Your subscriber base is the foundation on which you and so many publishers build your entire business. Understanding your subscribers is key to knowing what content to write, what operational and staffing decisions to make, and what marketing strategies work best to find more of them.

In short, you should know your subscribers as well as you know your product. Spending time getting to know them is a core function of a relatively recent new type of job, audience development, but really everyone from sales to marketing needs to have a fundamental grasp of who your subscribers are, their habits, likes, dislikes, and so on.

However, it's also incredibly valuable to look at your subscriber base in aggregate and assess the health of this part of the business.

Key metric: Quality

One metric that we'll focus on in this post is the quality of your subscriber base. In other words, the proportion of active readers compared to your whole subscriber base. A rudimentary formula looks like this:

Quality of your subscriber base = # of active readers / # of all subscribers

Why is this important? The short answer is the latent risk of churn (distinct from the actual rate of churn).

If you have a high proportion of subscribers who pay but don't read your content, your subscriber base is at a higher risk of increased or accelerating rates of churn due to factors outside of your control. Think: another recession. Depressed economies lead to people cutting back costs, and unused subscriptions are often the first to go.

For any business based on a subscription model, this is a serious strategic risk that need to be figured out. For one, it can give you a more accurate reading of the real value of your business. For another, it is the first step in building a risk mitigation strategy.

In this post we're going to look at the following:

  1. Background risk: The prevailing sentiment towards subscriptions
  2. Breakdown: The different levels of subscriber risk
  3. Analysis: Calculating your risk and the impact on real value
  4. Assessment: How to know what is good, bad, terrifying
  5. Treatment: How to start building a risk mitigation plan
  6. Tools: The tools to help you reduce the latent strategic risk

1. Background risk: The prevailing sentiment towards subscriptions

There is a lot of discussion in the publishing industry right now about 'subscription fatigue'. There were already signs of it before the pandemic, but since Covid-19 the trend has accelerated.

Deloitte's 14th edition of their highly regarded Digital Media Trends Survey brings this into stark relief with compelling data.

For Millennials, the fatigue is highest, with 40% feeling "overwhelmed" by their subscriptions, and 43% intending to cut back. For Gen Z and Gen X these numbers are also high, at around 30%. The data indicates churn will continue to be a growing issue for content providers in the near future.

While some publishers saw a 'Covid bump', there has been an opposing trend in higher churn. The publishing industry saw consumers make the most cancellations and fewest new sign ups. For digital magazines 6% of consumers cancelled a digital magazine subscription, while just 7% added one. For online newspapers it was 5% of consumers cancelling and 8% signing up. Compare that to video which saw similar numbers of cancellations, with 5% of US consumers dropping a video service, but a huge 23% of them signing up for new video streaming subscriptions.

The main takeaway is that all subscription-based businesses, publishers in particular, are facing a consumer landscape that has some serious built-in risks that are only growing.

2. Breakdown: The different levels of subscriber risk

Before calculating the risks, first you segment your subscribers into different types, each with their own level of risk attached.

  • Active
  • Sleeper
  • Zombie
  • Ghost

Active subscribers

The bread and butter of your business, these readers pay to access your content and actually visit, consuming your product on a regular basis. Of course, how you define 'active' is up to you, depending on whether you produce content, e.g. on a daily, weekly, monthly, or quarterly basis.

Risk: Low - You may think there is no risk, but while these subscribers may not face immediate churn, they are at risk of slipping into an 'inactive' category over time and then churning later.

Sleeper subscribers

The first tier of inactivity, these readers used to be active until recently and have now entered a dormant stage.

Sometimes these things are cyclical. Look at your data to see if you have a category of reader that demonstrates periods of both activity and inactivity. If you do, take a look at what prompted them to re-activate. There could be common themes or patterns that you can identify and use to shorten any cycle.

Sometimes, of course, they are not cyclical. Look at data to see if you have a recurring issue with active users becoming sleepers and then either zombifying or churning. There could be an opportunity to turn these into the cyclical variety.

Risk: Moderate - The risk of churn has increased, but can be mitigated if they can be persuaded to wake up and start engaging with your content again. Otherwise, they risk falling further down into deeper states of inactivity.

Zombie subscribers

These readers were at one time active readers, but have long since stopped consuming your content. Other signs of 'zombification' include not opening any newsletters or clicking on any links. They're not tempted by notifications and certainly don't click on any marketing ads.

