Product bundling for retention: the New York Times and… Spotify?

Last week, The New York Times’ digital team announced that it will begin offering free Spotify Premium membership to Times readers who subscribe at the annual tier, and a $5 NYT-plus-Spotify bundle for monthly subscribers.

Clay Fisher, the Times’ head of subscription products, has cited reader engagement and subscriber retention (“emotional tie-in”) as top priorities for getting the company to its 2020 $800 million digital-only revenue goal (in 2016, digital-only revenue, which is about half ads and half subscription was just under $500 million).

What are the Times’ sources of growth -- and how does Spotify help?

According to Neiman Lab, 12% of Times readers contribute 90% of its digital revenue, across ads and subscriptions.

So, the Times could achieve growth either by stepping up acquisition, or by deepening engagement and retention with its paid products.

On the acquisition side, channels are continuing to tighten:

• The SEO growth loop doesn’t work for many of the incremental, shorter form news stories that make up the day to day of journalism media, because the content isn’t long enough, becomes obsolete quickly, and doesn’t provide adequate coverage of long tail terms.
• Social and mobile platforms are increasingly coming out with their own somewhat competitive options: Apple has Apple News, Facebook has Instant Articles. These may deliver Times content to readers, but don’t necessarily deliver those readers back to the Times, where they can enter the subscription/monetization funnel.

Related Interview: Matt Barby of Hubspot on SEO-driven growth

On the retention side, offering other digital subscriptions as part of a bundle may be a way to flatten the retention curve. Spotify now has over 40 million paying subscribers (just under half of its users are paying subs), and is notoriously sticky:

• User-initiated personalization features make people feel invested in “their version” of Spotify
• The product is full of habit triggers that weave it into people’s daily routines: exercising, work or “focus” time, meals, on-the-go, etc.

Related Lecture: Natural Usage and Behavior Patterns

Because the Times onboards free and discounted trial subscribers with a variety of offers, many churn out before reaching maximum monetization potential.

And although some readers -- that 12% -- have probably formed a pretty strong habit weaving the NYT into other daily patterns, habit formation takes time -- and a “sure, why not” free trial with a month-one paywall may not be long enough to entrench the product into more users’ lives.

By bundling with Spotify, the Times can reap the benefits of Spotify’s personalization and identity features that trigger loss aversion upon churning -- and buy more time for habit formation. Creating a playlist is a core activity within Spotify, and doesn’t take a 30-day window to get into.

Related Lecture: Identifying High Impact Retention Optimizations

Related to this, the Wall Street Journal is now running a test to turn off Google’s “first click free” feature (where you can bypass the paywall for content that you find via Google), when a similar but much more limited-scope test last year resulted in an 86% increase in subscriptions.

Advertising will continue to grow, but we’ll continue to see even more emphasis on digital subscriptions and direct productization of content -- and it’ll be interesting to observe what new acquisition and retention drivers emerge.