acquire fewer people at their old customer acquisition rates.

Services like Peloton, Masterclass or even Rosetta Stone rely in part on constant new blood, not just as potential sign-ups at the full rate, but because membership in those programs is enhanced by an infusion of new users. Even the most loyal customers would likely perceive a decline in new users and notice a diminishment of a brand’s presence in “the conversation,” so to speak.

From a consumer point of view, though, it’s a bonanza. Now is the best time ever for American consumers to sign up for news, entertainment and other fun or educational subscription services.

But what about the marketers behind those cost-cutting and subscription reauthorization programs? Well, they’ll either have huge market share victories on their hands – or profit sustainability disasters waiting in the wings.

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