Risk: High - Significantly high risk of churn, particularly around any auto-payment that renews their subscription.

Ghost subscribers

These are rare, but they do exist. These are readers that paid for a subscription, and then never engaged with your content. Perhaps it was a gift, or they got it for free from work / university, or they signed up for a discount deal and forgot to cancel when it converted to the full subscription cost. In any case, these aren't your real audience and they weren't really interested in reading your content to begin with.

Risk: Very high - One day they'll decide to get their finances in order and cancel all the subscriptions they never use.

3. Analysis: Calculating your risk and the impact on real value

OK, so conceptually you get the idea, but how do you actually calculate the risk and what impact does that have on the business?

Latent risk of churn per year (%)

Let's look now at building a formula to help put some kind of quantitative analysis for measuring and understanding your risk. The data you need is:

  • The breakdown of your subscriber base into the four categories of subscribers described above
  • A segmented calculation of your average churn rates for each type of subscriber

We can then put them together like this:

Churn risk = (% active users * active user churn) + (% sleeper users * sleeper user churn) + (% zombie users * zombie user churn) + (% ghost users * ghost user churn)

An example: Let's say we have Acme Magazine that has the following breakdown:

  • Active:  70% of the subscriber base; 1% churn rate per year
  • Sleeper: 15% of the subscriber base; 10% churn rate per year
  • Zombie: 10% of the subscriber base; 25% churn rate per year
  • Ghost: 5% of the subscriber base; 50% churn rate per year

For Acme Magazine their annual latent risk of churn is:

(0.70*0.01)+(0.15*0.1)+(0.10*0.25)+(0.05*0.5) = 7.2%

You can see that the inactive subs, in this instance, are at much higher risk of churn. The average active v inactive risk ratio is 1:6.5 (weighted for the proportion of subscribers in each inactive category). So inactive subs are almost 7x more likely to churn than active ones. That's a serious strategic risk.

Strategic risk value ($)

The dollar value of that strategic risk can also be calculated. Let's now say that Acme Mag. charges $10 a month and has 100,000 subscribers. This gives it $1m in monthly revenue for a total of $12m ARR (annual recurring revenue).

Now, let's discount the annual revenue by the yearly churn rate risk of 7.2%. This leaves it with annual revenue of $11.136m (excluding any new customers acquired during that time). For the year, therefore, the subscriber base has built-in strategic risk worth $864,000. That's significant.

So where does the bulk of it lie? For the Acme Mag. it looks like this

  • Active:  70% of the subscriber base; 1% churn rate p/y = $84k (10%)
  • Sleeper: 15% of the subscriber base; 10% churn rate p/y = $180k (21%)
  • Zombie: 10% of the subscriber base; 25% churn rate p/y = $300k (35%)
  • Ghost: 5% of the subscriber base; 50% churn rate p/y = $300k (35%)

So the majority of the strategic value of the risk is unbalanced, leaning heavily (70% = $600k) towards the two most difficult subscriber segments to reactivate and which are most likely to churn.

This scenario paints an unhealthy picture of Acme Mag's strategic balance of risk, with a significant proportion of the potentially lost revenue in "high risk" categories.  If this were an investment portfolio, it would not make any sense, because the higher risk components do not provide any additional value over lower risk ones, and so would need rebalancing.

Subscriber margins ($)

Let's now say that Acme Mag. has $12m in revenue, as above, and $11.5m in costs (all in) so they run a profit of $500k per year. This gives us an average margin of $5 per subscriber per year, which is 4% of the $120 they pay in monthly subscriptions over 12 months.

Again, let's now add the latent risk of churn discount across each segment:

  • Active:  70% of the subscriber base; 1% churn rate p/y = $4.95 margin
  • Sleeper: 15% of the subscriber base; 10% churn rate p/y = $4.50 margin
  • Zombie: 10% of the subscriber base; 25% churn rate p/y = $3.75 margin
  • Ghost: 5% of the subscriber base; 50% churn rate p/y = $2.50 margin

By applying the churn discount, we see that the value of the higher risk segments has eroded, creating another reason to 'rebalance the portfolio'.

Adding complexity

To gain more accuracy you can of course add layers of nuance to this calculation, e.g. if you have different subscription tiers that bring in different amounts of revenue and have varying churn rates (annual subscriptions bring in less revenue than monthlies over the same period, but typically have lower churn rates).

