Okay, Let’s Do This (Notes on TPM and Digital Publishing)

We’re making a major push to grow our membership base in the second half of 2019. It is both critical to the future vitality of TPM and also a major opportunity. This post will explain what’s at stake, what’s within reach as well as important context and background. It’s mainly filled with points and details I’ll refer back to over time and it’s mainly intended for our core audience and members as some transparency into what we’re doing and why. But it also includes details about the nuts and bolts of the digital publishing economy. So others may be interested as well.

Over the last five years (2014-2019) we’ve changed TPM from an advertising-based (96%) to a membership-based (60%-70%) news organization. Each year we have worked to build subscriptions fast enough to offset the decline in advertising revenues, one that is mainly driven by the implosion of the digital advertising economy but also to deliberate decisions on our part. At several points we have taken funds once dedicated to our (declining) advertising business and redeployed them to our (growing) subscription business. This accelerates the process but in each case the bet has paid off. Through all of this the goal has been to build our subscription base to a level which can sustain the site into the future. Now, finally, we are in shooting distance of getting there.

Let me walk you through the details.

We started Prime at the end of 2012 (thank you, Launch Members!) for $50 a year and $4.99 a month. But it took us a while to get the kinks out and our membership numbers didn’t really start growing in a big way until 2014. Growth between 2014 and 2016 gave us a critical leg up in advance of the bloodbath of the digital ad market which really hit starting in 2016. Here’s a chart of the distribution of TPM’s revenue sources over the last five years.

To give some context for these percentages, both revenues and expenses have both grown steadily/incrementally over this period and in relative balance. We recently signed our first collective bargaining agreement with our editorial employees. That has increased expenses a bit. But the real growth came in the three years before they chose to form a union as we set a deliberate goal of raising salaries and benefits. (Salaries for the whole company went up 29.5% between 2014 and 2018; for editorial employees 35% and for non-management editorial employees 50%. Between 2017 and 2018 we increased spending on benefits by 44%.)

Most of the miscellaneous revenue is from “subscription” or “FIN” credits which readers purchase for us to distribute respectively to readers in financial need or registered students. Since those aren’t recurring memberships we categorize them differently. But arguably membership revenue – or at least revenue coming directly from readers – is approaching 80% of our budget rather than 70%.

In any case, if membership revenues can cover 68% of our current budget we believe that that along with other existing, durable sources of revenue can provide a stable foundation for the company into the future. So no more heroic efforts to build the new membership business as the ad economy spins out of control. More like managing that business and growing organically over time. We’ll have new goals of course. But those will be about growth rather than building a new business model on the fly to sustain what we currently do. There’s no steady state, no permanence in the digital publishing world. But I’ve been at this for a long time. And in relative terms, this is the critical threshold we’ve been building toward.

68% is the magic number. Last year we were at 48%. Currently, on an annualized basis, memberships account for 59% of the budget. Our goal in the second half of 2019 is getting from 59% to 68%. That is a big, big challenge. But as the chart shows it’s not an unrealistic one.

We think the most plausible framework for getting from 59% to 68% is this: We currently have 30,400 total members, which includes 26,116 Prime members, 4005 Prime AF members and 347 Inside members. Our goal is to grow total memberships from 30,400 to 32,700, convert 3,000 more existing Prime members to Prime Ad Free (AF) and convert or add 300 members to Inside. That’s about 12% growth year over year in total members and 8.5% growth from where we are mid-year. So all the different things you see us doing over the rest of the year will be aimed at achieving these goals.

The big benefit this provides for us as an organization isn’t just solvency but stability, which translates into deepened focus on our core mission of covering, contextualizing and analyzing the news for you. Everything we’re going to be doing over these coming months – things like our Ad Free trial, a drive for new members, new features and benefits of our membership, member appreciation week – are focused and tasked toward that goal.