LIFE IMITATES ART: SUBSCRIPTION MODELS STILL GOING STRONG


Amelia Northrup-Simpson
4/17/2012

How many times have you heard that the arts need a new business model or that subscriptions are dead? There's not a lot of people out there advocating for subscriptions. In fact most speak of abandoning it or make conclusions or assumptions based on reports that the number of arts subscribers in America is down.

But is the subscription model really dead? Really? The fact is, subscriptions are thriving in industries outside of the arts. In the past few months, there have been a slew of articles about entrepreneurs latching on to this model. These businesses, each of which offer a product along a specific vertical or family of products (from artisan coffee to cosmetics to books) each month for a set fee, see the subscription model as the ticket to sustaining revenue. And it's making them successful. The Next Web declared subscription service startups "the hot new thing."


Now it seems more businesses than ever are imitating what has made arts organizations successful for decades—and what some in our field are preparing to throw away.

The popularity of subscription business models makes sense. Businesses see the value in the guaranteed long-term revenue that subscriptions provide, as well as the loyalty it cultivates with their customers. When entrepreneurs make a commitment to the subscription model, they reap its rewards. For example, one of the most widely used and successful entertainment companies in America is subscription-based—Netflix.

They're playing our song. So what makes this model so attractive to consumers? To quote one article directly: "While each [subscription service] is more or less focused on a specific vertical, the goal is to introduce consumers to products that they may have been unaware of previously."

Sound familiar? One thing we hear again and again from loyal long-term subscribers and members is that they love being exposed to art that they may not see otherwise. That is a core value proposition behind the subscription model.

Essentially, it's the act of curation behind the subscription that makes it valuable. For these non-arts subscription programs, it's the selection of make-up samples or artisan coffees that are included in a monthly shipment. It's the service of having an expert choose for the consumer the best or newest or most interesting products, akin to having someone with similar taste in music burn a mix CD for you. For the arts industry, it's programming—what's on stage or in the exhibition hall—that is hand-picked by a recognized artistic authority. The missions of arts and entertainment organizations fundamentally revolve around curation.

Both inside and outside the arts industry, a subscription ensures that the consumer experiences products that are new, but that they will probably enjoy. Some companies offer the same subscription to everyone, tailoring the products to the community of customers, like arts organizations do. Others customize products around the individual (think about how Netflix suggests movies that you might enjoy) or type of individual (Birchbox, which distributes cosmetic samples on a subscription basis, has different offerings for male and female customers). For arts organizations, the equivalent is the choose-your-own subscription package.

Subscriptions may be hibernating, but not dead. It's NOT just in other industries that the subscription model is thriving. It still thrives in the arts industry too. One of our favorite examples of subscription success is that of Arena Stage (see case study). The staff knew the industry dialogue well and they asked if the subscription model was worth continuing. Our answer was, unequivocally, yes.

By focusing on high-value subscriptions, Arena Stage in Washington, DC grew subscription revenue by 73 percent in three years. Total number of subscriptions grew 57 percent. Arena Stage is a shining example and also typical in our firm's experience. When commitment to patron loyalty via subscription is made, big results follow. Organizations that have a "dead" or "failed" subscription program, more likely are seeing subscriber hibernation. Patron interest isn't dead, it's just sleeping—until you ask a lapsed subscriber to come back or that multi-buyer to subscribe, or show that blockbuster single ticket buyer the value of subscribing.

The fact remains: Subscriptions are a BIG, irreplaceable part of most performing arts organizations' revenue. Subscribers represent guaranteed revenue and, yes, butts in seats. And more to the point, subscribers bring deeper loyalty and consequently larger value over their lifetime to an organization. Our firm's study consistently shows that more loyalty equals more revenue for arts organizations. How? When you look at subscriptions from a patron-centric view, you see that subscribing is a patron's deliberate choice to continue and to add further engagement, greater affinity, deeper relationship with an organization over time—all attributes that describe loyal audience members and prospective donors. We like to say that subscription speeds a patron's rise up the loyalty escalator.

Entrepreneurs are choosing the subscription model to achieve sustainability at a time when challenges are great and margins for error are thin. That's every day, every year in the world of arts management. Let's not throw out a model that works. Let's add these companies' experience to our industry's knowledge base and apply what we learn.

 

 


Comments

"Subscriptions are a BIG, irreplaceable part of most performing arts organizations' revenue" because many (most?) —especially performing arts — organizations, whose fiscal years are closely connected with their seasons, which only comprise part of the year, are stuck in a negative fiduciary cycle where forward years' subscription revenue is relied upon to pay previous years' debt at worse. At best, subscription revenue, ideally collected from around May through August (considering a fall/winter performing season), must help, along with contributed revenues to sustain the organization throughout the year.

Your example, Arena Stage, doesn't include the entire story, as Arena Stage was able to leverage subscriptions with a very expensive, desirable new space. The real question will be if Arena Stage is able to sustain the subscriber base after the initial excitement ebbs.

So while you argue subscriptions are closely tied with sustainability and margins for error are thin, I agree. However, the mindset that subscriptions are irreplaceable is where I diverge. I suggest forward-thinking marketing directors work closely with their development counter-parts and leadership to come up with a fiscal plan that may include subscription, but not adhere to traditional subscription models.

Benefits offered in the for-profit world are tangible, and easily understood, while subscription benefits in the arts world are less so. Free ticket exchange, etc., are just not enough. Nurturing an identity with an arts organization, a core value based on trust when individuals risk the unknown is a difficult comparison to make. Buy-in may begin with a single ticket purchase and (ideally) end with a feeling of ownership and that results in contributions beyond subscription and even beyond life, which is a much more complicated process.


I agree with Laura. The success of subscriptions for for-profit businesses has no direct relation to the success (or lack of) in the non-profit world. What is a small art organization with a limited budget suppose to do? Of course they can't offer the things a commercial for profit does to attract subscribers. We need an article that gives examples and answers on how many arts organizations (of various budgets) are developing subscription programs.


I agree with Amelia, that 'previously deployed (not old)' performing arts subscription models are an important part of the revenue mix for most organizations. And I think that we're beginning to learn from those deploying new subscription models from outside the arts not unlike those described by Amelia. And we recognize that they're not as new as we think. Book of the Month Club had a very successful subscription model for many years. I also recall that my brother in his teens was a 'member' of a 'record of the month club'.

I've read that St. Paul Chamber Orchestra provides unlimited tickets for a monthly fee. Dallas Symphony Orchestra had the 'impromptu' program a few years back that provided $75 per month donors the 'best available seat' on the day of performance. Not certain if they've continued it or not. A theatre company in San Diego has a 'frequent attenders' program, where purchasing one ticket permits admission throughout the run of the show (presumably bringing a paying friend). Museums have done it for years. One point about the 'curated' aspect of the monthly wine, coffee, spices, flowers, vegetables, etc. subscriptions is that in most cases one can send it back it if it's not what we wanted. I'm wondering how many arts organizations would be willing to give a money back guarantee if there's nothing this month I wanted to see. Kicking Horse Culture in Golden, British Columbia, has a money back guarantee that's important in mitigating the risk of buying a ticket to a performer I've not seen before.

In any case, experimenting, gathering data/research on the results and then making improvements will be central to progressive arts practice going forward.

My thanks to Amelia for her post.


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