Similarly, you could segment further by calculating any variance in churn rates for subscriber types over time, e.g. a recent sleeper sub who has been paying for 3 months is likely to have a higher rate of churn than a recent sleeper sub who has had a subscription for 3 years. You can start easy and split between those under / over a year, as publishers often see a drop in churn for subscribers that have with them for more than 12 months.

4. Assessment: How to know what is good, bad, terrifying

Once you calculate your latent risk of churn and the value of the strategic risk inherent within your subscriber base, you can then decide how urgent an issue this is.

The first thing to do is benchmark your overarching latent risk of churn against industry benchmarks of actual churn. According to FIPP, a good churn rate is below 5% per month, and really good is below 1%. Here are some cross industry examples:

  • Netflix: <1% per month
  • Dish: 1.5 % (per quarter)
  • Verizon Wireless and AT&T: 1.5% per quarter
  • Sirius XM: 1.8 per month (2017)
  • Spotify: 5.1% per month (2018)
  • Publishing average: 10% per month (according to Piano)
“A churn rate of 10 percent a month effectively means you lose (the equivalent) of all of your customers every 10 months. Those businesses are not sustainable. Churn is a reaction to your value proposition after people have tried your service. If it is high, you have a problem with the service, not with your targeting.” - David Pakman, Venrock

Now you know where your churn rate stands against benchmarks, what about the value of your strategic risk?

This requires a broader look at the business's books. Again, let's say that Acme Mag. has $12m in revenue and $11.5m in costs (all in) so they run a profit of $500k per year, as above. Straight away you can see that the $600k sitting in "high risk" subscribers is a serious cause for concern.

5. Treatment: How to start building a risk mitigation plan

There are 3 main ways to mitigate this strategic risk, and most publishers do at least 2 of them.

1.  Acquire more subscribers

This is what every publisher is trying to do anyway, but instead of being a pathway to strong growth, it becomes a stop-gap solution that can lead to anaemic growth or stagnation. An 'audience replacement' strategy to mitigate subscriber base risk has its weaknesses, namely that you aren't solving the problem in the long run and are instead just kicking the can down the road.

Furthermore, most publishers will acquire new subscribers much in the same way they did for their existing subscriber base, which is what landed them with the imbalanced, risky portfolio in the first place. These are strategies such as giving offers and discounts - $1 for 3 months! - and other trials that have very high churn rates and bring the publisher little in terms of customer lifetime value.

It's also costly. It can be anywhere from 5 to 25 times more costly to acquire a new customer than to keep one.

2.  Engage and reactivate existing subscribers

Engaging with readers is one way to help stem the flow of subscribers slipping from active to inactive segments, and thus also reducing churn. It's a way to stimulate loyalty to the brand and build a habit of reading that hopefully lasts a lifetime.

It's a proven strategy that many of the bigger name publishers have built capacity for in the past few years. This involves things like newsletters, and other tactics from the audience development team, to help keep readers active and engaged with your content.

“Newsletters have been by far our biggest mechanism in influencing this behavior. In our experience, price doesn’t drive churn. Engagement — or lack of it — drives churn.” - Peter Doucette, chief consumer revenue officer at Boston Globe Media

The Boston Globe used 30+ newsletters (which brought in 4,475 members a day) to increase engagement and reader revenue. Subscriptions from newsletters generated more traffic than social media, had a retention rate of 7%, and increased year-one revenues by 13%. Yet even then, as of mid-July 2018, the Boston Globe had only 94,797 digital-only subscribers and continued to lose money.

For many other publishers the time, energy, and money required to build this capacity to engage readers isn't available, making it difficult to adopt this strategy in the first place. Cost is the limiting factor.

3.  Rebalance your subscriber base

The root of the problem is that publishers need readers who are already loyal and who already want to read your content regularly. The issue here is that it describes your core audience - the low hanging fruit you will already have converted.

So publishers have to do two very difficult things:

1.  Find non-loyal readers / visitors with little-to-no habit of reading their content and convert them to a subscriber (difficult to do)

2. Then somehow build this loyalty and reading habit before they churn so they become low-risk, lifelong subscribers (very difficult to do)

It's a race against the clock, and the result is that publishers spend lots of money trying to "upgrade" every non-loyal reader into a loyal subscriber without knowing if they're worth it.

But not all new subscribers are equal. Some will never build the loyalty and habit you need. Others need a long ramp up period. And for some it's just not the right time in their lives, for whatever financial, professional, or personal reason.

Without knowing who to focus on, publishers end up with higher customer acquisition costs (CAC) but with low customer lifetime value (LTV).

What publishers need to do is flip the order of operations.

Instead of: Find non-loyal readers -> Convert -> Build loyalty before churn

It should be: Find non-loyal readers -> Build loyalty -> Convert

The standard school of thinking is to do this is through metered paywalls. Give readers a taste, 3-5 articles per month maybe, and let them build an interest and convert. Sadly, metered paywalls are fundamental flawed.

Metered paywalls have to balance 2 opposing interests.

1.  Give away enough free content to let readers build loyalty and habit

2.  Restrict access to content so that readers will buy a subscription

There is no right balance because at any level publishers are forced to give away enormous amounts of value for free, but if they reduce the number of free articles the result is lower quality conversions and higher churn. So the trend in recent years has been for sites to reduce or even eliminate the metered paywall altogether and work extra hard on engagement after a reader subscribes. They choose to race the clock.

So what's the alternative? Charging users to read without a subscription.


Not micropayments, which are essentially just micro-subscriptions.

Streaming payments, a new way to monetize content, helps creators, especially publishers, get paid for the value they create.

Streaming payments allow publishers to charge readers as they scroll. The reader consumes as much or as little content as they like and they pay for exactly what they have read, even if it is half an article. The reader then pays at the end of the month (instead of the beginning, like a subscription) for what they consumed.

Let's walk through an example.

Jane likes reading Acme Magazine, but already has 2-3 subscriptions elsewhere so isn't ready to sign up to the $10 a month subscription just yet. She reads her 2 free articles a month and then waits until the next month to read the next two. She once took up an offer for $1 for 3 months, but made sure she didn't sign up to the full subscription when it ended.

One day she gets sent an offer to read whatever she likes and pay afterwards for what she read. She signs on and starts reading Acme Mag. content. She has transparency into what everything costs and can put in limits to what she spends. Best of all, Acme Mag. tells her that if she spends $12 in one month, every article after that is free to read for the rest of the month, just like being a subscriber.

In the beginning, Jane reads 3-4 articles a month, then 5-7, then 12-15 and eventually is regularly spending $10-12 every month. Now Acme Magazine offers her the $10 subscription saying she can save money if she signs up. Now that she has the loyalty and the reading habit, she does and Acme Mag. has acquired a high-quality reader who is low risk and likely a long-term subscriber.

Of course, publishers can play around with the design of this set up. Perhaps they set the monthly spending cap to the same value as the monthly subscription and pitch annual subscriptions as a way to save, thereby locking in longer term value.

It's up to you, but by combining a consumption business model with an access business model (i.e. subscriptions), publishers are able to build a powerful pathway to conversion that not only generates highly-qualified leads, but also generates revenue in the process. So instead of spending money to get poorly-qualified lists, you can earn money to make highly-qualified lists.

6. Tools: The tools to help you reduce the latent strategic risk

So what tools are available now for publishers to use that help them reduce this strategic risk?

Newsletters -> to increase engagement

There are lots of these platforms around, with many reviews to help you find the one right for you. These include the likes of MailChimp, SendGrid, SendinBlue, and SparkPost.

Metered paywalls -> to offer a taste of content

If you don't have one already and are thinking of adding a metered paywall, then again there are lots to choose from including Piano, LaterPay, Recurly and many others.

Streaming payments -> to generate revenue and leads

There is only one provider at the moment, and (you guessed it) that's StreemPay. If you're interested in learning more we'd be more than happy to set up a demo (it only takes 5 minutes).

If you like what you see, we've built StreemPay to be zero risk to try out. You can use our Simulator to get a feel for how it might look and work on your site, without having to install any code. Or try our revenue calculator to see what you could generate.

Even when you're set up with an account, you don't need to roll it out all at once. You can conduct micro-experiments on small and low-risk segments to see what the reaction is and work out what the ideal configuration is for you and your readers.

Oh, and it's all free. You only pay when you earn.

If you're interested, you can sign up for your demo here. If you have any questions around pricing, cannibalization, or how StreemPay functions as a conversion pathway, check out our in-depth FAQs.

If as a reader you're interested in supporting our mission to open up more great content to more people, then join our waitlist here and get $20 in credit when we launch. You can also follow us on Twitter @StreemPay